Problem I: ACCOUNTING FOR AGENCY TRANSACTION

Required 1: JOURNAL ENTRIES

a. Working Fund - Agency 5000
Cash 5000
b. Accounts Receivable 50000
Sales - Agency 50000
c. Cash 35000
Accounts Receivable 35000
d. Salaries expense - Agency 4500
Cash 4500
e. Utilities expense - Agency 2250
Cash 2250
f. Cost of goos sold - Agency 36000
Shipments to Agency 36000
Required 2: DETERMINE THE NET INCOME IDENTIFIED WITH THE AGENCY
Sales 50000
Less: Cost of Goods Sold 36000
Gross Profit 14000
Less: Expenses
Salaries Expense 4500
Utilities Expense 2250 6750
NET INCOME 7250
HOME OFFICE
RECIPROCAL ACCOUNTS
NONCURRENT ASSET
a. Transfer of cash to Branch xx xx c. Shipment returns from Branch
b. Shipment to Branch xx e. Depreciable assets acquired
d. Expense incurred by Branch xx and will be used by the Branch
but paid by Home Office xx xx f. Cash remittance by the Branch
BALANCE xx xx BALANCE
UNADJUSTED BALANCE XX
g. Depreciation charged to Branch xx
i. Adjusting items/reconciling items (if any) xx xx k. Adjusting items/reconciling items (if any)
xx xx
(balance before closing entries) ADJUSTED BALANCE XX
h. PROFIT from Branch operation (if any) xx xx j. LOSSES from Branch operation (if any)
Branch current balance after closing entries XX
PROBLEM 2
Home office
a. Transfer of cash to Branch 42500 0 c. Shipment returns from Branch
b. Shipment to Branch 50200 e. Depreciable assets acquired
d. Expense incurred by Branch 8000 and will be used by the Branch
but paid by Home Office 0 53400 f. Cash remittance by the Branch
BALANCE 92700 61400 BALANCE
UNADJUSTED BALANCE 31300
g. Depreciation charged to Branch 650
i. Adjusting items/reconciling items (if any) 0 0 k. Adjusting items/reconciling items (if any)
650 0
(balance before closing entries) ADJUSTED BALANCE 31950
h. PROFIT from Branch operation (if any) 0 1400 j. LOSSES from Branch operation (if any)
BRANCH CURRENT or Investment in Branch
BRANCH CURRENT or Investment in Branch
Branch current balance after closing entries 30550
1 Cash
Balance 59300
Remittance of cash from branch 53400
Cash collection from receivable 113600
Less: Cash transfer to branch -42500
Payments on account -124000
Expenses paid -26600
Dividends paid -10000
Cash balance 23200
Accounts receivable 19050
Merchandise inventory, end 48500
Prepaid expenses 2050
Home office total current assets 92800
Furniture and Fixtures 28000
Less: Accum. Depreciation -6230
Branch Current 30550
Home office total assets 145120
Accrued expenses 1350
Accounts payable 21300
Home office total liabilities 22650
Retained earnings, beg. Bal. 70420
Add: Net income of the home office 13450
Less: Net loss from branch -1400
Dividends paid -10000
Retained earnings. Ending bal. 72470
Sales 105000
Less: Cost of Goods Sold
Inventory, beginning 40120
Purchases 122500
Less: Shipment to branch -50200
Goods available for sale 112420
Less: Inventory, ending -48500 -63920
Gross Profit 41080
Less: Expenses paid 26350
Depreciation expense 1180
Accrued expenses 100 -27630
Net Income from own operation 13450
Net loss from branch operation -1400
Home office net income 12050
Combined net income 12050
Combined assets 155670
Combined liabilities 33200
Combined SHE 122470
PROBLEM 3
Home office
Store Furniture and Fixture - Branch 900
Branch Current 900
Shipment and installation cost paid by Branch
Allowance for Doubtful accounts 150
Branch Current 150
a. Transfer of cash to Branch 1500 900 c. Shipment and installation cost paid by Branch
b. Shipment to Branch 10200 150 Write off accounts from the transfer receivable
d. Transfer of Accounts receivable 2600
Shipment to Branch 1250 1000 Cash remittance by the Branch
BALANCE 15550 2050 BALANCE
UNADJUSTED BALANCE 13500
