A balance sheet for the Eagle Co. as of January 1, 19X4, is as follows: Balance Sheet
Question:
A balance sheet for the Eagle Co. as of January 1, 19X4, is as follows:
Balance Sheet
On this date a branch sales office is established in Miami. The branch is sent the following assets by the home office:
(a) Cash, $1,500.
(b) Merchandise, cost, $10,200.
(c) Store furniture and fixtures previously used by the home office — cost, $3,000; age, 2½ years; depreciation rate used in the past, 10% a year. The cost of shipment and installation, $900, is paid by the branch. This cost is to be written off over the remaining life of the asset. The equipment accounts are to be carried on the books of the home office.
(d) Accounts receivable, $2,600. Accounts arose from home office sales to customers in Miami. The branch is authorized to take over the accounts and make collections.
Home office and branch transactions with outsiders during January were:
The following took place with respect to accounts received by the branch from the home office: collections of $1,600 were made; accounts of $150 were uncollectible and were written off; it is believed that remaining accounts of $850 are collectible.
Interoffice transactions during January were:
The following information is to be recorded on January 31:
(a) Merchandise costing $600 was shipped by the home office to the branch on January 31; this merchandise is in transit and will not reach the branch until February 2. (This shipment is not included in transfers previously mentioned.)
(b) Expenses that are paid by the home office during the month and that are chargeable to the branch total $475. (These are included in the $9,200 amount.)
(c) Depreciation on furniture and fixtures is recorded at the rate of 10% a year.
(d) Merchandise inventories, excluding merchandise in transit, are: home office, $44,500; branch, $9,800.
(e) Accrued expenses are: home office, $750; branch, $350.
Instructions:
(1) Prepare journal entries to record the foregoing transactions for (a) the branch and (b) the home office.
(2) Prepare individual statements for the branch and for the home office.
(3) Prepare combined statements for the branch and the home office.
(4) Prepare the journal entries to adjust and close the books at the end of the month for (a) the branch and (b) the home office.
Cost Accounting Foundations and Evolutions
ISBN: 978-1111626822
8th Edition
Authors: Michael R. Kinney, Cecily A. Raiborn