Assessment No.

On January 2, 20XX, Elizabeth Company opened a new branch in a neighboring city. The balance sheet of the home office
on January 2, 20XX is given below:

Elizabeth Company (Home Office)

Balance Sheet
January 2, 20XX
Assets Liabilities and Shareholder’s Equity

Cash 88,950 Accrued Expenses 1,875

Accounts Receivable 41,475 Accounts Payable 34,200
Merchandise Inventory 60,180 Share Capital, P20 par 75,000
Prepaid Expenses 2,700 Retained Earnings 105,630
Furnitures and Fixtures 30,000
Less: Accumulated Depreciation (6,600)

Total Assets 216,705 Total Liabilities and Shareholders’ 216,705

Equity

The following is the summary of the transactions of the home office and the branch for 20XX:

Home Office Transactions

a. Transfers of cash to branch, P63,750.

b. Transfers of merchandise to branch (billed at cost), P75,300.
c. Sales on account, P157,500.
d. Purchases on account, P183,750.
e. Collection of accounts, P170,400.
f. Payment of accounts, P186,000.
g. Expenses paid, P39,900.
h. Cash received from branch, P80,100.
i. Dividends paid, P15,000.

Adjusting data on December 31:

Depreciation for the year, P1,770.
Merchandise Inventory, P72,750.
Prepaid Expenses, P3,075.
Accrued Expenses, P2,025.

Branch Transactions

a. Cash received from home office, P63,750.

b. Merchandise received from home office, P75,300.
c. Sales on account, P99,000.
d. Purchases on account, P33,750.
e. Collections of accounts deposited to the credit of home office, P80,100.
f. Payment of accounts, P18,375.
g. Purchase of furniture and fixtures for cash, P12,000.

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h. Expenses paid, P27,000.

Adjusting data on December 31:

Depreciation for the year, P975.
Merchandise Inventory, P35,250.
Prepaid Expenses, P1,125.
Accrued Expenses, P450.

Required:
1. Prepare the journal entries to record the foregoing transactions for the branch and the home office.
2. Prepare the journal entries to adjust and close the books for branch and the home office.
3. Prepare individual statements for the branch and the home office.
5. Prepare the combined statements for the branch and the home office.

1. Journal Entries

Home Office Books Branch Books

a. ? ? ? ?
? ? ? ?

b. ? ? ? ?
? ? ? ?

c. ? ? ? ?
? ? ? ?

d. ? ? ? ?
? ? ? ?

e. ? ? ? ?
? ? ? ?

? ?
? ?

f. ? ? ? ?
? ? ? ?

g. ? ?
? ?

? ? ? ?
? ? ? ?

h. ? ?
? ?

? ?
? ?

i. ? ?
? ?

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2. Adjusting and Closing Entries

Adjusting Entries

Home Office Books Branch Books

j. ? ?
? ?

k. ? ? ? ?
? ? ? ?

l. ? ? ? ?
? ? ? ?

m. ? ? ? ?
? ? ? ?

Closing Entries

Home Office Books Branch Books

n. ? ? ? ?
? ? ? ?
? ? ? ?
? ? ? ?
? ? ? ?
? ? ? ?
? ?

o. Branch loss 2,100 Home office 2,100

? 2,100 ? 2,100

p. ? 2,100
? 2,100

q. ? ?
Retained earnings 18,075

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3. Individual Financial Statements

Elizabeth Company – Home Office

Income Statement
Year Ended December 31, 20XX

Sales P?
Cost of sales
Merchandise inventory, 1/1 P?
Purchases ?
Goods available for sale P?
Shipment to branch ?
Goods available for own sale P168,630
Merchandise inventory, 12/31 ? ?
Gross profit P 61,620
Expenses ?
Net operating income P?
Branch income (loss) ?
Net income P?

Elizabeth Company – Home Office

Balance Sheet
December 31, 20XX

Assets
Cash P?
Accounts receivable ?
Merchandise inventory, 12/31 ?
Prepaid expenses ?
Furniture and fixtures P?
Less: Accumulated depreciation ? ?
Branch furniture and fixtures P?
Less: Accumulated depreciation ? ?
Investment in branch 45,825
Total assets P217,680

Liabilities and Shareholders’ Equity

Liabilities
Accrued expenses P?
Accounts payable ?
Total liabilities P?

Shareholders’ Equity
Share Capital P?
Retained earnings 108,705 ?
Total liabilities and shareholders’ equity P217,680

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Elizabeth Company – Branch
Income Statement
Year Ended December 31, 20XX

Sales P?
Cost of sales
Purchases P?
Shipments from home office ?
Goods available for sale P?
Merchandise inventory, 12/31 ? ?
Gross profit P 25,200
Expenses ?
Net income (loss) P?

Elizabeth Company - Branch

Balance Sheet
December 31, 20XX

Assets
Cash P?
Accounts receivable ?
Merchandise inventory, 12/31 ?
Prepaid expenses ?
Total assets P61,650

Liabilities and Capital

Accounts payable P?
Home office ?
Total liabilities and capital P61,650

Learning Module on Accounting for Business Combinations

4. Combined Financial Statements

Elizabeth Company
Combined Income Statement
Year Ended December 31, 20XX

Sales P?
Cost of sales
Merchandise inventory, 1/1 P?
Purchases ?
Goods available for sale P?
Merchandise inventory, 12/31 ? ?
Gross profit P?
Expenses ?
Combined net income P 18,075

Elizabeth Company
Balance Sheet
December 31, 20XX

Assets
Cash P?
Accounts receivable ?
Merchandise inventory ?
Prepaid expenses ?
Furniture and fixtures P?
Less: accumulated depreciation ? ?
Total assets P233,505

Liabilities and Shareholders’ Equity

Accrued expenses P?
Accounts payable ?
Capital stock ?
Retained earnings ?
Total liabilities and shareholders’ equity P233,505

Learning Module on Accounting for Business Combinations