g. Depreciation charged to Branch 35
Shipment in Transit 600
Expense incurred by branch and paid by home office 475
1110
(balance before closing entries) ADJUSTED BALANCE 14610
BRANCH CURRENT or Investment in Branch
h. PROFIT from Branch operation (if any) -560 j. LOSSES from Branch operation (if any)
Branch current balance after closing entries 14050
1 Cash
Balance 15000
Remittance of cash from branch 1000
Cash collection from receivable 40000
Less: Cash transfer to branch -1500
Payments on account -36200
Expenses paid -9200
Dividends paid
Cash balance 9100
Accounts receivable, net 32950
Merchandise inventory, end 44500
Prepaid expenses
Home office total current assets 86550
Store Furniture and Fixtures 12000
Less: Accum. Depreciation -3950 8050
Store Furniture and Fixtures - Branch 3900
Less: Accum. Depreciation -785 3115
Branch Current 14050
Home office total noncurrent assets 25215
Home office total assets 111765
Accrued expenses 750
Accounts payable 29150
Home office total liabilities 29900
Retained earnings, beg. Bal. 28200
Add: Net income of the home office 3665
Less: Dividends paid -
Retained earnings. Ending bal. 31865
Common stock 50000
Home office shareholder's equity 81865
Sales 34600
Less: Cost of Goods Sold
Inventory, beginning 46000
Purchases 31600
Less: Shipment to branch -12050
Goods available for sale 65550
Less: Inventory, ending -44500 -21050
Gross Profit 13550
Less: Expenses 8475
Depreciation expense 100
Accrued expenses 750 -9325
Net Income from own operation 4225
Net loss from branch operation -560
Home office net income 3665
Combined net income 3665
Combined assets 113665
Combined liabilities 31800
Combined SHE 81865
PROBLEM 3 (HOME OFFICE ALLOWS THE BRANCH TO CARRY ITS DEPRECIABLE AND NONDEPRECIABLE ASSETS.
Home office
Branch Current 2250
Accumulated Depreciation 750
Store Furniture and Fixtures 3000
Allowance for Doubtful accounts 150
Branch Current 150
a. Transfer of cash to Branch 1500 150 Write off accounts from the transfer receivable
b. Shipment to Branch 10200 1000 Cash remittance by the Branch
c. Transfer of store furniture and fixtures 2250
d. Transfer of Accounts receivable 2600
Shipment to Branch 1250
BALANCE 17800 1150 BALANCE
UNADJUSTED BALANCE 16650
Shipment in Transit 600
Expense incurred by branch and paid by home office 475
1075
BRANCH CURRENT or Investment in Branch
(balance before closing entries) ADJUSTED BALANCE 17725
h. PROFIT from Branch operation (if any) -560 j. LOSSES from Branch operation (if any)
Branch current balance after closing entries 17165
1 Cash
Balance 15000
Remittance of cash from branch 1000
Cash collection from receivable 40000
Less: Cash transfer to branch -1500
Payments on account -36200
Expenses paid -9200
Dividends paid
Cash balance 9100
Accounts receivable, net 32950
Merchandise inventory, end 44500
Prepaid expenses
Home office total current assets 86550
Store Furniture and Fixtures 12000
Less: Accum. Depreciation -3950 8050
Branch Current 17165
Home office total noncurrent assets 25215
Home office total assets 111765
Accrued expenses 750
Accounts payable 29150
Home office total liabilities 29900
Retained earnings, beg. Bal. 28200
Add: Net income of the home office 3665
Less: Dividends paid -
Retained earnings. Ending bal. 31865
Common stock 50000
Home office shareholder's equity 81865
Sales 34600
Less: Cost of Goods Sold
Inventory, beginning 46000
Purchases 31600
Less: Shipment to branch -12050
Goods available for sale 65550
Less: Inventory, ending -44500 -21050
Gross Profit 13550
Less: Expenses 8475
Depreciation expense 100
Accrued expenses 750 -9325
Net Income from own operation 4225
Net loss from branch operation -560
Home office net income 3665
