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Difficulty: EasyValuation and Accounting Treatment of Unsold Consignment Stock

Kalu consigned 100100 cases of goods costing ₦1,000\text{₦}1,000 per case to Bola. Kalu paid carriage and freight expenses of ₦10,000\text{₦}10,000. Bola received the consignment and sold 8080 cases, incurring non-recurring unloading charges of ₦5,000\text{₦}5,000 and recurring godown rent of ₦2,000\text{₦}2,000. What is the total valuation of the unsold consignment stock in Naira?

Answer: 23000 ₦

Answer

The total value of the unsold consignment stock is ₦23,000\text{₦}23,000.
The valuation of unsold consignment stock is calculated as the base cost of unsold units plus the proportionate share of all direct/non-recurring expenses. Base cost (20×₦1,000=₦20,00020 \times \text{₦}1,000 = \text{₦}20,000) plus 20%20\% of consignor freight (₦2,000\text{₦}2,000) plus 20%20\% of consignee unloading charges (₦1,000\text{₦}1,000) equals ₦23,000\text{₦}23,000. Godown rent is a recurring cost and is excluded.

Step-by-Step Solution

1
Determine the number of unsold units
2020 cases (100−80=20100 - 80 = 20 cases, or 20%20\% of the consignment)
Valuation is only performed on the proportion of goods remaining unsold.
2
Calculate the base cost of unsold stock
20 cases×₦1,000=₦20,00020 \text{ cases} \times \text{₦}1,000 = \text{₦}20,000
The base purchase/cost price of the remaining inventory.
3
Add proportionate consignor expenses
20100×₦10,000=₦2,000\frac{20}{100} \times \text{₦}10,000 = \text{₦}2,000
All direct non-recurring expenses incurred by the consignor to send the goods are added proportionally to the stock value.
4
Add proportionate non-recurring consignee expenses
20100×₦5,000=₦1,000\frac{20}{100} \times \text{₦}5,000 = \text{₦}1,000
Only non-recurring direct expenses (unloading charges) incurred before goods reach the godown are added. Recurring expenses like godown rent are excluded.
5
Calculate total valuation of unsold stock
\text{₦}20,000 + \text{₦}2,000 + \text{₦}1,000 = \text{₦}23,000
Total unsold stock value equals base cost plus proportionate direct expenses.

Key Concept

Valuation of Unsold Consignment Stock
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Topics

Valuation and Accounting Treatment of Unsold Consignment Stock

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