Addis Ababa University

College of Business and Economics

School of Commerce
Accounting and Finance Department
Advance Accounting Individual Assignment 2

Name- Chalachew Simachew

Section- E4A1

ID NO.- BEE/1434/09

Submitted to: Instructor Kiros

May, 2020

Addis Ababa, Ethiopia

1.) Home office and Branch

Reconciliation of Reciprocal Ledger Accounts

Dec 31, 2012

Branch book Home office book

Balance before adjustment 44,000 85,000

Remittance of transit (10,000)

Shipment in transit 20,000

Expense allocated 5,000

Unrecorded HO collection of A/R (3,000)

Error in recording shipments 9,000

Adjusted balance 75,000 75,000

2.) A. Journal Entries recorded by home office

(1) Finished good inventory 200,000

Work in process 200,000

Cost of inventory completed

(2) Investment In branch 280,000

Inventory 200,000

Unrealized Intercompany profit 80,000

Transfer of inventory to branch billed in excess of cost

(3) Unrealized Intercompany profit 20,000

Realized Profit on branch shipments 20,000

Recognize portion of Intercompany Profit Realized (80,000×0.25)

Journal recorded by branch

 (1) Inventory from home office 280,000

Home office 280,000

Transfer of inventory from home office.

(2) A/R 105,000

Sales 105,000

Record Sales of inventory

(3) CGS 70,000

Inventory from home office 70,000

Record cost of inventory sold

B, Eliminating Entries

(1) Realized profit on branch shipments 20,000

CGS 20,000

Eliminates Home Office profit from CGS

(2) Unrealized Intercompany Profit 60,000

Inventory from home office 60,000

Eliminate unrealized intercompany profit from inventory

(3) Inventory 150,000

Inventory from home office 150,000

Reclassify inventory from home office (280,000-70,000-60,000)

3.) A journal entries record by branch

1) Cash 200,000

Automobile inventory 350,000

Home Office 550,000

2.) Automobile inventory 400,000

 A/P 400,000

3) A/R 650,000

Sales 650,000

4) CGS 425,000

Automobile 425,000

5) Cash 600,000

A/R 600,000

6) Adv.Exp. 40,000

Sales Commission 65,000

Other ExP. 45,000

Cash 150,000

7) A/P 370,000

Home Office 120,000

Cash 490,000

Closing Entries

8) Sales 650,000

CGS 425,000

Adv.Exp. 40,000

Sales Commission 65,000

Other Exp. 45,000

Income Summery 75,000

9) Income Summery 75,000

Home Office 75,000

B) Mason City Branch

Income Statement
 Year Ended Dec.31

Sales 650,000

CGS 425,000

Adv.Exp. 40,000

Sales Commission 65,000

Other Exp. 45,000

Total Exp. 57,5000

Net Income 75,000

C) Mosan City Branch

Balance Sheet

Dec. 31

Cash 160,000

A/R 50,000

Automobile Inventory 325,000

535,000

A/P 300,000

Home Office 505,000

535,000

4.) A Geda Company’s home office and Oda Branch

Reconciliation of Reciprocal Ledger Account

July 31, 2008

Inv’t in oda branch H.O in oda branch

Balances before adjustments 69,300 52,500

Add: (1) Merchandise shipped to 7,000

Branch by home office

: (2) Payment of branch trade A/P 3,000

Less: (3) acquisition of furniture (2,200)

: (4) Return on merchandise (3,200)

(5) Collection of trade A/R (2,100)

(6) Payment of cash by branch (3,500)

Adjusted balances 60,400 60,400

B,) Prepare journal entries on July 31, 2008, for the (1) home office and (2) Oda Branch of Geda
Company to bring the accounting records up to date. Both the home office and the branch use the
perpetual inventory system.

(1) Accounting records of home office

Office equipment 2,200

Investment in oda branch 2,200

Return on merchandise 3,200

Merchandise inventory 3,200

Cash in transit 3,500

Investment in oda branch 3,500

(2) Accounting records of branch

Inventory in transit 7,000

Home office 7,000

Trade accounts payable 3,000

Home office 3,000

Home office 2,100

Trade in account /R 2,100

5.) A. Eliminating Entries

1) Home office 305,000

Investment in branch 305,000

2) Unrealized intercompany profit 12,000

Inventory Fromt Home Office 12,000

3) Inventory 20,000

Inventory from Home Office 20,000

B) Plastic Product Corporation

Balance Sheet

Dec. 31

Cash 90,000

A/R 170,000

Inventory 288,000

Total Current Asset 548,000

Land 120,000

Building Equip. 800,000

Less: Accu.Dep. (360,000) 440,000

Total Asset 1,108,000

A/P 78,000

Bonds Payable 300,000

N/P 100,000

Total Liability 478,000

 Common Stock 200,000

Retained Earing 430,000

Total Stock holders’ equity 630,000

Total Liability and Stock holder equity 1,108,000

6,) . Record the transactions for the year on the books of (1) the Denton branch, (2) the Houston
branch, and (3) the home office (include recognition of branch income).

