Problem V
SPENCER CO.
Work Sheet for Combined Statements for Home Office and Branch
December 31, 20x5
Adjusted Trial BalanceAdjustments
Home
and Eliminations
Office
Branch
Dr.
Cr.
Debits
Cash ..
Cash in Transit .
Accounts Receivable .
Merchandise Inv. Dec 1 .
Store Supplies .
Prepaid Expenses .
Furniture & Fixtures
Branch
Retained Earnings .
Purchases .
Shipments from Home Office
Advertising Expense .
Salaries and Commissions Expense.
Store Supplies Expense .
Miscellaneous Selling Expense ..
Rent Expense ..
Depreciation Expense F&F ..
Miscellaneous General Expense ..
Merchandise Inv, Dec 31
10,350
1,500
26,200
31,500
380
350
8,500
32,260
6,850
27,600
2,850
4,250
560
1,850
2,700
85
2,510
160,295
24,900
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
Combined
Income
Statement
Sheet
Dr.
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Combined
Balance
Cr.
Dr.
Cr.
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
13,100
1,500
39,050
..
580
470
12,700
..
6,850
..
..
..
..
..
..
..
..
..
..
36,850
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
..
Problem V continued
Credits
Accumulated Depreciation Furniture
And Fixtures
2,585
Unrealized Intercompany Inventory..
Profit .
3,700
Accounts Payable 36,400
Accrued Expenses ...
260
Home Office .. ..
Capital Stock 65,000
Sales 44,850
Shipments to Branch ...
8,500
P160,295
Merchandise Inv, Dec 31 .. 24,200
576
..
..
4,200
105
32,250
..
20,000
..
57,141
14,600
(b)
(c)
(a)
(b)
(d)
..
1,700
2,000
..
..
32,260
..
..
8,500
..
1,950
46,410
Net Income to Balance .
..
..
..
..
..
..
..
..
..
..
..
46,410
..
..
..
..
..
..
..
..
..
..
..
99,326
2,374
101,700
..
..
3,161
..
..
..
..
..
..
..
..
39,000
..
..
365
..
..
..
..
..
65,000
64,850 ..
..
..
..
..
..
..
..
36,850
..
..
101,700
110,500 108,126
..
..
2,374
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
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
(f)
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
_______
__41000
549,000
161,000
(d)
(e)
3,600
12,000
74,400
53,000
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.
