Problem V SPENCER CO.

Work Sheet for Combined Statements for Home Office and BranchDecember 31, 20x5

Adjustments Income BalanceHome and Eliminations Statement Sheet

Office Branch Dr. Cr. Dr. Cr. Dr. Cr.

DebitsCash …………………………………….. 10,350 2,650 ……….. ……….. ……….. ……….. 13,100 ………..Cash in Transit …………………………. 1,500 …….. ……….. ……….. ……….. ……….. 1,500 ………..Accounts Receivable ………………. 26,200 12,850 ……….. ……….. ……….. ……….. 39,050 ………..Merchandise Inv. Dec 1 ……………. 31,500 14,400 (c) 2,000 43,900 ……….. ……….. ……….. ………..Store Supplies …………………………. 380 300 ……….. ……….. ……….. ……….. 580 ………..Prepaid Expenses ……………………. 350 120 ……….. ……….. ……….. ……….. 470 ………..Furniture & Fixtures …………………… 8,500 3,600 ……….. ……….. ……….. ……….. 12,700 ………..Branch…………………………………… 32,260 ……… (a) ……….. 32,260 ……….. ……….. ……….. ………..Retained Earnings ……………………. 6,850 ……… ……….. ……….. ……….. ……….. 6,850 ………..Purchases ………………………………. 27,600 4,100 ……….. ……….. ……….. ……….. ……….. ………..Shipments from Home Office ………………… 10,200 (b) 10,200 ……….. ……….. ……….. ……….. ………..Advertising Expense …………………. 2,850 2,800 ……….. 5,650 ……….. ……….. ……….. ………..Salaries and Commissions Expense . 4,250 2,350 ……….. 6,600 ……….. ……….. ……….. ………..Store Supplies Expense ………………. 560 280 ……….. 840 ……….. ……….. ……….. ………..Miscellaneous Selling Expense …….. 1,850 1,050 ……….. 2,900 ……….. ……….. ……….. ………..Rent Expense ………………………….. 2,700 1,500 ……….. 4,200 ……….. ……….. ……….. ………..Depreciation Expense – F&F ……….. 85 36 ……….. 121 ……….. ……….. ……….. ………..Miscellaneous General Expense ….. 2,510 95 ……….. 3,415 ……….. ……….. ……….. ………..

160,295 57,141 ……….. ……….. ……….. ……….. ……….. ………..Merchandise Inv, Dec 31 …………… 24,900 14,600 ……….. (d) 1,950 ……….. ……….. 36,850 ………..

Problem V continued

CreditsAccumulated Depreciation – FurnitureAnd Fixtures ……………………… 2,585 576 ……….. ……….. ……….. ……….. ……….. 3,161Unrealized Intercompany Inventory ……….. ……….. (b) 1,700 ……….. ……….. ……….. ……….. ………..Profit ………………………………. 3,700 ……….. (c) 2,000 ……….. ……….. ……….. ……….. ………..Accounts Payable ……………… 36,400 4,200 ……….. ……….. ……….. ……….. ……….. 39,000Accrued Expenses ……………... 260 105 ……….. ……….. ……….. ……….. ……….. 365Home Office …………………….. ……….. 32,250 (a) 32,260 ……….. ……….. ……….. ……….. ………..Capital Stock …………………… 65,000 ……….. ……….. ……….. ……….. ……….. ……….. 65,000Sales ……………………………… 44,850 20,000 ……….. ……….. ……….. 64,850 ……….. ………..Shipments to Branch …………... 8,500 ……….. (b) 8,500 ……….. ……….. ……….. ……….. ………..

P160,295 57,141 ……….. ……….. ……….. ……….. ……….. ………..Merchandise Inv, Dec 31 …….. 24,200 14,600 (d) 1,950 ……….. ……….. 36,850 ……….. ………..

46,410 46,410 99,326 101,700 110,500 108,126Net Income to Balance ………. 2,374 ……….. ……….. 2,374

101,700 101,700 ……….. ………..……….. ………..110,500 110,500

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 Eliminations Statement Income StatementHome Office Branch

Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.

Debits

Cash 15,000 2,000 (f) 10,000(g) 3,000 30,000

Accounts Receivable 20,000 17,000 37,000

Inventory, December 31,20x4 30,000 8,000 (a) 10,000(d) 3,600 44,400

Plant Assets (net) 150,000150,000

Branch 44,000 (f) 10,000(h) 34,000

Cost of goods sold - Home office 220,000

(b) 84,000 136,000

Expenses - Home Office 70,000 70,000

Cost of goods sold - Branch 93,000(d) 3,600

(b) 21,000 74,400

(c) 1,200

Expenses - Branch _______

__41000 (e) 12,000 53,000

549,000161,000

Credits

Accounts Payable 23,000 23,000

Mortgage Payable 50,000 50,000

Capital Stock 100,000100,000

Retained Earnings - January 1, 20x4 26,000 (c) 1,200 24,800

Sales - Home Office 350,000(b) 105,000

245,000

Sales - Branch150,000

150,000

Accrued Expenses 2,000 2,000

Home Office 9,000(h) 34,000 (a) 10,000

(e) 12,000 ________

_______

_______

(g)

___3000

_______

_______

_______

_______

_______

_______

549,000161,000 178,800

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.