Adeleke Traders consigned 300 boxes of merchandise costing \text{₦}8,000 per box to Danjum… — JAMB UTME

Adeleke Traders consigned $300$ boxes of merchandise costing $\text{₦}8,000$ per box to Danjuma & Sons. Adeleke Traders paid $\text{₦}120,000$ for freight and transit insurance. Danjuma & Sons paid landing charges of $\text{₦}60,000$ and warehouse rent of $\text{₦}40,000$ . Danjuma & Sons sold $240$ boxes at $\text{₦}12,000$ per box and earned an ordinary commission of $5\%$ and a del-credere commission of $2.5\%$ on total sales. A credit customer defaulted, creating a bad debt of $\text{₦}35,000$ . Before sales commenced, Danjuma & Sons had remitted a cash advance of $\text{₦}500,000$ . What is the net amount (in $\text{��}$ ) remitted by Danjuma & Sons to settle their account in Adeleke Traders' ledger?

Answer: 2064000 NGN

Answer

The net amount remitted by Danjuma & Sons to settle the consignee ledger account is ₦2,064,000.

In the consignor's books, the Consignee Personal Account is debited with gross sales proceeds (₦2,880,000) and credited with advance payments (₦500,000), expenses paid by the consignee (₦100,000), and commissions earned (₦216,000). Because a del-credere commission was granted, bad debts of ₦35,000 are borne by the consignee and excluded from this ledger account. The resulting credit balance cleared by bank draft is ₦2,064,000.

Step-by-Step Solution

Calculate the gross sales revenue credited to the Consignee Account

₦2,880,000

The consignee is debited with the total proceeds realized from selling 240 boxes at ₦12,000 each.

Calculate total commission entitlement (ordinary plus del-credere)

₦216,000

Ordinary commission (5%) = ₦144,000; Del-credere commission (2.5%) = ₦72,000. Total = ₦216,000.

Sum expenses incurred by the consignee

₦100,000

Landing charges (₦60,000) and warehouse rent (₦40,000) paid by Danjuma & Sons are recoverable from the consignor.

Apply del-credere accounting rule for bad debts

Bad debt of ₦35,000 is ignored in consignor's ledger

Del-credere commission transfers credit default risks to the consignee; thus, bad debts are not credited to the Consignee Account.

Deduct advance payment, consignee expenses, and commission from gross sales

₦2,064,000

Net Remittance = Gross Sales (₦2,880,000) - Advance (₦500,000) - Consignee Expenses (₦100,000) - Commission (₦216,000) = ₦2,064,000.

Key Concept

Preparation of Consignee Personal Account under Del-Credere Commission Agreement

Estimated Time:1m 30s

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