PROBLEM 1

No. 1 Home Office books

Branch current 55,000.00
Shipments to branch (at cost) 50,000.00
Allowance for mark-up on branch inventory 5,000.00

Branch books
Shipments from home office 55,000.00
Home Office 55,000.00

Per GAAP
No. 2 HO Outside Per branch
(billed price) (cost) books
Inventory beginning 17,600.00 17,600.00 35,200.00
Shipments from home office 55,000.00 55,000.00
Purchases 24,000.00 24,000.00
COGAS 72,600.00 41,600.00 114,200.00
Inventory Ending (22,000.00) (8,000.00) (30,000.00)
COGS 50,600.00 33,600.00 84,200.00

Sales 140,000.00
COGS (84,200.00) --> overstated from HO POV
Gross profit 55,800.00
General expenses (32,000.00)
Selling expenses (8,000.00)
Net income, per branch books 15,800.00 --> understated from HO POV

No. 3
Home Office books
Branch current 15,800.00
Income summary - branch 15,800.00

Allowance for mark-up on branch inventory 4,600.00

Income summary - branch 4,600.00

Income summary - branch 20,400.00

Retained earnings 20,400.00

Allowance for mark-up on branch inventory

Ending balance 2,000.00 1,600.00 Beg. Balance
Realized m-up (closing entries) 4,600.00 5,000.00 Shipments
6,600.00 6,600.00 COGAS/balance before closing entrie

PROBLEM 2
No. 1
Home Office Books Branch books
Branch current 30,000.00 Shipments from home office
Shipments to branch 25,000.00 Home office
Allowance for overvaluation on branch inventory 5,000.00

Branch current 12,000.00 Shipments from home office

Shipments to branch 10,000.00 Home office
Allowance for overvaluation on branch inventory 2,000.00

Shipments to branch 625.00 Home office

Allowance for overvaluation on bra 125.00 Shipments from home office
Branch current 750.00

Income summary - branch 2,600.00 Home office

Branch current 2,600.00 Income summary

Allowance for overvaluation on bra 4,125.00

Income summary - branch 4,125.00
Shipments from Home office
NO. 2 COGAS
Branch loss, per branch books (2,600.00) Ending inventory
Realized mark-up 4,125.00 COGS
Branch net income, per GAAP 1,525.00
COGS (at billed price)

COGS (per GAAP)

Realized Mark-up

PROBLEM 4

BRANCH BOOKS from HO from outside Total per

(at billed price) (cost) branch books
Beginning inventory 12,000.00 3,000.00 15,000.00
Shipments from Home Office 9,600.00 9,600.00
Purchases 2,500.00 2,500.00
COGAS 21,600.00 5,500.00 27,100.00
Ending inventory (8,400.00) (1,600.00) (10,000.00)
COGS 13,200.00 3,900.00 17,100.00

POV OF HOME OFFICE/PER GAAP/COMBINED FS/TRUE/AT COST

from HO from outside Total

(cost) (cost) (cost)
Beginning inventory 10,000.00 3,000.00 13,000.00
Shipments from Home Office 8,000.00 8,000.00
Purchases 2,500.00 2,500.00
COGAS 18,000.00 5,500.00 23,500.00
Ending inventory (7,000.00) (1,600.00) (8,600.00)
COGS 11,000.00 3,900.00 14,900.00

from HO
Unrealized m-up at billed price
Beginning balance 2,000.00 12,000.00
Shipments 1,600.00 9,600.00
COGAS 3,600.00 21,600.00
Ending inventory (1,400.00) (8,400.00)
COGS 2,200.00 13,200.00

