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TitleAccounting for Branch Operation- Baker
TagsTypes Business/Law
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Page 18

622 Chapter 11

4. The branch’s Home Office account replaces retained earnings in the branch’s
trial balance for the retained earnings and balance sheet sections of the
workpaper.

5. The $5,000 of Unrealized Intracompany Profit from the home office’s trial
balance is eliminated by entry E(26), and the carrying amount of the branch’s
inventory is reduced to the original cost to the company (home office).

FIGURE 11–3 December 31, 19X1, Workpaper for Ulmer, Inc., Combined Home Office and Branch
Financial Statements

Eliminations

Home Florida
Item Office Branch Debit Credit Combined

Sales 500,000 200,000 700,000
Florida Branch Income 32,000 (24) 32,000
Realized Profit on Branch Shipments 35,000 (25) 35,000

Credits 567,000 200,000 700,000

Cost of Goods Sold 254,000 128,000 (25) 35,000 347,000
Depreciation 30,000 6,000 36,000
Other Expenses 133,000 34,000 167,000

Debits (417,000) (168,000) (550,000)

Net Income, carry forward 150,000 32,000 67,000 35,000 150,000

Retained Earnings, January 1 285,000 285,000
Home Office, preclosing balance 170,000 (24) 170,000
Net Income, from above 150,000 32,000 67,000 35,000 150,000

435,000 202,000 435,000
Dividends Declared (50,000) (50,000)

Retained Earnings, December 31,
carry forward 385,000 202,000 237,000 35,000 385,000

Cash 47,000 41,000 88,000
Accounts Receivable 75,000 42,000 117,000
Inventory 52,000 12,000 (27) 15,000 79,000
Inventory—From Home Office 20,000 (26) 5,000

(27) 15,000
Land 105,000 105,000
Buildings and Equipment 545,000 100,000 645,000
Investment in Florida Branch 202,000 (24) 202,000

Debits 1,026,000 215,000 1,034,000

Accumulated Depreciation 105,000 6,000 111,000
Accounts Payable 31,000 7,000 38,000
Common Stock 500,000 500,000
Retained Earnings (and Home Office),

from above 385,000 202,000 237,000 35,000 385,000
Unrealized Intracompany Profit 5,000 (26) 5,000

Credits 1,026,000 215,000 257,000 257,000 1,034,000

Elimination entries:

(24) Eliminate intracompany accounts.

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

(26) Eliminate unrealized intracompany profit from inventory.

(27) Reclassify inventory from home office.

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