SALES AGENCY OPERATION

H & B CORPORATION located in Jakarta established a sales agency in Surabaya on January

1, 2018. The statement of Financial Position of H & B CORPORATION on January 1, 2018
(immediately before sales agency establishment) appeared as follows (in US $):

Cash 500,000 Accounts payable 190,000

Accounts receivable 120,000
Inventory 250,000 Capital stock 500,000
Equipments 150,000
Acc. Depreciation (30,000) Retained earning 300,000
TOTAL 990,000 TOTAL 990,000

The transactions during January 2013 of H & B CORPORATION were as follows:

1. The Home Office transferred cash $ 15,000 for petty cash of Surabaya Sales Agent
2. The Home Office purchased equipment $ 24,000 cash, and transferred it to Suarabaya
Sales Agent.
3. The Home Office paid $ 12,000 for rent office for Surabaya Sales Agent for Jnauary
2018.
4. The Home Office purchased inventory on account from external parties for $ 2,000,000.
5. The Home Office transferred inventory costing $ 15,000 for demonstration at Surabaya
Sales Agent.
6. The Home Office sold merchandise costing $ 1,100,000 to external parties for $
1,750,000 on account.
7. The Home Office fulfilled cash sales order from Surabaya Sales Agent for $ 250,000
(cost of goods sold was $ 190,000).
8. The Home Office paid bill received from Surabaya Sales Agent for salary $ 8,000 and
other operating expenses $ 2,500.
9. The Home Office paid $ 250,000 for promotion expense. This expense was allocated to
the Home Office and the Surabaya Sales Agent of 90 % and 10 % respectively.
10. Other operating expenses paid by the Home Office were $ 175,000
11. The Home Office replenished petty cash of Surabaya Sales Agent. The disbursement of
petty cash comprised of promotion expense $ 700 and other operating expenses $
10,800.
12. The Home Office paid salary expenses $ 75,000 and rent expense $ 100,000
13. The equipments were depreciated using straight line method. The equipments had
expected residual value of $ 0 and estimated useful life of 5 years.

REQUIRED

1. Prepare the journal entries to record the transactions during January 2018 in the book
of the Home Office
2. Prepare The Financial Statements of H & B corporation for the year ended as of January
31, 2018.