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

Adjustments
and Eliminations
Dr.
Cr.

Branch
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

(c)

(a)
(b)

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

(d)

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

Income
Statement
Dr.
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..

Cr.
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..

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

Cr.
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..

Problem V continued
Credits
Accumulated Depreciation Furniture
And Fixtures
2,585
576
..
Unrealized Intercompany Inventory
..
..
(b)
Profit .
3,700
..
(c)
2,000
Accounts Payable 36,400
4,200
..
Accrued Expenses ...
260
105
..
Home Office .. ..
32,250
(a) 32,260
Capital Stock 65,000
..
..
Sales 44,850
20,000
..
Shipments to Branch ...
8,500
..
(b)
8,500
P160,295
57,141
..
Merchandise Inv, Dec 31 .. 24,200
14,600
(d)
1,950
Net Income to Balance .

Explanation of adjustments and eliminations:

..
1,700

46,410

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

..
..

46,410

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

..
..

..
..

3,161
..

..
..
..
..
..
..
..
..
..
..
64,850 ..
..
..
..
..
..
36,850 ..
..
99,326
101,700 110,500 108,126
2,374
..
..
101,700
101,700 ..
..
110,500

..
39,000
365
..
65,000

..

..
..
2,374
..
110,500

..

(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

December 31, 20x4

Home
Office
Branch

Eliminations

Statement

Income Statement

Dr.

Cr.

Dr.

Cr.

Dr.

Cr.

Balance Sheet
Dr.

Cr.

Debits
Cash

15,000

2,000

Accounts Receivable

20,000

17,000

Inventory, December 31,20x4

30,000

8,000

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

_______

10,000

(g)

3,000

(a)

10,000

30,000
37,000
(d)

3,600

(f)

10,000

(h)

34,000

(b)

84,000

(b)

21,000

(c)

1,200

44,400
150,000

136,000
70,000

93,000

549,000

(f)

__41000

(d)
(e)

3,600
12,000

74,400
53,000

161,000

Credits
Accounts Payable

23,000

23,000

Mortgage Payable

50,000

50,000

Capital Stock
Retained Earnings - January 1,
20x4

100,000

100,000

26,000

(c)

1,200

Sales - Home Office

350,000

(b)

105,000

Sales - Branch

150,000

Accrued Expenses

2,000

Home Office

9,000

24,800
245,000
150,000
2,000

(h)

34,000

________

_______

_______

549,000

161,000

178,800

(a)

10,000

(e)

12,000

(g)

___3000

_______

_______

_______

_______

_______

_______

178,800

127,400

150,000

206,000

245,000

261,400

199,800

Problem VI continued
Branch Net Income

22,600

22,600

Home Office Net Income

_______

_______

__39,000

_______

_______

__39,000

150,000

150,000

245,000

245,000

261,400

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.