—_—_— ~— Toe 4d [Ch ea ADVANCED ACCOUNTING {Ch. 8 Products Co. receives remit- inated in sates roade by other such collections, simply cof such collections, home office and the 10. The New York branch of the Suprex tances from customers whose accounts 0m) branches. This branch keeps the cash from notifying the home office and the other branches What entries would you recommend be made by the related branches in accounting for the collections? ; 11. What point of view is taken in the restatement of branch and horne ice activi sentation? office activities for purposes of combined statement prese se data for home office and branch in mbined statements, home office home office has recognized Josed its nominal accounts. f the reciprocal accounts? a Se ee = 12. In listing adjusted trial bal the development of working papers for co and branch balances are not reciprocal if the branch earnings but the branch has not yet ¢ What effect does this have on the elimination o| din the preparation of working in allowance for overvaluation trial balance? 13. What special adjustments are require papers for combined statements when a of branch merchandise is found on the home office of combined statements on the SESE 14, What is the effect of the preparation closing entries for home and branch office books? ae R EXERCISES 1. Branch A is authorized by its home office to send cash of $1,500 that it can spare to Branch B. How is this transfer best recorded on the books of (a) Branch A, (b) Branch B, and (c) the home office? 2. The McCall Manufacturing Company maintains branches that mar- ket the products that it produces. Merchandise is billed to the branches at manufacturing cost, the branches paying freight charges from the home office to the branch, On November 15, Branch No. | ships part of its stock to Branch No. 5 upon authorization by the home office. Origi- nally Branch No. | had been billed for this merchandise at $1,600 and had paid freight charges on the shipment from the home office of $350. Branch No. 5, upon receiving the merchandise, pays freight charges on the shipment from Branch No, | of $250, If the shipment had been made from the home office directly to Branch No. 5, the freight cost to Branch No. 5 would have been $400, How should the merchandise transiers be recorded on the books of (a) Branch No. 1, (b) Branch No. 5, and (c) the home office? ee 3. The ledger of the Phillips Branch Store #5 sh tt ances on December 31: #5 shows the following bal ——y 7 & ast au j i i a & me, Merchandise inventory, January 1 (cost) , Shipments from home oflice (at out) et $40,000 Freight in... 30,000 Sales... e- s+ EX Sales returns. 50,000 2,000' 1 ‘ st om 8) HOME OFFICE AND BRANCH — SPECIAL PRCOLEMS. 245 A closing inventory is taken on December 31, and the merchandise stsales price is determined to be $52,000, Atw i peri ata etaiar eee . At what cost should the ending 4. Trial balances before adjustment for the home office and the branch of the Ace Company show the following items on December 31. Differ- ences in the shipments account balances result from the home office policy of billing the branch for merchandise at 20% above cost. Home Office Branch Books Books Allowance for overvaluation of branch merchandise. $3,600 Shipments to branch... 8,000 Purchases (outsiders)... $ 2,500 Shipments from home office 9,600 Merchandise inventory, December 1 15,000 (a) What part of the branch inventory as of December | represented purchases from outsiders and what part represented goods acquired from the home office? (b) Assuming that the branch ending inventory is $10,000, composed of merchandise from home office at billed price, $8,400, and merchandise from outsiders at cost, $1,600, what entry is necessary on the home office books to adjust the allowance account at the end of the fiscal period? 5. The Marsh Co. bills its branch for merchandise at 135% of cost. On December 31 the balance in the inventory allowance account is to be calculated from the following information reported by the branch: Merchandise from Merchandise Pur- Home Office (at chased from Out- Merchandise billed price) siders (at cost) Total Mase, inventory, Dec. 1 . $16,200 $ 4,000 $20,200 Mase. into stock, Dec. 1-31. 20,250 12,000 32,250 Mase, inventory, Dec. 31. 18,900, 5,000 23,900 (a) What is the balance of the allowance account on the home office books before any adjustment is made for branch sales for December? (b) What entry is required on the home office books to adjust the allowance account at the end of December? (©) Assuming that the branch had returned to the home office mer- chandise originally acquired at a billed price of $540, what entries would be made on the branch and home office books to record this return? 6. The Berkeley branch of the Bruin Co. is billed for merchandise by the home office at 20% above cost. The branch in turn prices merchan tise for sales purposes at 25% above billed price. On January 7 allo the branch merchandise is destroyed by fire. No insurance was matn- tained. Branch accounts show the following information:246 [ADVANCED ACCOUNTING Ih g Merchandise inventory, Jan. 1, (at billed price) : 526400 Shipments from home oflice (Jan. 1-17). 204 0 Sales....... 300 Sales returns 200 Sales allowances - i (a) What was the cost of the merchandise destroyed? (b) Give the entries on both the branch books and the home office books to record the loss, (Assume perpetual inventory records.) 7. On December 1, Walsh Co, opened a branch in Newark, shipping tg the branch merchandise billed at $30,000. During the month additionay shipments were made at billed prices of $12,000. During December the branch returned merchandise that was defective and received credits of $750 on the returns. At the end of the month the branch records its inventory at $18,500, as follows: Merchandise acquired from home oltice at billed price $16,500 Merchandise acquired from outsiders 2,000 Total inventory .....0.e0ccceeeeeeeeeeeeeeeegecseaes - $18,500 A branch loss for December is calculated at $2,600. The home office has followed the practice of billing the branch at 20% above merchandise cost. Further, the home office has recorded branch merchandise shipments and returns in its regular sales and sales returns accounts at this billed price. Give the journal entries that are necessary on the books of the home office at the end of JYecember to recognize the results of branch operations and to correct and bring its books up to date. PROBLEMS 8-1. On December 31, the end of a monthly period, the trial balance for the Burnside Sales Co. Branch No. 1 reported balances as listed below: ‘The home office bills the branch for merchandise at 334% above Cost Cash... + $ 2,510 Notes Payab 16,000 Home Oilice 100 Sale 8,000, Inventory. Store Supplies ' Store Furnitur Allowance for Deprec Store Furniuur Accounts Payal ion of 320 3,500 The following data were available on December 31: Store supplies inventory, §140, Depreciation of furniture, 1% a month, Accr clling expenses, $120, : Prepaid selling expenses, $150,