Star Stores has its head office and main store in Crewe, and a branch store in Leek. All goods are purchased by the head office. Goods are invoiced to the branch at cost price plus a profit loading of 20 per cent. The following trial balances have been extracted from the books of account of both the head office and the branch as at 31 December 20X9:

Additional information:

1. The stocks in hand at 31 December 20X9 were estimated to be as follows:

In addition, £60,000 of stocks at invoiced price had been despatched to the branch on 28 December 20X9. These goods had not been received by the branch until 5 January 20X0 and so they had not been included in the branch books of account.

2. On 31 December 20X9, the branch had transferred £15,000 of cash to the head office bank, but this was not received in Crewe until 2 January 20X0.

Required:

(a) Prepare in adjacent columns and using the vertical format: 

(i) The head office, and 

(ii) The branch trading and profit and loss accounts for the year to 31 December 20X9; and

(b) Prepare in the vertical format, Star Stores’ balance sheet as at 31 December 20X9.

Transcribed Image Text:

Administrative expenses Distribution costs Capital (at 1 January 20X9) Cash and bank Creditors and accruals Current accounts Debtors and prepayments Motor vehicles: at cost accumulated depreciation at 31 December 20X9 Plant and equipment: at cost accumulated depreciation at 31 December 20X9 Proprietor's drawings during the year Provision for unrealised profit on branch stocks at 1 January 20X9 Purchases Sales Stocks at cost/invoiced amount at 1 January 20X9 Transfer of goods to the branch/from the head office Head Office Books Dr Cr £000 £000 380 157 25 255 130 470 250 64 880 80 £2,691 550 176 280 120 5 1,200 360 £2,691 Branch Books Dr £000 30 172 2 76 230 80 30 300 £920 Cr £000 20 180 120 30 570 £920