Home office books

Unrealized intercompany inventory profit 2,200.00

Income summary - branch 2,200.00

Note:
PROBLEM 7 balance of unrealized
mark-up before closing
Branch entries
books Branch
from HO from HO
at billed price Mark-up at cost
Beginning inventory 44,500.00 8,900.00 35,600.00
Purchases
Shipments to branch
Shipments from home office 252,000.00 42,000.00 210,000.00
COGAS 296,500.00 50,900.00 245,600.00
Ending inventory (58,500.00) (9,750.00) (48,750.00)
COGS 238,000.00 41,150.00 196,850.00
Note:
Realized mark-up
Branch
INCOME STATEMENT Branch books Per GAAP
Sales 315,000.00 315,000.00
COGS (238,000.00) (196,850.00)
Gross profit 77,000.00 41,150.00 118,150.00
Operating expenses (101,500.00) (101,500.00)
Net income (loss) (24,500.00) 41,150.00 16,650.00
 Combined FS
Per GAAP Per GAAP Per GAAP
Allowance HO Outside Total
for m-up (cost) (cost) books
1,600.00 16,000.00 17,600.00 33,600.00
5,000.00 50,000.00 50,000.00
24,000.00 24,000.00
6,600.00 66,000.00 41,600.00 107,600.00
(2,000.00) (20,000.00) (8,000.00) (28,000.00)
4,600.00 46,000.00 33,600.00 79,600.00

140,000.00
(79,600.00)
4,600.00 60,400.00
(32,000.00)
(8,000.00)
20,400.00

Branch books
Income summary 15,800.00
Home Office

g. Balance

GAS/balance before closing entries

anch books
pments from home office 30,000.00
30,000.00

pments from home office 12,000.00

12,000.00

750.00
pments from home office 750.00

2,600.00
ome summary 2,600.00

Mark-up From HO Outside

pments from Home office 6,875.00 41,250.00
6,875.00 41,250.00
ding inventory (2,750.00) (16,500.00) (2,000.00)
4,125.00 24,750.00

GS (at billed price) 24,750.00

1.20
GS (per GAAP) 20,625.00
0.20
alized Mark-up 4,125.00

nch books
billed price

Home office
books Combined
at cost at cost
115,000.00 150,600.00
820,000.00 820,000.00
(210,000.00) None
None
725,000.00 970,600.00
(142,500.00) (191,250.00)
582,500.00 779,350.00

HO books Combined
1,060,000.00 1,375,000.00
(582,500.00) (779,350.00)
477,500.00 595,650.00
(382,000.00) (483,500.00)
95,500.00 112,150.00
ombined FS

15,800.00
PROBLEM 1

Unrealized profit account

Ending balance 4,900.00 4,200.00 Beginning balance
Realized mark-up/closing entry 4,550.00 5,250.00 Shipments
9,450.00 9,450.00 COGAS/Pre-closing balance

Branch books Branch

From HO From HO From outside
at billed price -- Mark-up = at cost + at cost =
Beginning balance 16,200.00 4,200.00 12,000.00 4,000.00
Shipments 20,250.00 5,250.00 15,000.00
Purchases 12,000.00
COGAS 36,450.00 9,450.00 27,000.00 16,000.00
Ending balance (18,900.00) (4,900.00) (14,000.00) (5,000.00)
COGS 17,550.00 4,550.00 13,000.00 11,000.00

No. 2
Unrealized profit account 4,550.00
Income summary - branch 4,550.00

No. 3
Home Office Books Branch books
Shipments to branch 400.00 Home office 540.00
Unrealized profit acco 140.00 Shipments from home office
Investment in branch 540.00

PROBLEM 9

Investment in branch Home Office Current

Unadjusted balance 60,000.00 51,500.00
Cash remittance (1,700.00)
Reimbursement check 1,800.00
Shipments in transit 5,000.00
Adjusted balance 58,300.00 58,300.00

Branch inventory from home office Branch inventory

at billed price M-up at cost STB
Beginning 11,550.00 1,000.00 10,550.00 Mark-up
Shipments 110,000.00 10,000.00 100,000.00 Billed price, including in trans
Freight-in from HO 5,750.00 5,750.00 Freight-in
COGAS 127,300.00 11,000.00 116,300.00 Inventoriable cost
Ending inventory (16,170.00) (1,400.00) (14,770.00)
COGS 111,130.00 9,600.00 101,530.00

