Addis Ababa University

College of Business and Economics

School of Commerce

Department of Accounting and Finance

Assignment on Advanced Accounting

Prepared by: Bezawit Abrham

ID No.: BEE/1370/09

Sec: E4A1

Submitted to: Instructor Kiros

May, 2020

Addis Ababa, Ethiopia

 1.

Reconciliation Statement
Particular Amount$ Amount$
Capital Account Balance as per Branch Book 44,000
Add:
Branch remittance to home office but recorded at home office on 1 stJan 2013 10,000
Home office inventory shipment to Branch Dec,28,2014 but recorded by branch Jan,4,2013 20,000
Advertisement expenses allocated to Branch by on Dec,23,2014 5,000
Wrongly recorded the cost of inventory as$34,000 but it needs to be 43,000(43,000-34,000) 9,000 44,000
Less:
Branch customer remitted to the home office -3,000
Capital Account Balance as per Home Office Book 85,000

HOME OFFICE AND BRANCH

RECONCILIATION OF RECIPROCAL LEDGER ACCOUNTS
DEC 31, 2012
Investment in Branch Home Office
Balance before adjustment 85,000 44,000
Remittance in transit (10,000)
Shipment in transit 20,000
Expense allocated 5,000
Unrecorded HO collection of A/R (3,000)
Error in recording shipment 9000
75,000 75,000
2.
A. Journal Entries
Journal Entries made by HO
Finished goods inventory 200,000
Work-in-process 200,000
Investment in branch 280,000
Inventory 200,000
 Unrealized Intra-company profit 80,000
Unrealized intra-company profit 20,000
Realized profit on branch shipment 20,000
Journal Entries made by Branch
Inventory from home office 280,000
Home office 280,000
Account receivable 105,000
Sales 105,000
COGS 70,000
Inventory from HO 70,000
B. Eliminating entry
Realized profit on Branch shipment 20,000
COGS 20,000
Unrealized intra-company profit 60,000
Inventory from HO 60,000
Inventory 150,000
Inventory from HO 150,000
# Reclassifying Inventory from HO: (280,000-70,000-60,000=150,000)
3.
A. Record each of the transactions on the books of the branch.
a. Cash 200,000
Automobile inventory 350,000
Home office 550,000
b. Automobile inventory 400,000
Account payable 400,000
c. Account receivable 650,000
Sales 650,000
COGS 425,000
Automobile inventory 425,000
Cash 600,000
Account receivable 600,000
d. Advertising expense 40,000
 Sales commissions 65,000
Other expenses 45,000
Cash 150,000
e. Account payable 370,000
Home office 120,000
490,000
Closing entry for revenue and expense account
Sales 650,000
COGS 425,000
Advertising expense 40,000
Sales commission 65,000
Other expense 45,000
Income summary 75,000
Closing entries for income summary ledger account
Income summary 75,000
Home office 75,000
B. Income statement for the branch for 19X3
MANSON CITY BRANCH
INCOME STATEMENT
FOR THE YEAR ENDED DEC 31, 19X3
Revenue
Sales 650,000
Total revenues 650,000
Expense
Cost of goods sold 425,000
Advertising expense 40,000
Sales commission 65,000
Other expenses 45,000
Total expenses 575,000
Net Income 75,000
 C. Balance sheet as of December 31, 19X3, for the branch
MANSON CITY BRANCH
BALANCE SHEET
DECEMBER 31, 19X3
Assets

Cash 160,000

Account receivable 50,000

Automobile inventory 325,000

Total assets 535,000

Liabilities

Account Payable 30,000

Home office 505,000

Total liability 535,000

4.
A. working paper to reconcile the reciprocal ledger accounts of Geda
Company’s home office and Oda Branch to the corrected balance on July 31,
2008
 GEDA COMPANY
HOME OFFICE AND ODA BRANCH
RECONCILATION OF RECIPROCAL LEDGER ACCOUNTS
JULY, 2008
Accounts Investment in Oda Branch Home Office

Balance Prior to adjustment 69,300 52,500

Add: Merchandise shipped to branch 7000

Payment of branch trade A/P 3000

Less: Acquisition of furniture equipment (2,200)

Collection of trade A/R (2,100)

Return on merchandise (3,200)

Remittance of cash by branch (3,500)

60,400 60,400

B. Journal entries on July 31, 2008

Accounting of home office

Equipment 2,200

Investment in Branch 2,200

Cash in Transit 3,500

Investment in Branch 3,500

Merchandise Inventory 3,200

Investment in Branch 3,200

Accounting of Oda Branch of Geda Company

 Home office 2,100
Trade A/R 2,100
Inventory in Transit 7,000
Home Office 7,000
Trade A/p 3,000
Home Office 3,000

5.
A. Eliminating entries
Home Office 305,000
Investment in Branch 305,000
Unrealized Intercompany Profit 12,000
Inventory─from Home Office 12,000
Inventory 20,000
Inventory─from Home Office 20,000

