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San opening a branch in other city in the country, the following is unadjusted trial balance...

San opening a branch in other city in the country, the following is unadjusted trial balance for san and its branch for the year ended 31/12/2019

Trail balance 31/12/2019:

                                                   San                      branch        

Cash

22000

10175

account /rec.

12000

7550

Investment in Branch

60000

Inventories1/1/2019

23000

11000

Allowance for valuation

(1000)

Prepaid rent

8000

8450

Equipment

177000

32450

Ordinary shares

(200,000)

Retained earning1/1/2019

(34,000)

Dividend

15000

Account payable

(35000)

(2725)

Home office

(51000)

Purchases

190,000

Shipment from home office

104500

Shipment to branch

(110,000)

Sales

(169000)

(144700)

Operating expenses

42000

24300

total

0000

0000

The following information are available for you not considered in the trial balance:

1- the branch sent 1700$ cash for the home office in 31/12/2019.

2- the home office replenished the branch petty cash in 31/12/2019 by 1800$ in transit.

3- the home office shipped the goods for the branch at markup %10.

4- goods in transit for branch at cost was $5000.

5- ending inventory in san company was $30,000 and 9,900 in branch

Required:

1-Prepare the entries required to reconcile the home office and investment accounts?

2- prepare adjusted trial balance for san and its branch?

3- prepare a working paper for combined financial statement for san company in 31/12/2019?

4- prepare closing entries in branch and san books?

Solutions

Expert Solution

Adjusted Trial Balance
Particulars San Branch
Cash 22000 10275
account /rec. 12000 7550
Investment in Branch 60000
Inventories1/1/2019 23000 11000
Allowance for valuation -1000
Prepaid rent 8000 8450
Equipment 177000 32450
Ordinary shares -2,00,000
Retained earning1/1/2019 -34,000
Dividend 15000
Account payable -35000 -2725
Home office -51100
Purchases 1,90,000
Shipment from home office 104500
Shipment to branch -1,10,000
Sales -169000 -144700
Operating expenses 42000 24300
Total 0 0

Notes:

1 Cash of Branch = 10175 - 1700 + 1800 = 8475
2 Home office= 51000- 1800 +1700 = 50900
3 Goods in transit is not entered in trial balance as goods are not yet received by Branch.
Combined Financial Statement of San and Branch
Particulars Amount Particulars Amount
To Opening stock 34000 By Sales 313700
(23000 + 11000) (169000 + 144700)
To Purchase 190000 By Closing stock 39900
To operating expenses 66300 (30000 + 9900)
(42000 + 24300)
To Net profit 63300
353600 353600
Balance sheet of San Comapny as on 31st Dec,2019
Particulars Amount Amount
Ordinary shares 200000 Cash (22000 + 10275) 32275
Retain earnings 34000 Accounts receivable (12000+7550) 19550
Accouts payable (35000 + 2725) 37725 Dividend 15000
P&L Account 63300 Inventory (30000+9900) 39900
Allowances for valuation 1000 Investment in Branch 60000
Home office 51100 Prepaid rent (8000+8450) 16450
Shipment to branch 5500 Equipments (177000+32450) 209450
(Refer note)
392625 392625
Calculation of shipment
Shipment to branch 110000
Shipment from home office 104500
Shipment of branch 5500

ekkarill92 answered 3 years ago
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