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Zorluk: ZorValuation and Accounting Treatment of Unsold Consignment Stock

Chief Mensah consigned 500500 cases of goods costing ₦2,000\text{₦}2,000 per case to Ade. The consignor incurred the following expenses on dispatch: freight of ₦100,000\text{₦}100,000 and transit insurance of ₦50,000\text{₦}50,000.

Upon taking delivery, Ade paid ₦30,000\text{₦}30,000 for clearing and unloading, ₦40,000\text{₦}40,000 for godown rent, and ₦50,000\text{₦}50,000 for salesman commission and advertising. At the end of the period, Ade reported that 400400 cases were sold.

What is the total value of the unsold consignment stock to be credited to the Consignment Account?

  1. A
    ₦200,000
  2. B
    ₦230,000
  3. ₦236,000Cevap
  4. D
    ₦254,000

Cevap

The valuation of unsold consignment stock is ₦236,000.
The correct valuation of unsold stock is ₦236,000. Unsold stock is valued at cost plus a proportionate share of non-recurring expenses incurred by both consignor and consignee. The cost of 100 unsold cases is ₦200,000. Adding 1/5th of consignor freight/insurance (₦30,000) and 1/5th of consignee clearing/unloading charges (₦6,000) gives ₦236,000. Operational expenses like godown rent and selling expenses are recurring and must be excluded.

Adım Adım Çözüm

1
Determine the proportion and basic cost of unsold stock
Unsold units = 500−400=100500 - 400 = 100 cases. Fraction unsold = 100500=15\frac{100}{500} = \frac{1}{5}. Basic cost = 100×₦2,000=₦200,000100 \times \text{₦}2,000 = \text{₦}200,000.
Stock valuation begins with the cost price of the remaining physical inventory.
2
Calculate proportionate consignor non-recurring expenses
Total consignor expenses = ₦100,000+₦50,000=₦150,000\text{₦}100,000 + \text{₦}50,000 = \text{₦}150,000. Unsold share = 15×₦150,000=₦30,000\frac{1}{5} \times \text{₦}150,000 = \text{₦}30,000.
All expenses incurred by the consignor to bring goods to location (freight, insurance) are non-recurring and added to stock value.
3
Identify and calculate proportionate consignee non-recurring expenses
Non-recurring consignee expense = clearing/unloading (₦30,000\text{₦}30,000). Unsold share = 15×₦30,000=₦6,000\frac{1}{5} \times \text{₦}30,000 = \text{₦}6,000.
Only direct, non-recurring expenses incurred before goods reach the godown are capitalized into stock value. Recurring expenses (godown rent and selling expenses) are excluded.
4
Sum all components for total stock valuation
Total valuation = ₦200,000+₦30,000+₦6,000=₦236,000\text{₦}200,000 + \text{₦}30,000 + \text{₦}6,000 = \text{₦}236,000.
Combining cost price with proportionate direct expenses yields the valuation under accounting rules.

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Valuation of Unsold Consignment Stock
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Valuation and Accounting Treatment of Unsold Consignment Stock

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