Chief Adeleke consigned goods to Kalu to sell on commission. Kalu sold goods worth ₦750,000 for cash and ₦560,000 on credit. Under the agreement, Kalu receives a 5% ordinary commission on total sales and a 2.5% del-credere commission on credit sales. Kalu paid ₦25,000 for handling expenses and sustained a bad debt loss of ₦15,000 from a credit customer. What is the net amount remitted by Kalu to Chief Adeleke?
- ₦1,205,500Answer
- B₦1,190,500
- C₦1,186,750
- D₦1,204,500
Answer
The net amount remitted by Kalu to Chief Adeleke is ₦1,205,500.
Total sales equal ₦1,310,000 (₦750,000 cash + ₦560,000 credit). Ordinary commission is 5% of ₦1,310,000 = ₦65,500, and del-credere commission is 2.5% of ₦560,000 = ₦14,000, bringing total commission to ₦79,500. Since Kalu receives del-credere commission, Kalu bears the bad debt of ₦15,000. Deducting Kalu's expenses of ₦25,000 and total commission of ₦79,500 from total sales yields ₦1,205,500 as the net amount remitted to Chief Adeleke.
Step-by-Step Solution
Key Concept
Accounting for Consignee's Ordinary and Del-Credere Commission and Treatment of Bad Debts
Estimated Time:1m 30s