Consignments, Commissions, Joint Venture
7. December 1, 1917, a New York merchant ships goods of the value of $5,000 on consignment to a commission merchant at Rio de Janeiro, insuring them in the Atlantic Mutual against loss or damage in transit and prepaying freight and insurance amounting to $250. On arrival the goods are found to be in a partially damaged condition and the loss is adjusted at $1,000, the certificates for which the consignee transmits to the consignor together with an account sales for $3,000, dated March 1, 1918, and a final account sales for $2,000, dated April 1, 1918. A draft on New York for $4,300 accompanied this final account, being the balance due after deducting duty paid and commission earned.
Give expression to these transactions on the books of the consignor.
8. On November 15, 1917, Isaac Cohen & Co., Ltd. sent for sale on their account a consignment of goods valued at $5,000 to John Stimson & Sons, factors of Boston; sale to be on a 5% basis with 1% additional for guaranty of collection of accounts. Prepaid freight amounted to $25.40. December 26, an account sales from Stimson & Sons showed sales of $5,775.20, and expenses in connection therewith, exclusive of commission and guaranty, of $42.25. The net proceeds were placed to Cohen & Co.’s credit, subject to sight draft.
(a) Show the alternative treatment of all the accounts affected on Cohen & Co.’s books in order either to show the profit or loss on this consignment, or to include the profit or loss with their regular sales.
(b) Stimson & Sons’ fiscal year ended November 30. On November 25 they had sold one-fourth of the Cohen & Co. consignment for $1,500 and had incurred the expenses of $42.25 mentioned above but applicable to the whole consignment. Show Stimson & Son’s accounts affected properly closed.
(c) If Cohen & Co.’s fiscal year ends on November 30, what entries would be needed to make the record in accord with the additional data of question (b) above?
9. A, B & Co. and C, D & Co. enter a joint adventure to ship machinery to New Zealand. C, D & Co., October 5, 1917, handed A, B & Co. $600 in cash and granted them their acceptance at 6 months for $1,500. A, B & Co. were to provide balance of cash required, to manage the venture, to receive a commission of 2% on amount of invoice for machinery. Profits of venture to be divided equally.
On October 6, 1917, A, B & Co. paid J, K & Co. for machinery $2,500, and on the same date discounted acceptance of C, D & Co. for $1,500, paying $30 for discount thereon. On the following day A, B & Co. paid $210 for freight and $30 for insurance. On March 25, 1918, A, B & Co. received from New Zealand to account of proceeds of machinery a draft payable in London for $1,600, out of which, April 8, 1918, they paid $1,500 to retire bills for that amount.
On August 8, 1918, A, B & Co. received from New Zealand a draft for $1,550, being balance of proceeds for machinery, after deducting agent’s commission charges and duty. They thereupon closed the accounts and sent C, D & Co. check for balance due to them.
Make up an account showing result of venture, also C, D & Co.’s account with A, B & Co. Do not regard interest.
10. A B, a commission merchant, doing business on a 5% basis, hands you the following abstract of his ledger, showing his transactions for the year.
Furnish A B’s capital account, showing his original investment; also a balance sheet and a detailed cash account.
| Sales | $45,000.00 | $60,000.00 |
| Freight | 2,100.00 | 1,400.00 |
| Claims and Allowance on Settled Account only | 600.00 | 1,500.00 |
| Expense | 900.00 | |
| Customers’ Accounts | 60,000.00 | 45,000.00 |
| Creditors’ Accounts | 37,950.00 | 39,850.00 |
| Cash | 59,000.00 | 40,950.00 |
| Discounts Lost | 400.00 | |
| $205,950.00 | $188,700.00 |
11. A and B, commission merchants, suspect their cashier of embezzlement. From the following data determine whether or not their suspicions are well founded, and produce a balance sheet and profit and loss statement to prove or disprove the suspicion.
| Sales | $42,000.00 | |
| Cash Receipts, Customers | $42,000.00 | |
| Freight | 4,240.00 | 2,480.00 |
| Duty | 2,120.00 | 1,240.00 |
| Dock Charges | 212.00 | 124.00 |
| Custom House Charges | 90.00 | 45.00 |
| Interest (account sales at 6%) | 248.00 | |
| Commission (5% on sales) | 1,240.00 | |
| Office Expense | 2,000.00 | |
| Documentary Advances | 20,000.00 | 12,000.00 |
| Acceptances against Shipments | 12,000.00 | 20,000.00 |
Analysis of account sales ledger debits, duty $875, freight $1,560, dock charges $70, custom house charges $40.