Star Stores has its head office and main store in Crewe, and a branch store in Leek. All goods are
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%. The following trial balances have been extracted from the books of account of both the head office and the branch as at 31 December 2016:
1 The inventories in hand at 31 December 2016 were estimated to be as follows:
In addition, £60,000 of inventory at invoiced price had been despatched to the branch on 28 December 2016. These goods had not been received by the branch until 5 January 2017 and so they had not been included in the branch books of account.
2 On 31 December 2016, the branch had transferred £15,000 of cash to the head office bank, but this was not received in Crewe until 2 January 2017.
(a) Prepare in adjacent columns: (i) the head office, and (ii) the branch trading accounts and profit and loss accounts for the year ending 31 December 2016; and
(b) Prepare Star Stores’ statement of financial position as at 31 December 2016.
This problem has been solved!
Step by Step Answer: