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Intermediate Accounting (Kieso)
Found in: Page 1033

Short Answer

Jansen Corporation shipped $20,000 of merchandise on consignment to Gooch Company. Jansen paid freight costs of $2,000. Gooch Company paid $500 for local advertising, which is reimbursable from Jansen. By year-end, 60% of the merchandise had been sold for $21,500. Gooch notified Jansen, retained a 10% commission, and remitted the cash due to Jansen. Prepare Jansen’s journal entry when the cash is received.

Revenue is $21,500.

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Step by Step Solution

Meaning of Freight Cost

Freight expenditure is the fee charged by a carrier for transporting cargo to a destination location from a source location. The individual who wants the items carried from one site to other is responsible for the cost.

Journal entries when cash is received



Debit ($)

Credit ($)

Cash a/c


Advertising expense a/c


Commission expense a/c (21,500*10%)


Revenue from consignment sales a/c


Cost of goods sold a/c


Inventory on consignment a/c


Working Notes:

Revenue from consignment sales = $21,500

Commission Retained = 10%

Advertising Expense = $500

Jansen co. shipped merchandise of cost = $20,000

Freight cost paid by Jansen = $2,000

Only 60% of merchandise has been sold by the end of the year.

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