STB Mark-up = SFHO

Unadjusted balance 110,000.00 105,000.00
Shipments in transit 5,000.00
Home office error (10,000.00)
Adjusted balance 100,000.00 10,000.00 = 110,000.00

ADJUSTING ENTRIES:
Home Office books Branch books
AJE 1 Cash 1,700.00 AJE 2
Investment in branch 1,700.00

AJE 4 Shipments to branch 10,000.00 AJE 3

Unrealized intercompany inventory profit 10,000.00

Home Office Branch

Cash 18,700.00 200.00
Inventory-home office 23,000.00 11,550.00
Inventory-branch 48,450.00
Sundry assets 200,000.00
Branch 58,300.00
Purchases 190,000.00
Shipments from Home Office 110,000.00
Freight -in from Home Office 5,750.00
Sundry expenses 42,000.00 26,100.00
Sundry Liabilities (35,000.00) (3,750.00)
Home Office - (58,300.00)
Sales (155,000.00) (140,000.00)
Shipments to branch (100,000.00)
Unrealized intercompany inventory prof (11,000.00)
Retained earnigns (200,000.00)
Capital stock (31,000.00)
- -

INCOME STATEMENTS Home Office Branch Debit

Sales 155,000.00 140,000.00

Inventory-home office 23,000.00 11,550.00
Purchases 190,000.00
Shipments from Home Office 110,000.00
Freight -in from Home Office 5,750.00
Shipments to branch (100,000.00) 100,000.00
COGAS 113,000.00 127,300.00 100,000.00
Ending inventory (30,000.00) (16,170.00) 1,400.00
COGS 83,000.00 111,130.00 98,600.00
Gross profit 72,000.00 28,870.00
Sundry expenses (42,000.00) (26,100.00)
Net income from own operations 30,000.00 2,770.00
Branch net income
books 2,770.00
realized m-up 9,600.00 12,370.00
Combined net income 42,370.00

STATEMENT OF FINANCIAL POSITION

Cash 18,700.00 200.00
Inventory-home office 30,000.00 16,170.00
Inventory-branch 48,450.00
Sundry assets 200,000.00
Branch 61,070.00
Unrealized intercompany inventory prof (1,400.00) 11,000.00
Total assets 308,370.00 64,820.00

Sundry Liabilities 35,000.00 3,750.00

Home Office - 61,070.00 61,070.00
Capital stock 31,000.00 -
Retained earnigns 242,370.00 -
Total liabilities and SHE 308,370.00 64,820.00
ing balance No. 1

Combined
FS
at cost
16,000.00
15,000.00
12,000.00
43,000.00
(19,000.00)
24,000.00

540.00

ome Office Current

Beg End
100% 10,000.00 14,000.00
10% 1,000.00 1,400.00
100% 110% 11,000.00 15,400.00
5% 550.00 770.00
105% 11,550.00 16,170.00
anch books
Sundry expenses 1,800.00
Home Office 1,800.00

Shipments from home office 5,000.00

Home Office 5,000.00

Freight-in from Home Office 250.00

Sundry Liabilities 250.00

Credit Combined FS

295,000.00
1,000.00 33,550.00
190,000.00 ELIMINATING ENTRY
110,000.00 - Home Office 61,070.00
5,750.00 Branch
 -
111,000.00 229,300.00 Shipments to branch 100,000.00
(44,770.00) Unrealized intercompany inventory profit 10,000.00
111,000.00 184,530.00 Shipments from Home Office
110,470.00
(68,100.00) Unrealized intercompany inventory profit 1,000.00
42,370.00 Inventory, beginning

Inventory, ending - IS 1,400.00

Inventory, ending - SFP

9,600.00
Unrealized intercompany inventory profit

18,900.00
1,400.00 44,770.00
48,450.00
200,000.00
61,070.00 -
9,600.00 -
312,120.00

