HOME OFFICE - SPECIAL PROCEDURES Fast-Stop three all-night grocery stores located in western Virginia. Each store has a branch manager with authority to accept inventory items at home office or to purchase from outside wholesalers, at his or her discretion. Pre-closing summary information for Fast-stop and its branches at December 31, 2015 includes the following accounts and amounts. Home Office Debits Cash Other current assets Inventories Plant assets Dublin branch current Radford branch current Blacksburg branch current Cost of sales Expenses Total debits Credits Liabilities Ordinary share Retained earnings Home office Unrealized profit in Dublin Unrealized profit in Radford Unrealized profit in Blacksburg Sales Total credits
Dublin Branch
Radford Branch
Blacksburg Branch
20,000.00 5,500.00 14,000.00 150,000.00 28,534.00 15,393.50 11,409.00 17,000.00 62,500.00 324,336.50
6,000.00 4,400.00 7,400.00 20,000.00
4,800.00 3,520.00 5,450.00 16,000.00
3,840.00 2,816.00 4,650.00 12,800.00
24,137.00 35,000.00 96,937.00
20,690.50 40,000.00 90,460.50
15,643.00 30,000.00 69,749.00
12,500.00 100,000.00 81,310.00
10,000.00
8,000.00
6,400.00
19,368.00
11,887.50
4,409.00
67,569.00 96,937.00
70,573.00 90,460.50
58,940.00 69,749.00
3,204.00 1,273.50 1,049.00 125,000.00 324,336.50
1.) Cost of merchandise shipped from home office to Dublin and Radford amounted to $100 and $400, respectively. Freight-in of $10 for every $100 billed price of merchandise shipments is paid by the home office. These shipments were still in transit and no communication has yet been made. 2.) Cash remittance of $5,000 and $2,500 by Blacksburg and Dublin, respectively, were still not recorded by the home office as of end of the month. 3.) Merchandise are shipped at the following mark up on cost: 20% Dublin Radford 15% Blacksburg 10% 4.) At end of the month, the following inter branch cash transfer transactions were only recorded by the transferring party. From To Amount Radford Blacksburg 3,000.00 Dublin Blacksburg 1,500.00 5.) Communication as to the following inter office transactions were not yet made by the paying party. Total Amount of expense charged to Amount Paid by Home office Dublin Radford Blacksburg 2,000.00 Blacksburg 1,000.00 500.00 ### 4,000.00 Dublin 1,750.00 250.00 1,500.00 500.00 6.) The branches have no stocks of merchandise at the beginning, except for Radford, amounting to 6,000, all coming from outside sources. The home office has a beginning inventories of 15,000. 7.) The home office has not yet recorded a receipt of purchase of merchandise from a supplier costing 2,000, freight collect of 40. The purchase has a term of n/30, FOB shipping point. This batch of merchandise were subsequently shipped to Dublin branch with a freight of 50 (paid by home office), in which both the home office and Dublin branch properly recorded. Subsequently, Dublin shipped equally, half of these merchandise to Blacksburg and Radford with a freight paid by Dublin for 20 and 15, respectively. Shipments of this type would have a freight cost of 30 and 20 to Blacksburg and Radford, respectively, if directly shipped from home office.This interbranch transfer of merchandise was only recorded by Dublin branch and was still in transit.
8.) Details of merchandise ending, purchases, and freight in, before the above adjustments, are as follows: Ending inventory Outside Home office Freight in Purchases 1,000.00 Home office 14,000.00 50,000.00 1,157.00 Dublin 5,000.00 2,400.00 12,500.00 837.00 Radford 2,000.00 3,450.00 10,000.00 754.00 Blacksburg 3,000.00 1,650.00 8,000.00 Required: 1.) Prepare a schedule reconciling the home office and branches' reciprocal accounts. 2.) Prepare the necessary adjusting entries in each books. 3.) Compute for the net income of the home office and each of the three branches in their separate books. 4.) Prepare a worksheet consolidating all balances, with proper eliminating entries under perpetual inventory system.
