Determining whether the entity is acting as a principal or as an agent
Entity E operates an internet business. E”s customers pay via credit card. After a credit card check, the order is automatically sent to producer P who immediately sends the goods to the final customer.
E is responsible for any defects of P”s products to the final customers. However, E and P have stipulated that all claims of final customers are forwarded to and resolved by P at P”s cost.
E receives commission of 10% of the amount billed to the final customer for each sale. The selling prices and the conditions of sales are determined by P alone.
On Dec 07, 01, E sells goods to the final customer in the amount of CU 50. All payments are carried out on the same day.
Required
Assess whether E is acting as a principal or as an agent and prepare all necessary entries in E”s financial statements as at Dec 31, 01.
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