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‫‪Advanced‬‬
‫‪Accounting‬‬
‫)‪Session (2‬‬
‫‪Home office and Branch‬‬

‫َ‬ ‫ن‬
‫يمي وأنت‪ِ /‬‬
‫أنت خارج من المجمع‪ ،‬شارع ال ـ ‪( KM‬إسالم‪)01095350069 -‬‬ ‫مكتبة التفوق‪ ،‬أول شارع‬
 Mahmoud Mohamed Badwi ‫ واذكر الل‬،‫صلي علي النيب من قلبك‬
Chapter (1): Home Office and Branch
Question (1):

Andrew Co. opens a branch in Tanta. It sent the following assets to the branch:

• Cash L.E. 30,000

• Furniture L.E. 60,000
• Car L.E. 50,000

Required: Prepare journal entries in the home office and the branch.

Home Office Tanta Branch

Investment in Tanta Branch 140,000 Cash 30,000
Cash 30,000 Furniture 60,000
Furniture 60,000 Car 50,000
Car 50,000 Home Office 140,000
1. The branch sent the car to the home office.
2. The branch acquires equipment home office paid L.E 80,000 for the equipment.
3. The branch purchased car to the home office and for L.E 100,000 on account.
4. Home office spent L.E 100,000 for electricity.
5. The branch paid L.E 5,000 expenses on behalf of home office.
6. Home office sent equipment of L.E 60,000 to Tanta branch.
7. Home office received car from the branch of L.E 80,000.
8. Tanta branch purchased a building for L.E 200,000 on account on behalf of home office.
9. Home office purchased machine for Tanta branch L.E 90,000 on account.
10. Home office acquires machine for L.E 60,000 cash.

2
 Mahmoud Mohamed Badwi ‫ واذكر الل‬،‫صلي علي النيب من قلبك‬

Home Office Journal Entries Tanta Branch Journal Entries

Car 50,000 Home office 50,000
1
Investment in Tanta branch 50,000 Car 50,000
Investment in Tanta branch 80,000 Equipment 80,000
2
Cash 80,000 Home office 80,000
Car 100,000 Home office 100,000
3
Investment in Tanta branch 100,000 Account Payable 100,000

4
Electricity expenses 100,000
None
Cash 100,000
Expenses 5,000 Home office 5,000
5
Investment in Tanta branch 5,000 Cash 5,000
Investment in Tanta branch 60,000 Equipment 60,000
6
Equipment 60,000 Home office 60,000
Car 80,000 Home office 80,000
7
Investment in Tanta branch 80,000 Car 80,000
Building 200,000 Home office 200,000
8
Investment in Tanta branch 200,000 Account Payable 200,000
Investment in Tanta branch 90,000 Machine 90,000
9
Account Payable 90,000 Home office 90,000
Machine 60,000
––

10
Cash 60,000 None

3
 Mahmoud Mohamed Badwi ‫ واذكر الل‬،‫صلي علي النيب من قلبك‬

Billing of Merchandise to branches at prices above home office cost

Example: Assume that Mahmoud Company bills merchandise to Adam Branch at prices above
home office cost Merchandise with a home office cost of $80,000 was shipped by the home
office to Adam Branch with 40% markup on cost.

(Cost + Cost * Markup) ‫ من خالل قانون‬%40 ‫قبل أي حاجة الزم تحسب ثمن البضاعة بعد الزيادة ال ـ‬ •
80,000 + (80,000 * 40%) = $112,000

Home Office Journal Entries Adam Branch Journal Entries

Investment in Adam Branch 112,000 Inventories 112,000
Inventories 80,000 Home Office 112,000
Allowance for overvaluation of inventories: Adam branch 32,000

Example:

Maysara company sent merchandise that cost $60,000 to Nader branch with 50% markup on
cost. If there was no beginning inventory and if ending inventory was $22,500 at billed price.

Required: Prepare flow of merchandise.

Answer

Billed price= Cost + (Cost * Markup)

22,500= 100% Cost + (100% Cost * 50%)

22,500= 100% Cost + 50% Cost

22,500= 150% Cost

Cost= 22,500 ÷ 150%= 15,000

Markup= 15,000* 50%= 7,500

Maysara company
Flow of merchandise for Nader branch
Billed price Home office Markup
cost (50% of cost)
Beginning inventories Zero Zero Zero
+ Shipments from home office $90,000 $60,000 $30,000
= Available for sale $90,000 $60,000 $30,000
(-) Ending inventories $22,500 $15,000 $7,500
= Cost of goods sold (COGS) $67,500 $45,000 $22,500

4
 Mahmoud Mohamed Badwi ‫ واذكر الل‬،‫صلي علي النيب من قلبك‬

Transaction between branches

Home office shipped merchandise cost L.E. 30,000 to Dana branch

Home Office Journal Entries Dana Branch Journal Entries

Investment in Dana Branch 30,000 Inventory 30,000
Inventory 30,000 Home Office 30,000
The Home Office informed Dana branch to transfer this merchandise to Evan branch.

Home Office Dana Branch Evan Branch

Investment in Evan Branch 30,000 Home Office 30,000 Inventory 30,000
Investment in Dana Branch 30,000 Inventory 30,000 Home Office 30,000