38,750.00
-
31,000.00
242,370.00
312,120.00
-
61,070.00
110,000.00

1,000.00

1,400.00

9,600.00
 PROBLEM 8

Branch Home Office

Sales 78,500.00 256,000.00
Cost of goods sold (60,500.00) --> overstated (205,000.00)
Gross profit 18,000.00 51,000.00
Expenses (12,500.00) (60,000.00)
Net income (loss) from own operat 5,500.00 --> understated (9,000.00)
Branch income 5,500.00
Realized mark-up 8,000.00
Branch income, per GAAP/POV of HO 13,500.00
Combined net income 4,500.00
BRANCH
From HO From outside Total
(billed price) (cost) (books) HOME OFFICE
Beginning balance 24,500.00 7,500.00 32,000.00 80,000.00
Purchases 20,000.00 20,000.00 210,000.00
Shipments from HO/to branch 40,000.00 40,000.00 (30,000.00)
COGAS 64,500.00 27,500.00 92,000.00 260,000.00
Ending inventory (26,000.00) (5,500.00) (31,500.00) (55,000.00)
COGS 38,500.00 22,000.00 60,500.00 205,000.00

PROBLEM 12

HOME B1
Upon shipment
Investment in B1 1,600.00 SFHO 1,600.00
STB1 1,600.00 HO 1,600.00

F-in from HO 350.00

Cash 350.00

Inter-branch transfer
Investment in B5 1,600.00 HO 1,600.00
Investment in B1 1,600.00 SFHO 1,600.00

STB1 1,600.00
STB5 1,600.00

Investment in B5 150.00 HO 350.00

Excess freight 200.00 F-in from HO 350.00
Investment in B1 350.00

PROBLEM 10
 POV of branch
@ billed price POV of HO
Merchandise inventory, beginning 26,400.00
Shipments from home office 20,000.00
COGAS 46,400.00
COGS (10,400.00)
Inventory destroyed by fire 36,000.00 30,000.00

Sales 15,000.00
Sales returns (2,000.00)
Net sales for inventory estimation purposes 13,000.00 125%
Markup on billed price (2,600.00) 25%
COGS - POV of branch 10,400.00 100%

Home Office books Branch books

Investment in branch 20,000.00 Merchandise inventory
Merchandise inventory 16,666.67 Home office
Allowance for inventory mark-up 3,333.33

COGS
Merchandise inventory

Loss on inventory destroyed by

Merchandise inventory

CLOSING ENTRIES

Sales
Income summary
Sales returns
Sales allowance
COGS
Loss on inventory destroyed by fire

Income summary - branch 34,400.00 Home office

Investment in branch 34,400.00 Income summary

Allowance for inventory mark-up 1,733.33

Income summary - branch 1,733.33

Allowance for inventory mark-up 6,000.00

Income summary - branch 6,000.00

PROBLEM 5
 Home book Branch book
Unadjusted balance 33,760.00 32,040.00
Cash remittance in transit (1,500.00)
Taxes and insurance 220.00
Adjusted balance 32,260.00 32,260.00

ADJUSTING ENTRIES:
Home Office Branch books
Cash 1,500.00
Branch 1,500.00
Miscellaneous general expe
Home office

