Arghan Ltd purchases gas cookers at Sh.6,500 each and sells them through consigners as Sh. 8,000 each. Each consignee is entitled to a commission of 5% on sales from consigned goods and full recovery from sales made of any expenses incurred on the consigned goods.

The following transactions took place between Arghan Ltd and Bacelorna Ltd, a consignee, during the three-month period ended 30 June 2016:

1. Arghan Ltd sent 600 gas cookers to Bacelorna Ltd. and incurred the following costs:
Packing – Sh160,000
Insurance - Sh. 300,000
Transport - Sh. 420,000
2. On receipt of the cookers, Barcelorna Ltd. incurred Sh. 120,000 on unpacking and preparing the cookers for sale.

3. Barcelorna Ltd, sold 360 cookers and incurred carriage out costs of Sh. 180,000. Other costs incurred by Barcelorna Ltd. in the period included casual wages Sh. 150,000, advertising expenses Sh. 50,000 and storage cost Sh.120,000.
4. Some customers returned gas cookers to Barcelorna Ltd. after experiencing gas leakage. Barcelorna Ltd. spent Sh. 10,000 to repair the cookers.
5. In order to sell the 240 cookers, they were all fitted with additional safety gadgets at a total cost of Sh. 300,000 which was paid by Barcelorna Ltd.
6. Barcelorna Ltd. sold 150 of the cookers fitted with the additional safety gadgets at Sh.9,000 each.
7. Barcelorna Ltd sent Arghan Ltd. an account sale on 30 June 2016 enclosing a cheque for Sh.2,000,000.

Required:n
The accounts listed below in the books of Arghan Ltd. for the three-month period ended 30 June 2016.

Goods sent on consignment account.
Other than Fitting the additional safety gadgets what other four factors should be considered to make the gas cookers in a sellable condition

Due to globalization, a number of consignments take place across countries’ borders. As an accountant advise the management on issues related to accounting for international consignments.

Answer rating: 100% (QA)

In the books of Arghan Ltd Goods on consignment Account Trading Account 3900000 Consignment Account 3900000 Barcelorna Account Sales 4230000 Unpacking ... View the full answer