Combined net income 3665
Combined assets 113665
Combined liabilities 31800
Combined SHE 81865
BRANCH OFFICE
EQUITY ACCOUNT
c. Shipment returns from Branch c. Shipment returns to Home office xx
e. Depreciable assets acquired e. Depreciable assets acquired
and will be used by the Branch and will be used by the Branch xx
f. Cash remittance by the Branch f. Cash remittance to Home office xx
BALANCE xx
k. Adjusting items/reconciling items (if any) k. Adjusting items/reconciling items (if any) xx
xx
j. LOSSES from Branch operation (if any) j. LOSSES from Branch operation (if any) xx
Branch office
c. Shipment returns from Branch c. Shipment returns to Home office 0
e. Depreciable assets acquired e. Depreciable assets acquired
and will be used by the Branch and will be used by the Branch 8000
f. Cash remittance by the Branch f. Cash remittance to Home office 53400
BALANCE 61400
k. Adjusting items/reconciling items (if any) k. Adjusting items/reconciling items (if any) 0
0
j. LOSSES from Branch operation (if any) j. LOSSES from Branch operation (if any) 1400
BRANCH CURRENT or Investment in Branch HOME OFFICE CURRENT
BRANCH CURRENT or Investment in Branch HOME OFFICE CURRENT
1 Cash
Received cash transfer 42500
Cash collection from receivable 53400
Less: Remittance of cash to home office -53400
Payments on account -12250
Purchased asset on cash -8000
Expenses paid -18000
Cash balance 4250
Accounts receivable 12600
Merchandise inventory, end 23500
Prepaid expenses 750
Branch total assets 41100
Note: The home office is the accountable in keeping the records for
any depreciable assets which in this case the furniture and fixtures
acquired by the branch will be accounted by the home office
2 Accrued expenses 300
Accounts payable 10250
Home office current after closing 30550
Brach total liabilities 41100
Sales
Less: Cost of Goods Sold 66000
Inventory, beginning
Purchases 0
Add: Shipment from branch 22500
Goods available for sale 50200
Less: Inventory, ending 72700
Gross Profit -23500 -49200
Less: Expenses paid 16800
Depreciation expense 17250
650
Accrued expenses 300 -18200
Net loss -1400
Branch office
c. Home office current 900
Cash 900
Home office current 150
Accounts receivable - home office 150
c. Shipment and installation cost paid by Branch c. Shipment and installation cost paid by Branch 900
Write off accounts from the transfer receivable Write off accounts for the transfer receivable 150
Cash remittance by the Branch Cash remittance to Home office 1000
BALANCE 2050
3150
315
BRANCH CURRENT or Investment in Branch HOME OFFICE CURRENT
j. LOSSES from Branch operation (if any) j. LOSSES from Branch operation (if any)
1 Cash
Received cash transfer 1500
Cash collection from receivable 4200
Less: Remittance of cash to home office -1000
Payments on account -1450
Payments on shipment and installation -900
Expenses paid -1250
Cash balance 1100
Accounts receivable 3600
Accounts receivable - HO 850
Merchandise inventory, end 10400
Prepaid expenses
Branch total assets 15950
Note: The home office is the accountable in keeping the records for
any depreciable assets which in this case the furniture and fixtures
acquired by the branch will be accounted by the home office
2 Accrued expenses 350
Accounts payable 1550
Home office current after closing 14050
Brach total liabilities 15950
Sales 6200
Less: Cost of Goods Sold
Inventory, beginning 0
Purchases 3000
Add: Shipment from branch 12050
Goods available for sale 15050
Less: Inventory, ending -10400 -4650
Gross Profit 1550
Less: Expenses 1725
Depreciation expense 35
Accrued expenses 350 -2110
Net loss -560
PROBLEM 3 (HOME OFFICE ALLOWS THE BRANCH TO CARRY ITS DEPRECIABLE AND NONDEPRECIABLE ASSETS.