Miscellaneous sellling expense 560.00 Miscellaneous sellling expen

Store supplies 560.00 Store supplies

Prepaid expense 350.00 Prepaid expense

Miscellaneous general expense 350.00 Miscellaneous general expense

Miscellaneous general expense 260.00 Miscellaneous general expe

Accrued expense 260.00 Accrued expense

Miscellaneous general expense 85.00 Miscellaneous general expe

Accumulated depreciation - F&F 85.00 Accumulated depreciation - F&F

Home Debit Credit

Cash 10,350.00 1,500.00 -
Accounts receivable 26,200.00 - -
Merchandise ivnentory, beg 31,500.00 - -
Furniture and fixtures 8,500.00 - -
Accumulated depreciation - F&F (2,500.00) - 85.00
Unrealized intercompany inventory profit (3,700.00) - -
Store supplies 940.00 - 560.00
Prepaid expense 350.00 -
Branch 33,760.00 - 1,500.00
Accounts payable (35,400.00) - -
Accrued expense - 260.00
Home office - -
Capital stock (65,000.00) - -
Retained earnings 6,850.00 - -
Sales (44,850.00) - -
Shipments to branch (8,500.00) - -
Purchases 27,600.00 - -
Shipments from Home office - -
Advertising expense 2,850.00 - -
Salaries and commission expense 4,250.00 - -
Miscellaneous sellling expense 1,850.00 560.00 -
Rent expense 2,700.00 - -
Miscellaneous general expense 2,600.00 345.00 350.00
- 2,755.00 2,755.00

WORKING PAPER
Home office Branch Debit
Cash 11,850.00 2,650.00 -
Accounts receivable 26,200.00 12,850.00 -
Merchandise ivnentory, beg 31,500.00 14,400.00 -
Furniture and fixtures 8,500.00 3,600.00 -
Accumulated depreciation - F&F (2,585.00) (576.00) -
Unrealized intercompany inventory profit (3,700.00) - 3,700.00
Store supplies 380.00 300.00 -
Prepaid expense 350.00 120.00 -
Branch 32,260.00 - -
Accounts payable (35,400.00) (4,200.00) -
Accrued expense (260.00) (105.00) -
Home office - (32,260.00) 32,260.00
Capital stock (65,000.00) - -
Retained earnings 6,850.00 - -
Sales (44,850.00) (20,000.00) -
Shipments to branch (8,500.00) - 8,500.00
Purchases 27,600.00 4,100.00 -
Shipments from Home office - 10,200.00 -
Advertising expense 2,850.00 2,800.00 -
Salaries and commission expense 4,250.00 2,350.00 -
Miscellaneous sellling expense 2,410.00 1,330.00 -
Rent expense 2,700.00 1,500.00 -
Miscellaneous general expense 2,595.00 941.00 -
- -
Ending inventory 24,200.00 14,600.00
Net income

ELIMINATING ENTRIES
Home Office 32,260.00
Branch 32,260.00
Beginning
Shipments to branch 8,500.00 Ending
Unrealized intercompany inventory p 1,700.00
Shipments from Home office 10,200.00

Unrealized intercompany inventory p 2,000.00

Merchandise ivnentory, beg 2,000.00

Home Branch
Sales 44,850.00 20,000.00
Merchandise ivnentory, beg 31,500.00 14,400.00
Purchases 27,600.00 4,100.00
Shipments from Home office - 10,200.00
Shipments to branch (8,500.00) -
Cost of goods available for sale 50,600.00 28,700.00
Ending inventory (24,200.00) (14,600.00)
COGS 26,400.00 14,100.00
Gross profit 18,450.00 5,900.00
Advertising expense 2,850.00 2,800.00
Salaries and commission expense 4,250.00 2,350.00
Miscellaneous sellling expense 2,410.00 1,330.00
Rent expense 2,700.00 1,500.00
Miscellaneous general expense 2,595.00 941.00
Total expenses 14,805.00 8,921.00
Net income (loss) from own operations 3,645.00 (3,021.00)
Branch net income (loss)
per books (3,021.00)
realized m-up 1,750.00 (1,271.00)
Combined net income 2,374.00

Home Branch
Cash 11,850.00 2,650.00
Accounts receivable 26,200.00 12,850.00
Ending inventory 24,200.00 14,600.00
Furniture and fixtures 8,500.00 3,600.00
Accumulated depreciation - F&F (2,585.00) (576.00)
Store supplies 380.00 300.00
Prepaid expense 350.00 120.00
Branch 29,239.00 -
Unrealized intercompany inventory profit (1,950.00) -
Total assets 96,184.00 33,544.00