A Transaction recorded by HO and Branchs

(1) Journal entry record by Denton branch

1) Equipment 20,000

Cash 3,000

Home Office 23,000

2) Inventory 140,000

Home Office 140,000

3) A/R 136,000

Sales 136,000

4) CGS 102,000

Inventory 102,000

Records cost of inventory sold (136000×0.75)

5) Operating exp. 13.000

A/P 13,000

6) Cash 125,000

A/R 125,000

7) A/P 12,000

Cash 12,000

8) Cash 35,000

N/P 35,000
 9) Dep.Exp. 4,000

Accu.Dep. 4000

10) Home Office 135000

Cash 135000

(2) Journal Entries records houston branch

1) Equipment 20,000

cash 5,000

Home Office 25,000

2) Inventory 150,000

Home Office 150000

3) A/R 152,000

Sales 152,000

4) CGS 114,000

Inventory 114,000

Records cost of inventory sold (152000×0.75)

5) Operating exp. 11,000

A/P 11,000

6) Cash 138,000

A/R 138,000

7) A/P 9000

Cash 9,000

8) Cash 40,000

N/P 40,000

9) Dep.Exp. 4,000

Accu.Dep. 4,000
 10) Home Office 151,000

Cash 151,000

Journal entries records home office

1) Equipment 40,000

A/P 40,000

2) Inv.In Denton branch 23,000

Inv.in housetons branch 25,000

Equipment 40,000

Cash 8,000

3) A/R 175,000

Sales 175,000

4) CGS 105,000

Inventory 105,000

5) Inv.In Denton branch 140,000

Inv.in housetons branch 150,000

Inventory 232,000

Utilized intercompany profit 58,000

Transfer of inventory to branch billed in excess of cost

(290000×0.8) =232000

(290000×0.2)= 58000

6) Inventory 341,000

A/P 341,000

Purchase of inventory. (105000+231000+45000-41000)= 341000

7) Operating Exp. 85,000

A/P 85,000
 8) Cash 172,000

A/R 172,000

Record collection on account :( 25000+175000-28000) = 172000

9) A/P 464,000

Cash 464,000

Payment on account payable: (18000+40000+341000+85000-28000) =464000

10) Dep.Exp. 7,000

Accu.Dep. 7,000

11) Cash 286,000

Inv.In Denton branch 135,000

Inv.in housetons branch 151,000

12) Investment in Denton bra. 17,000

Denton branch income 17,000

13) Investment in housetons bra. 23,000

Housetons income 23,000

14) Unrealized intercompany profit 43,200

Realized profit on branch shipment 43,200

Recognize portion of intercompany profit realization :( 102000+114000) ×0.2= 43200

B,)

Ortegren Sales Company

Financial Statement Work paper

December 31

Home Denton Houston Eliminations

Item Combined
Office Branch Branch Debit Credit

Sales 175,000 136,000 152,000     463,000

Denton Branch Income 17,000     (1) 17,000    

Houston Branch Income 23,000     (2) 23,000    

Realized Profit on Branch

43,200     (3) 43,000    
Shipments

Credits 258,200 136,000 152,000     463,000

Cost of Goods Sold 105,000 102,000 114,000   (3) 43,200 277,800

Depreciation Expense 7,000 4,000 4,000     15,000

Operating Expenses 85,000 13,000 11,000     109,000

Debits (197,000) (119,000) (129,000)     (401,800)

Net Income, carry

61,200 17,000 23,000 83,200 43,200 61,200
forward

Ret. Earnings, Jan. 59,000         59,000

Home Office, pre closing (1) 28,000

  28,000 24,000    
balance (2) 24,000

Net Income, from above 61,200 17,000 23,000 83,200 43,200 61,200

Retained Earnings, carry

120,200 45,000 47,000 135,200 43,200 120,200
forward

Cash 6,000 16,000 23,000     45,000

Accounts Receivable 28,000 11,000 14,000     53,000

Inventory 45,000 38,000 36,000   (4) 14,800 1,042,000

Land 52,000         52,000

Buildings & Equipment 90,000 20,000 20,000     130,000

Investment in: Denton

45,000     (1) 45,000    
Branch

Houston Branch 47,000     (2) 47,000    

Debits 313,000 85,000 93,000     384,200

Accum. Depreciation 28,000 4,000 4,000     36,000

Accounts Payable 20,000 1,000 2,000     23,000

Notes Payable 30,000 35,000 40,000     105,000

Common Stock 100,000         100,000

Ret. Earnings (& Home

120,200 45,000 47,000 135,200 43,200 120,200
Office), from above

Unrealized Intra-
14,800     (4) 14,800    
company Profit

Credits 313,000 85,000 93,000 150,000 150,000 384,200

(1) Eliminate intercompany account with Denton branch.

(2) Eliminate intercompany account with Houston branch.

(3) Eliminate home office profit from cost of goods sold.

(4) Eliminate unrealized intercompany profit from inventory.