Initial Investment
1. Home Office establishes a branch for an initial investment of P1,000,000 in cash.
Branch
Home Office Books Books
Property carried in branch books-Branch Acquisition
2. Branch acquires equipment for 400,000 to be carried in Branch books.
Branch
Home Office Books Books
*Recording of depreciation expense
Property carried in home office books-Branch Acquisition
3. Branch acquires equipment for P200,000 to be carried in the home office books.
Branch
Home Office Books Books
*Recording of depreciation expense
4. Property carried in branch books-Home Office Acquisition
Home office acquires furniture for 50,000 to be carried in branch books.
Branch
Home Office Books Books
*Recording of depreciation expense
5. Property carried in home office books-Home Office Acquisition
Home office acquires furniture for 30,000 to be carried in home office books, but possession
and use of the equipment is transferred to the branch.
Branch
Home Office Books Books
*Recording of depreciation expense
6. Transfer of inventories-freight paid by home office.
Home office transfers inventory worth P150,000 to the branch. Freight paid by the home office
is P10,000.
Branch
Home Office Books Books
7. Transfer of inventories-freight paid by home office.
Home office transfers inventory worth P80,000 to the branch. Freight paid by the home office is
P6,000.
Branch
Home Office Books Books
8. Purchase of inventories-acquisition from outside parties.
Branch purchases inventory worth 40,000 on account from outside party. Freight paid by the branch is
2,000.
Home Office Books Branch Books
9. Revenue
Branch makes total sales of P500,000 on account.
Home Office Books Branch Books
10.
Collection
Branch collects 400,000 from accounts receivable.
Home Office Books Branch Books
11. Remittance to home office.
Branch remits 300,000 cash collections to home office.
Home Office Books Branch Books
Allocation of
expenses
12. Branch incurs various operating expenses amounting to P100,000, one-fourth of which remains unpaid.
Home Office Books Branch Books
13. Home office allocates 10,000 utilities expense and 4,000 general overhead costs to the branch.
Home Office Books Branch Books
Combined Financial Statements
ABC Co.
Trial balance
December
31,20x1
Home Office Branch
Dr.(Cr.) Dr.(Cr.)
Cash 1,100,000 417,000
Accounts Receivable 180,000 100,000
Inventory, beg. 650,000
Shipments from home office 230000
Purchases 72,000 40000
Freight-in 22,000 18000
Shipments to branch (230,000)
Investment in branch 827,000
Equipment 720,000 400000
Acc. Depreciation-equipment (72,000) (40000)
Furniture 90,000 50000
Acc. Depreciation-furniture (9,000) (5000)
Accounts Payable (72,000) (40000)
Accrued Expenses (45,000) (25000)
Share Capital (2,000,000)
Share Premium (500,000)
Retained earnings-beg (206,200)
Home Office (827000)
Sales (900,000) (500000)
Depreciation Expense 168,000 68000
Utilities Expense 18,000 10000
General Overhead Expense 7,200 4000
Various Operating Expenses 180,000 100000
Totals - -
The home office and the branch have ending inventories of 270,000 and 150,000, respectively.
Requirement:
a. Statement of Financial Position; and
b. Statement of profit or loss
ABC Co.
Trial balance
December
31,20x1
Eliminatio
Home Office Branch n Combined
Dr.(Cr.) Dr.(Cr.) Dr.(Cr.) Dr.(Cr.)
Cash 1,100,000 417,000 1,517,000
Accounts Receivable 180,000 100,000 280,000
Inventory, beg. 650,000 650,000
Shipments from home office 230000 (230000) -
Purchases 72,000 40000 112,000
Freight-in 22,000 18000 40,000
Shipments to branch (230,000) 230000 -
Investment in branch 827,000 (827000) -
Equipment 720,000 400000 1,120,000
Acc. Depreciation-equipment (72,000) (40000) (112,000)
Furnitur
e 90,000 50000 140,000
Acc. Depreciation-furniture (9,000) (5000) (14,000)
Accounts Payable (72,000) (40000) (112,000)
Accrued Expenses (45,000) (25000) (70,000)
(2,000,000
Share Capital (2,000,000) )
Share Premium (500,000) (500,000)
Retained earnings-beg (206,200) (206,200)
(827000
Home Office ) 827000 -
(500000 (1,400,000
Sales (900,000) ) )
Depreciation Expense 168,000 68000 236,000
Utilities Expense 18,000 10000 28,000
General Overhead Expense 7,200 4000 11,200
Various Operating Expenses 180,000 100000 280,000
Totals - - -
Elimination Entries:
a. Home Office 827,000
Investment In Branch 827,000
Shipment to
b. branch 230,000
Shipments from home office 230,000
ABC Co.
Statement of profit or loss
For the year ended December 31, 20x1
1400000
Sales
COGS:
Inventory,beg. 650000
Purchases 112000
Freight-in 40000
Total Goods Available for Sale 802000
Inventory,end (420000) (382000)
Gross Profit 1018000
Depreciation Expense (236000)
Utilities Expense (28000)
General Overhead Costs (11200)
Various operating expenses (280000)
Profit for the Period 462800
Individual Statement of Profit or Loss of the Home Office
Sales 900000
COGS:
Inventory,beg. 650000
Purchases 72000
Shipments to Branch 22000
Freight-in (230000)
Total Goods Available for Sale 514000
Inventory,end (270000) (244000)
Gross Profit 656000
Depreciation Expense (168000)
Utilities Expense (18000)
General Overhead Costs (7200)
Various operating expenses (180000)
Profit for the Period 282800
Entries:
ABC Co.
Statement of Financial Position
As of December 31, 20x1
ASSETS
CASH 1517000
ACCOUNTS RECEIVABLE 280000
INVENTORY 420000
EQUIPMENT 1120000
ACC. DEP'N-EQUIPMENT (112000)
FURNITURE 140000
ACC. DEP'N-FURNITURE (14000)
TOTAL ASSETS 3351000
LIABILITIES AND EQUITY
ACCOUNTS PAYABLE 112000
ACCRUED EXPENSES 70000
SHARE CAPITAL 2000000
SHARE PREMIUM 500000
RETAINED EARNINGS 669000
TOTAL LIABILITIES AND
EQUITY 3351000