On March 15, 2023, Starz Hardware Limited, a manufacturer of pipe fittings, shipped a consignment of gas valves costing $7,000 to Home-Sweet-Home, a retail store. (Note: A gas valve is a device that regulates the flow of gas that is allowed to pass through pipes.)

Starz shipped the gas valves to Home-Sweet-Home through a third-party shipping company which charged Starz $600 for the shipping. Under the consignment arrangement, it is the responsibility of Starz to pay for all shipping costs. The shipping bill was received by Starz on March 20 and was paid on April 12. In addition, under the consignment arrangement, HomeSweet-Home is entitled to receive a 15% commission on any sales it makes.

Also, under the consignment arrangement, Home-Sweet-Home is to be reimbursed for any advertising expenses incurred as well as a 2% credit-card processing fee (chargeable to cost of goods sold) based upon sales of the valves. Advertising expenses amounted to $1,000 which were immediately paid by Home-Sweet-Home on March 24 when the invoice was received.

On April 30, 2023, Home-Sweet-Home had sold 50% of the consigned goods for $8,000, On the same date, the retailer notified Starz of the sale and the expenses incurred. Home-Sweet-Home retained its 15% commission and remitted the balance of cash to Starz. Starz also appropriately recorded the cost of the valves that were sold on the same date.

Required:

Prepare dated journal entries on the books of the consignor and consignee based upon the above.

Answer rating: 100% (QA)

On the books of Starz Hardware Limited Consignor 1 March 15 2023 Accounts Receivable HomeSweetHome 8... View the full answer