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17 December, 07:12

Willett Co. had the following amounts related to the sale of consignment inventory: Cost of merchandise shipped to consignee $100,000 Sales revenue for three fourths of inventory sold by consignee $125,000 Freight cost for merchandise shipped $10,000 Advertising paid for by consignee, to be reimbursed $5,000 10% commission due the consignee for the sale $12,500 What amount should Willett report as net profit (loss) from this transaction for the year?

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  1. 17 December, 07:36
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    Net profit: 52,500

    Explanation:

    Sales revenue 125,000 (Only recogniced by the sold goods)

    COSG - 75,000 (Only recogniced by the sold goods)

    Commission 12,500 (recognized even without being collected)

    Freight cost - 10,000 (It's an expence of the period)

    Net Profit: 52,500

    The rest of goods given to consignee is an Asset (Consignment inventory) for 25,000

    The avertising paid for by consignee, to be reimbursed $5,000 is a liability.
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