SELECT THE INVENTORY SYSTEM HOME OFFICE BOOKS
PERPETUAL
Debit
Credit
1
Inventories Inventories Home office
2 Cash 2 points/.5 Dublin branch current Blacksburg branch current
7,500.00
3 Blacksburg branch current Dublin branch current Radford branch current
4,500.00
4
2,500.00 5,000.00
2 points/.5
1,500.00 3,000.00
Dublin branch current Radford branch current Blacksburg branch current
1,000.00 2 points/.5 500.00 Home office 500.00 2,000.00
Radford branch current Blacksburg branch current Dublin branch current
1,750.00 1,500.00 2 points/.5 500.00 3,750.00
5 Inventories Inventories Liabilities Cash
2 points/.5
2,000.00 40.00 2,000.00 40.00
Dublin branch current Inventory Unrealized profit Dublin branch Cash
2,448.00 2,040.00 408.00 50.00 50.00
Radford branch current Blacksburg branch current Unrealized profit in Dublin Excess freight Unrealized profit in Radford Unrealized profit in Blacksburg Dublin branch current
606.50 591.00 204.00 10.00 1 point 1 point 1 point
Inventories Inventories Inventories
1 1 1 1
point point point point 76.50 51.00 1,284.00
1,020.00 510.00 510.00
COMPUTATION OF EXCESS FREIGHT Home office to Dublin Dublin to fellow branches Actual freight Home office to branches Excess freight
1 Cash Other current assets Inventories Plant assets Dublin branch current Radford branch current Blacksburg branch current Cost of sales Expenses Excess freight Liabilities Ordinary share Retained earnings Home office Unrealized profit in Dublin Unrealized profit in Radford Unrealized profit in Blacksburg Sales
2 Cash Other current assets Inventories
Blacksburg 12.50 20.00 32.50 30.00 2.50
Radford ### 15.00 27.50 20.00 7.50
HOME OFFICE BOOKS Unadjusted Debit 20,000.00 7,500.00 5,500.00 14,000.00 3,060.00 150,000.00 28,534.00 500.00 15,393.50 2,606.50 11,409.00 5,591.00 17,000.00 62,500.00 10.00 (12,500.00) (100,000.00) (81,310.00) (3,204.00) 204.00 (1,273.50) (1,049.00) (125,000.00) 19,471.50
2,000.00 76.50 51.00 22,221.50
DUBLIN BOOKS Unadjusted Debit 6,000.00 4,400.00 7,400.00 132.00
Credit -
Credit 40.00 1,020.00 9,034.00 3,000.00 7,000.00
Plant assets Dublin branch current Radford branch current Blacksburg branch current Cost of sales Expenses Excess freight Liabilities Ordinary share Retained earnings Home office Unrealized profit in Dublin Unrealized profit in Radford Unrealized profit in Blacksburg Sales
3 Cash Other current assets Inventories Plant assets Dublin branch current Radford branch current Blacksburg branch current Cost of sales Expenses Excess freight Liabilities Ordinary share Retained earnings Home office Unrealized profit in Dublin Unrealized profit in Radford Unrealized profit in Blacksburg Sales
4 Cash Other current assets Inventories Plant assets Dublin branch current Radford branch current Blacksburg branch current Cost of sales Expenses
20,000.00 24,137.00 35,000.00 (10,000.00) (19,368.00) (67,569.00) -
132.00
RADFORD BOOKS Unadjusted Debit 4,800.00 3,520.00 5,450.00 1,112.50 16,000.00 20,690.50 40,000.00 (8,000.00) (11,887.50) (70,573.00) 1,112.50 BLACKSBURG BOOKS Unadjusted Debit 3,840.00 4,500.00 2,816.00 4,650.00 591.00 12,800.00 15,643.00 30,000.00 -
632.00 632.00