Accounts payable 35,400.00 4,200.00

Accrued expense 260.00 105.00
Home office - 29,239.00
Capital stock 65,000.00 -
Retained earnings Deficit (4,476.00) -
Total liabilities and SHE 96,184.00 33,544.00
 Per GAAP/POV of HO Based Based
Combined on cost on billed price
334,500.00 Cost 30,000.00 100% 75%
(257,500.00) Mark-up 10,000.00 33% 25%
77,000.00 Billed price 40,000.00 133% 100%
(72,500.00)
4,500.00

Allowance for unrealized

ME OFFICE inventory mark-up
4,500.00 22.50%

10,000.00 25%
14,500.00 ----> preclosing balance sa Trial Balance
(6,500.00) -----> post closing balance
8,000.00 ----> adjustment sa closing entry

B5

SFHO 1,600.00
HO 1,600.00

F-in from HO 400.00

HO 150.00
Cash 250.00
nch books
chandise inventory 20,000.00
20,000.00

10,400.00
chandise inventory 10,400.00

s on inventory destroyed by 36,000.00

chandise inventory 36,000.00

OSING ENTRIES

15,000.00
me summary 34,400.00
2,000.00
es allowance 1,000.00
10,400.00
s on inventory destroyed by fire 36,000.00

34,400.00
me summary 34,400.00
 220.00
220.00

280.00
280.00

120.00
neral expense 120.00

105.00
105.00

36.00
reciation - F&F 36.00

Adjusted Bal Branch Debit Credit Adjusted Bal

11,850.00 2,650.00 - - 2,650.00
26,200.00 12,850.00 - - 12,850.00
31,500.00 14,400.00 - - 14,400.00
8,500.00 3,600.00 - - 3,600.00
(2,585.00) (540.00) - 36.00 (576.00)
(3,700.00) - - -
380.00 580.00 - 280.00 300.00
350.00 120.00 - 120.00
32,260.00 - - -
(35,400.00) (4,200.00) - - (4,200.00)
(260.00) - 105.00 (105.00)
- (32,040.00) - 220.00 (32,260.00)
(65,000.00) - - -
6,850.00 - - -
(44,850.00) (20,000.00) - - (20,000.00)
(8,500.00) - - -
27,600.00 4,100.00 - - 4,100.00
- 10,200.00 - - 10,200.00
2,850.00 2,800.00 - - 2,800.00
4,250.00 2,350.00 - - 2,350.00
2,410.00 1,050.00 280.00 - 1,330.00
2,700.00 1,500.00 - - 1,500.00
2,595.00 700.00 361.00 120.00 941.00
- - 761.00 761.00 -

Credit Combined TB Combined IS Combined SFP

- 14,500.00 14,500.00
- 39,050.00 39,050.00
2,000.00 43,900.00 43,900.00
- 12,100.00 12,100.00
- (3,161.00) (3,161.00)
- - -
- 680.00 680.00
- 470.00 470.00
32,260.00 - -
- (39,600.00) (39,600.00)
- (365.00) (365.00)
- - -
- (65,000.00) (65,000.00)
- 6,850.00 6,850.00
- (64,850.00) (64,850.00)
- - -
- 31,700.00 31,700.00
10,200.00 - -
- 5,650.00 5,650.00
- 6,600.00 6,600.00
- 3,740.00 3,740.00
- 4,200.00 4,200.00
- 3,536.00 3,536.00
-
36,850.00 (36,850.00) 36,850.00
(2,374.00) 2,374.00

From HO Outside Total

billed price cost
12,000.00 2,400.00 14,400.00
 11,700.00 2,900.00 14,600.00

Combined
64,850.00
43,900.00
31,700.00
-
-
75,600.00 3,700.00
(36,850.00)
38,750.00 1,750.00
26,100.00
5,650.00
6,600.00
3,740.00
4,200.00
3,536.00
23,726.00
2,374.00

1,750.00

Combined
14,500.00
39,050.00
36,850.00
12,100.00
(3,161.00)
680.00
470.00
-
-
100,489.00

39,600.00
365.00
 -
65,000.00
(4,476.00)
100,489.00
Based Based
on cost on billed price
100% 81.63%
22.50% 18.37%
122.50% 100.00%