Pronghorn Corporation Consignment Transaction Optimism

How can Pronghorn Corporation stay optimistic about the consignment transaction with Gooch Company?

What are the key financial aspects to consider in this scenario?

Encouraging Pronghorn's Entry Upon Receiving Cash

Pronghorn Corporation can maintain a positive outlook by understanding the financial implications of the consignment transaction with Gooch Company.

Pronghorn Corporation shipped $20,800 worth of merchandise to Gooch Company on consignment, with freight costs of $2,200 covered. Gooch Company incurred $550 in local advertising expenses, reimbursable from Pronghorn. By year-end, 57% of the merchandise had been sold for $22,300.

When Gooch Company notified Pronghorn and remitted the cash due after retaining a 10% commission, Pronghorn's entry upon receiving the cash should be recorded as follows:

Date                 Account Title                                       Debit            Credit
Year end          Cash                                                 $19,520
Advertising expenses                          $550
Commission expenses                    $2,230
Revenue from Consignment                       $22,300
Cost of Goods sold                          $13,110
Inventory on Consignment                                   $13,110

Pronghorn received $19,520 in cash after deducting advertising and commission expenses.

The cost of goods sold is calculated as 57% of the total value of goods plus shipping, amounting to $13,110.

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