Credit 3,112.50 3,112.50
Credit -
Excess freight Liabilities Ordinary share Retained earnings Home office Unrealized profit in Dublin Unrealized profit in Radford Unrealized profit in Blacksburg Sales
(6,400.00) (4,409.00) (58,940.00) -
5
Cash Other current assets Inventories, ending Plant assets Dublin branch current Radford branch current Blacksburg branch current Inventories, beginning Purchases Shipments from home office Freight-in Shipments to Dublin branch Shipments to Radford branch Shipments to Blacksburg branch Cost of sales Expenses Excess freight Liabilities Ordinary share Retained earnings Home office Unrealized profit in Dublin Unrealized profit in Radford Unrealized profit in Blacksburg Sales Net income per books Realized profits Actual net income
Home Office 27,460.00 5,500.00 16,040.00 150,000.00 20,000.00 15,000.00 10,000.00 17,000.00 62,500.00 10.00 (14,500.00) (100,000.00) (81,310.00) (3,000.00) (1,350.00) (1,100.00) (125,000.00) (2,750.00) (45,490.00) (45,490.00) 2 points
RECONCILIATION OF INTER-SHIPMENTS ACCOUNTS Shipments to branch, adjusted Unrealized profits, preclosing Total Shipments from home office, adjusted
5,091.00
5,591.00 5,591.00
PRE-CLOSING TRIAL BALANCE Dublin Radford Branch Branch 6,000.00 4,800.00 4,400.00 3,520.00 7,532.00 6,562.50 20,000.00 16,000.00 24,137.00 20,690.50 35,000.00 40,000.00 (10,000.00) (8,000.00) (20,000.00) (15,000.00) (67,569.00) (70,573.00) (500.00) (2,000.00) (8,432.00) (9,882.50) (2,580.00) (763.50) (11,012.00) (10,646.00) 2 points 2 points
15,000.00 3,000.00 18,000.00 18,000.00
9,000.00 1,350.00 10,350.00 10,350.00
Difference
-
ANALYSIS OF ENDING INVENTORIES Inventories, per adjusted TB Outside Home (at billed price) Unadjusted Adjustment Freight Total ending inventory (billed)
16,040.00
7,532.00
6,562.50
14,000.00
5,000.00
2,000.00
2,400.00 120.00 12.00 7,532.00 -
3,450.00 1,046.50 66.00 6,562.50 -
3,000.00
1,350.00
2,040.00 16,040.00
COMPUTATION OF REALIZED PROFITS Unrealized profits, preclosing Unrealized profits on branch's ending inventory Before adjustment Adjustment Realized profits
400.00 20.00 420.00 2,580.00 -
Elimination entries under perpetual inventory system 420.00 586.50 2 points /.5 201.00 1,207.50
Unrealized profit in Dublin Unrealized profit in Radford Unrealized profit in Blacksburg Cost of sales
2,580.00 763.50 2 points /.5 899.00 4,242.50
45,000.00 2 points /.5
450.00 136.50 586.50 763.50 (0.00)
Elimination entries under perio
Unrealized profit in Dublin Unrealized profit in Radford Unrealized profit in Blacksburg Inventories, ending
Home office Dublin branch current Radford branch current Blacksburg branch current
-
Shipments Shipments Shipments Unrealized Unrealized Unrealized Shipments
to Dublin branch to Radford branch to Blacksburg branc profit in Dublin profit in Radford profit in Blacksburg from home office
Home office 20,000.00 Dublin branch current 15,000.00 Radford branch current 10,000.00 Blacksburg branch current
DUBLIN BOOKS
RADFOR Debit
2 points/.5
1 point
120 12
Credit
Inventories Inventories 132 Home office
500.00 500.00 Home office
Expenses Home office Cash
250.00 3,750.00
Home office 4,000.00
