Problem V

SPENCER CO.
Work Sheet for Combined Statements for Home Office and Branch
December 31, 20x5
Home
Office
Debits
Cash ..
10,350
Cash in Transit . 1,500
Accounts Receivable .
26,200
Merchandise Inv. Dec 1 .
31,500
Store Supplies .
380
Prepaid Expenses .
350
Furniture & Fixtures
8,500
Branch
32,260
Retained Earnings .
6,850
Purchases .
27,600
Shipments from Home Office
Advertising Expense .
2,850
Salaries and Commissions Expense .
4,250
Store Supplies Expense .
560
Miscellaneous Selling Expense ..
1,850
Rent Expense ..
2,700
Depreciation Expense F&F ..
85
Miscellaneous General Expense ..
2,510
160,295
Merchandise Inv, Dec 31
24,900

Branch

Adjustments
and Eliminations
Dr.
Cr.

Dr.

Cr.

Dr.

Cr.

2,650
..
12,850
14,400
300
120
3,600

4,100
10,200
2,800
2,350
280
1,050
1,500
36
95
57,141
14,600

..
..
..
2,000
..
..
..
..
..
..
10,200
..
..
..
..
..
..
..
..
..

..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..

..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..

13,100
1,500
39,050
..
580
470
12,700
..
6,850
..
..
..
..
..
..
..
..
..
..
36,850

..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..

(c)

(a)
(b)

(d)

..
..
..
43,900
..
..
..
32,260
..
..
..
5,650
6,600
840
2,900
4,200
121
3,415
..
1,950

Income
Statement

Balance
Sheet

Problem V continued
Credits
Accumulated Depreciation Furniture
And Fixtures 2,585
Unrealized Intercompany Inventory
..
Profit . 3,700
Accounts Payable 36,400
Accrued Expenses ...
260
Home Office .. ..
Capital Stock 65,000
Sales 44,850
Shipments to Branch ... 8,500
P160,295
Merchandise Inv, Dec 31 .. 24,200

576
..
..
(c)
4,200
105
32,250
(a)
..
20,000
..
(b)
57,141
14,600
(d)

..
(b)
2,000
..
..
32,260
..
..
8,500
..
1,950

..
1,700

..
..

..
..
..
..
..
..
..
..
..
46,410

Net Income to Balance .

..
..

..
..

3,161
..

..
..
..
..
..
..
39,000
..
..
365
..
..
..
..
..
65,000
64,850
..
..
..
..
..
..
..
..
36,850
..
..
99,326
101,700
110,500
108,126
2,374
..
..
2,374
101,700
101,700
..
..
..
..
110,500
110,500

..
..
..
..
..
..
..
..
..
46,410

Explanation of adjustments and eliminations:

(a) To eliminate reciprocal accounts, Home Office and Branch.
(b) To eliminate shipments to Branch and Shipments to Home Office. Difference between the two balances is debited to Unrealized Intercompany Inventory
profit (20% of P8,500, or P1,700).
(c) To eliminate unrealized profit in beginning inventory balances : P3,700 balance per trial balance, less P1,700 adjustment per entry (b) or P2,000
(d) To reduce ending inventory cost:
Branch inventory form home office at billed price . P11,700
Branch inventory from home office at cost, P11,700/1.20
9,750
Inventory reduction .. P 1,950

Problem VI
Accounts

Trial Balance

Alignments and

Branch Income

Home Office

Balance Sheet

December 31, 20x4

Home
Office
Branch

Eliminations
Dr.

Statement
Cr.

Dr.

Income Statement
Cr.

Dr.

Cr.

Dr.

Cr.

Debits
Cash

Accounts Receivable

15,000

20,000

Inventory, December 31,20x4

30,000

Plant Assets (net)

150,000

Branch

44,000

Cost of goods sold - Home

office

220,000

Expenses - Home Office

70,000

Cost of goods sold - Branch

Expenses - Branch

2,000

549,000

10,000
3,000

30,000

17,000
8,000

37,000
(a)

10,000

(d
)

(f)
(h
)
(b
)

3,600

44,400
150,00
0

10,000
34,000
84,000

136,000
70,000

93,000

_______

(f)
(g
)

__4100
0
161,00
0

(d
)

(e)

3,600

(b
)

21,000

(c)

1,200

12,000

74,400

53,000

Credits
Accounts Payable

23,000

23,000

Mortgage Payable

50,000

50,000

Capital Stock
Retained Earnings - January 1,
20x4

100,000

100,000

Sales - Home Office

26,000

(c)
(b
)

350,000

Sales - Branch

150,00
0

Accrued Expenses

2,000

Home Office

9,000

1,200

24,800
245,00
0

105,000
150,00
0

2,000
(h
)

34,000

(a)

10,000

(e)

12,000

________
549,000

_______
161,00
0

_______
178,800

(g
)

___300
0
178,80
0

_______
127,40
0

_______
150,00
0

_______
206,000

_______
245,00
0

_______
261,40
0

_______
199,800

Problem VI continued
Branch Net Income
Home Office Net Income

22,600
_______
150,00
0

_______
150,00
0

__39,00
0
245,000

_______
245,00
0

_______
261,40
0

22,600
__39,00
0
261,400

Explanation of adjustments and eliminations:

(a) To record merchandise in transit from home office, determined as follows:
Billings from home office plus beginning inventory amount available for sale P105,000 + P6,000 .P111,000
Less cost of goods sold and ending inventory per branch records: P93,000 + P8,000 . 101,000
Balance representing shipments from home office not yet recorded by the branch.P 10,000
(b) To eliminate shipments of merchandise to branch recorded as sales. Reduction in home office cost of goods sold: P105,000 1.25 or
P84,000.
(c) To adjust branch cost of goods sold for unrealized profit on beginning inventory: P6,000 (P6,000 1.25), or P1,200.
(d) ) To adjust branch cost of goods sold for unrealized profit on ending inventory: P18,000 (P18,000 1.25) or P3,600.
(e) To record branch expenses paid by home office.
(f) To record cash deposited by branch on December 29 and 30 for account of the home office and not recorded by home office in 20x4.
(g) To record cash in transit from home office.
(h) To eliminate inter office accounts.