Branch office
Store furniture and fixtures 3150
Home office current 2250
Cash 900
Home office current 150
Accounts receivable - home office 150
Write off accounts from the transfer receivable Write off accounts for the transfer receivable 150
Cash remittance by the Branch Cash remittance to Home office 1000
BALANCE 1150
BRANCH CURRENT or Investment in Branch HOME OFFICE CURRENT
j. LOSSES from Branch operation (if any) j. LOSSES from Branch operation (if any) -560
1 Cash
Received cash transfer 1500
Cash collection from receivable 4200
Less: Remittance of cash to home office -1000
Payments on account -1450
Payments on shipment and installation -900
Expenses paid -1250
Cash balance 1100
Accounts receivable 3600
Accounts receivable - HO 850
Merchandise inventory, end 10400
Store furniture and fixtures 3150
Accumulated Depreciation (3150/7.5 years x 1/12) -35
Branch total assets 19065
2 Accrued expenses 350
Accounts payable 1550
Home office current after closing 17165
Brach total liabilities 19065
Sales 6200
Less: Cost of Goods Sold
Inventory, beginning 0
Purchases 3000
Add: Shipment from branch 12050
Goods available for sale 15050
Less: Inventory, ending -10400 -4650
Gross Profit 1550
Less: Expenses 1725
Depreciation expense 35
Accrued expenses 350 -2110
Net loss -560
xx a. Received cash from Home office
xx b. Shipment from Home Office
d. Expense incurred by Branch
xx but paid by Home Office
xx BALANCE
XX UNADJUSTED BALANCE
xx g. Depreciation charged by the Home Office
xx i. Adjusting items/reconciling items (if any)
xx
XX ADJUSTED BALANCE (balance before closing entries)
xx h. PROFIT from Branch operation (if any)
XX Home office current balance after closing entries
42500 a. Received cash from Home office
50200 b. Shipment from Home Office
d. Expense incurred by Branch
0 but paid by Home Office
92700 BALANCE
31300 UNADJUSTED BALANCE
650 g. Depreciation charged by the Home Office
0 i. Adjusting items/reconciling items (if any)
650
31950 ADJUSTED BALANCE (balance before closing entries)
0 h. PROFIT from Branch operation (if any)
HOME OFFICE CURRENT
HOME OFFICE CURRENT
30550 Home office current balance after closing entries
1500 a. Received cash from Home office
10200 b. Shipment from Home Office
2600 d. Transfer of Accounts receivable
1250 Shipment from Home Office
15550 BALANCE
13500 UNADJUSTED BALANCE
35 g. Depreciation charged by the Home Office
475 Expense incurred by branch and paid by home office
600 Shipment In Transit from Home office
1110
14610 ADJUSTED BALANCE (balance before closing entries)
HOME OFFICE CURRENT
h. PROFIT from Branch operation (if any)
14050 Home office current balance after closing entries
1500 a. Received cash from Home office
10200 b. Shipment from Home Office
2250 c. Transfer of store furniture and fixtures
2600 d. Transfer of Accounts receivable
1250 Shipment from Home Office
17800 BALANCE
16650 UNADJUSTED BALANCE
475 Expense incurred by branch and paid by home office
600 Shipment In Transit from Home office
1075
HOME OFFICE CURRENT
17725 ADJUSTED BALANCE (balance before closing entries)
h. PROFIT from Branch operation (if any)
17165 Home office current balance after closing entries