Inventories Inventories Home office Inventory Home office
2,448.00
Inventory Home office
50.00
Home office Inventory
2,448.00 Total cost from home office Cost of merchandise shipped from Du 50.00
1,249.00 1,249.00
Cost from home office Mark-up Freight from home to dublin Home office Cash Payment of freight (interbranch)
Cost of merchandise shipped from Du Mark-up Total billed price
1,020.00 204.00 25.00 35.00 35.00
R Home to dublin Dublin to branch Total actual Direct shipment Excess freight
Adjusted 27,460.00 5,500.00 16,040.00 150,000.00 20,000.00 15,000.00 10,000.00 17,000.00 62,500.00 10.00 (14,500.00) (100,000.00) (81,310.00) (3,000.00) (1,350.00) (1,100.00) (125,000.00) (2,750.00)
Adjusted 6,000.00 4,400.00 7,532.00
B 12.50 15.00 27.50 20.00 7.50
12.50 20.00 32.50 30.00 2.50
20,000.00 24,137.00 35,000.00 (10,000.00) (20,000.00) (67,569.00) (500.00)
Adjusted 4,800.00 3,520.00 6,562.50 16,000.00 20,690.50 40,000.00 (8,000.00) (15,000.00) (70,573.00) (2,000.00)
Adjusted 8,340.00 2,816.00 5,241.00 12,800.00 15,643.00 30,000.00
(6,400.00) (10,000.00) (58,940.00) (500.00)
G TRIAL BALANCE Blacksburg Branch 8,340.00 2,816.00 5,241.00 12,800.00 15,643.00 30,000.00 (6,400.00) (10,000.00) (58,940.00) (500.00) (13,297.00) (899.00) (14,196.00) 2 points
11,000.00 1,100.00 12,100.00 12,100.00
TOTAL 46,600.00 16,236.00 35,375.50 198,800.00 20,000.00 15,000.00 10,000.00 77,470.50 167,500.00 10.00 (38,900.00) (100,000.00) (81,310.00) (45,000.00) (3,000.00) (1,350.00) (1,100.00) (322,082.00) (5,750.00) (77,101.50) (4,242.50) (81,344.00)
Elimination Debit 45,000.00 3,000.00 1,350.00 1,100.00 50,450.00
entries Credit 1,207.50 20,000.00 15,000.00 10,000.00 4,242.50 50,450.00
Total 46,600.00 16,236.00 34,168.00 198,800.00 73,228.00 167,500.00 10.00 (38,900.00) (100,000.00) (81,310.00) (322,082.00) (5,750.00)
-
5,241.00
35,375.50
3,000.00
24,000.00
1,650.00 561.00 30.00 5,241.00 -
7,500.00 3,767.50 108.00 35,375.50
1,100.00
5,450.00
150.00 51.00 201.00 899.00 0.00
1,000.00 207.50 1,207.50 4,242.50
Checking Ending inventories @ billed price Unrealized profit, ending Ending inventories, @ cost
ation entries under periodic inventory system
ments ments ments lized lized lized ments
to Dublin branch to Radford branch to Blacksburg branch profit in Dublin profit in Radford profit in Blacksburg from home office
n branch current rd branch current sburg branch current
3,000.00 1,350.00 1,100.00 45,000.00 20,000.00 15,000.00 10,000.00
RADFORD BOOKS
BLACKSBURG BOOKS Debit
2 points/.5
Credit
460.00 46.00 506
Cash Home office
1 point
500.00 500.00
1 point
1,500.00 1,500.00 Home office
2 points/.5
586.50 20.00 -
Inventories - Inventories 606.50 Home office
st from home office merchandise shipped from Dublin to R and B
merchandise shipped from Dublin to R an
2,040.00 510.00
R
B 510.00 76.50 586.50
510.00 51.00 561.00
Income Statement
-
Balance Sheet 46,600.00 16,236.00 34,168.00 198,800.00 -
73,228.00 167,500.00 10.00 (38,900.00) (100,000.00) (81,310.00) (322,082.00) (81,344.00) (5,750.00)
75,594.00
billed price
35,375.50 (1,207.50) 34,168.00
BLACKSBURG BOOKS Debit
Credit
4,500.00 1 point
1 point
4,500.00
500.00 500.00
2 points/.5
561.00 30.00 -
591.00