B. Balance sheet for Plastic Products Corporation

BALANCE SHEET FOR PLASTIC PRODUCTS CORPORATION

PLASTIC PRODUCTS CORPORATION

BALANCE SHEET

DECEMBER 31, 19X6

ASSETS

Current Assets

Cash 90,000

Accounts Receivable 170,000

Inventory 288,000

Total Current Assets 548,000

Long-Term Asset

Land 120,000

Buildings and Equipment 800,000

Accumulated Depreciation (360,000) 440,000

Total Long-Term Asset 660,000

Total Assets 1,108,000

LIABILTIES

Current Liabilities

Accounts Payable 78,000

Total Current Liability 78,000

Bonds Payable 300,000

Notes Payable 100,000

Total Long-Term Liabilities 400,000

Total Liabilities 478,000

OWNER’S EQUITY

Owner’s Equity

Common Stock 200,000

Retained Earnings 430,000

Total Stockholders' Equity 630,000

Total Liabilities and Stockholders' Equity l, 108,000

6.
A. Transactions recorded by home office and branches
 Journal entries recorded by Denton branch

Equipment 20,000

Cash 3,000

Home Office 23,000

Inventory 140,000

Home Office 140,000

Accounts Receivable 136,000

Sales 136,000

Cost of Goods Sold (136,000 x75%) 102,000

Inventory 102,000

Operating Expense 13,000

Accounts Payable 13,000

Cash 125,000

Accounts Receivable 125,000

Accounts Payable 12,000

Cash 12,000

Cash 35,000

Notes Payable 35,000

Depreciation Expense 4,000

Accumulated Depreciation 4,000

Home Office 135,000

Cash 135,000
Equipment 20,000

Cash 5,000

Home Office 25,000

Inventory 150,000

Home Office 150,000

Accounts Receivable 152,000

Sales 152,000

Cost of Goods Sold (152,000 x 75%) 114,000

Inventory 114,000

Operating Expenses 11,000

Accounts Payable 11,000

Cash 138,000

Accounts Receivable 138,000

Accounts Payable 9,000

Cash 9,000

Cash 40,000

Notes Payable 40,000

Depreciation Expense 4,000

Accumulated Depreciation 4,000

Home Office 151,000

Cash 151,000
Journal entries recorded by home office

Equipment 40,000

Accounts Payable 40,000

Investment in Denton Branch 23,000

Investment in Houston Branch 25,000

Equipment 40,000

Cash 8,000

Accounts Receivable 175,000

Sales 175,000

Cost of Goods Sold (175,000*60%) 105,000

Inventory 105,000

Investment in Denton Branch 140,000

Investment in Houston Branch 150,000

Inventory (290,000 x80%) 232,000

Unrealized Intercompany Profit (290,000*20%) 58,000

Inventory (341,000=105,000+232,000+45,000-41,000) 341,000

Accounts Payable 341,000

Operating Expenses 85,000

Accounts Payable 85,000

Cash (25,000+175,000-28,000) 172,000

Accounts Receivable 172,000

Accounts Payable (18,000+40,000+341,000+85,000-20,000) 464,000

Cash 464,000
Depreciation Expense 7,000

Accumulated Depreciation 7,000

Cash 286,000

Investment in Denton Branch 135,000

Investment in Houston Branch 151,000

Investment in Denton Branch 17,000

Denton Branch Income 17,000

Investment in Houston Branch 23,000

Houston Branch Income 23,000

Unrealized Intra-company Profit (102,000+114,000)20% 43,200

Realized Profit on Branch Shipments 43,200

B. A work paper with the appropriate eliminations for the preparation of

annual financial statements for Ortegren Sales Company.
 ORTEGREN S ALES COMPANY
WORKING PAPER FOR COMBINED F INANCIAL S TATEMENT OF HOME OFFICE, DENTON AND HUSTON BRANCH
FOR THE YEAR ENDED DECEMBER 31, 19X1
(PERPETUAL INVENTORY BILLING AT COST )
Adjusted Trial Balance
Items Home Office Denton Branch Huston Branch Eliminations Combined
Dr. (Cr.) Dr. (Cr.) Dr.(Cr.) Dr.(Cr.) Dr.(Cr.)
Income Statement
Sales (175,000) (136,000) (152,000) (463,000)
Denton Branch income (17,000) (a)17,000
Huston branch income (23,000) (b)23,000

(43,200) (c)43,200
105,000 102,000 114,000 (c)(43,200) 277,800
7000 4000 4000 15,000
85,000 13,000 11,000 109,000
Realized profit on

Branch shipments
61,200 17,000 23,000 83,200 61,200
Cost of goods sold
Depreciation expense -0- -0- -0- -0-

Operating expense
Net Income (to statement
of retained earnings
below) (59,000) (59,000)
Totals
(a)28,000
28,000 24,000
(b)24,000
Statement of Retained
Earnings
(83,200)
Retained earnings, (61,200) (17,000) (23,000) (61,200)
beginning of year
Home office,
Pre-closing balance
135,200
102,200 45,000 47,000 120,200
Net income (from income
-0-
statement above)
Retained earnings, end of
45,000
year (to balance 6000 16,000 23,000
53,000
sheet below) 28,000 11,000 14,000
(d)(14,800) 104,200
Totals 45,000 38,000 36,000
52,000
52,000
130,000
Balance Sheet 90,000 20,000 20,000
Cash
(a)(45,000)
Accounts receivable 45,000
(b)(47,000)
Inventory 47,000
(36,000)
Land (28,000) (4000) (4000)
(23,000)
Buildings and equipment (20,000) (1000) (2000)
(105,000)
Investment in: (30,000) (35,000) (40,000)
(100,000)
Denton Branch (100,000)
Huston Branch
Accumulated depreciation
135,200
Account Payable (120,200) (45,000) (47,000)
(d)14,800 (120,200)
Notes Payable (14,800)
 Common Stock -0- -0- -0- -0- -0-
Retained earnings (from
statement of retained
earnings above)
unrealized intra-company
Profit
Totals

(a) To eliminate intra-company accounts with Denton Branch.

(b) To eliminate intra-company accounts with Houston Branch.

(b) To eliminate home office profit from cost of goods sold.

(d) To eliminate unrealized intra-company profit from inventory.