HOME OFFICE BOOKS

Working Fund - Agency 55,000

Cash 55,000

Samples inventory 200,000

Advertising materials 20,000
Shipments to Agency 220,000

Accounts Receivable 1,500,000

Sales - Agency 1,500,000

Cost of sales - Agency 800,000

Shipments to Agency 800,000

Cash 833,000
Sales Discount - Agency 17000
Accounts Receivable 850,000

Expenses - Agency 15,000 OR

Working Fund - Agency 15,000

Working Fund - Agency 15,000

cash 15,000

Advertising expense - Agency 108000

Samples Inventory - Agency 100000
Advertising materials 8000

HOME OFFICE BOOKS BRANCH BOOKS

A. INVESTMENT IN BRANCH 200,000 CASH
CASH 200,000 HOME OFFICE

B. INVESTMENT IN BRANCH 78,750 SHIPMENTS FROM HOME OFFICE

SHIPMENTS TO BRANCH 78,750 HOME OFFICE

C. INVESTMENT IN BRANCH 3500 EXPENSE

CASH 3500 HOME OFFICE

D. EXPENSE 3,375 HOME OFFICE

INVESTMENT IN BRANCH 3,375 CASH

E. SHIPMENTS TO BRANCH 10,000 HOME OFFICE

INVESTMENT IN BRANCH 10,000 SHIPMENTS FROM HOME OFFIC
F. INVESTMENT IN BRANCH 20,500 FURNITURE & FIXTURES
CASH 20,500 HOME OFFICE

G. NO ENTRY DEPRECIATION EXPENSE

ACCUM. DEP.

H. CASH 15,000 HOME OFFICE

INVESTMENT IN BRANCH 15,000 CASH
 AGENCY INCOME
Sales 1,500,000
Less: Sales Disc 17,000
Net sales 1,483,000
Less: COS 800,000
Gross Profit 683,000
Less: Ope Expenses 15,000
Advertising Exp 108,000
Net income 560,000

Expenses - Agency 15,000

Cash 15,000

200,000
200,000

78,750
78,750

3,500
3,500

3,375
3,375

10,000
TS FROM HOME OFFIC 10,000
20,500
20,500

1025
1025

15,000
15,000
DO-IT-YOURSELF - MANILA SALES

HOME OFFICE BOOKS BRANCH BOOKS

1 Investment in Branch 350,000 Shipments from Home Office
Shipments to Branch 350,000 Home Office

Investment in Branch 200,000 Cash

Cash 200,000 Home Office

2 No entry Purchases
Accounts Payable

3 No entry Accounts Receivable

Sales

Cash
Accounts Receivable

4 No entry Advertising Expense

Sales Commissions
Operating Costs
Cash

5 Cash 120,000 Accounts Payable

Investment in Branch 120,000 Cash

Home Office
Cash

COMPUTATION OF BRANCH NET INCOME

Sales 650,000
COS 425,000
Gross Profit 225,000
Advertising Expense 40,000
Sales Commissions 65,000
Operating Costs 45,000
Net Income 75,000
350,000
350,000

200,000
200,000

400,000
400,000

650,000
650,000

600,000
600,000

40,000
65,000
45,000
150,000

370,000
370,000

120,000
120,000
 EXAMPLE 2 - AGILA COMPANY (BILLED ABOVE COST)

HOME OFFICE BOOKS BRANCH BOOKS

1 Investment in Branch 18,000 Equipment
Cash 18,000

2 Investment in Branch 3,000 Rent Expense

Cash 3,000

3 Investment in Branch 100,000 Shipments from Home Office

Shipments to Branch 80,000
Allowance for Overvaluation 20,000

4 No entry Expenses

5 No entry Cash

6 Cash 60,000 Home Office

Investment in Branch 60,000

COMPUTATION OF BRANCH NET INCOME

Sales 105,000
COS (100T*75%) 75,000
Gross Profit 30,000
Expenses 11,000
Rent Exp 3,000
Net income b4 adj 16,000
Adjustment 15,000 (AFOBI 20T *75%)
Branch net income 31,000

ALTERNATIVE COMPUTATION (GET THE TRUE COST OF COS)

Sales 105,000
COS (80T*75%) 60,000 based on original cost from HO
Gross Profit 45,000
Expenses 11,000
Rent 3,000
Branch net income 31,000
BRANCH BOOKS
Equipment 18,000
Home Office 18,000

Rent Expense 3,000

Home Office 3,000

Shipments from Home Office 100,000

Home Office 100,000

11,000
Cash 11,000

105,000
Sales 105,000

Home Office 60,000

Cash 60,000