Problem V

SPENCER CO.
Work Sheet for Combined Statements for Home Office and Branch
December 31, 20x5

Adjustments Income Balance

Home and Eliminations Statement Sheet
Office Branch Dr. Cr. Dr. Cr. Dr. Cr.

Debits
Cash .. 10,350 2,650 .. .. .. .. 13,100 ..
Cash in Transit . 1,500 .. .. .. .. .. 1,500 ..
Accounts Receivable . 26,200 12,850 .. .. .. .. 39,050 ..
Merchandise Inv. Dec 1 . 31,500 14,400 (c) 2,000 43,900 .. .. .. ..
Store Supplies . 380 300 .. .. .. .. 580 ..
Prepaid Expenses . 350 120 .. .. .. .. 470 ..
Furniture & Fixtures 8,500 3,600 .. .. .. .. 12,700 ..
Branch 32,260 (a) .. 32,260 .. .. .. ..
Retained Earnings . 6,850 .. .. .. .. 6,850 ..
Purchases . 27,600 4,100 .. .. .. .. .. ..
Shipments from Home Office 10,200 (b) 10,200 .. .. .. .. ..
Advertising Expense . 2,850 2,800 .. 5,650 .. .. .. ..
Salaries and Commissions Expense . 4,250 2,350 .. 6,600 .. .. .. ..
Store Supplies Expense . 560 280 .. 840 .. .. .. ..
Miscellaneous Selling Expense .. 1,850 1,050 .. 2,900 .. .. .. ..
Rent Expense .. 2,700 1,500 .. 4,200 .. .. .. ..
Depreciation Expense F&F .. 85 36 .. 121 .. .. .. ..
Miscellaneous General Expense .. 2,510 95 .. 3,415 .. .. .. ..
160,295 57,141 .. .. .. .. .. ..
Merchandise Inv, Dec 31 24,900 14,600 .. (d) 1,950 .. .. 36,850 ..
Problem V continued

Credits
Accumulated Depreciation Furniture
And Fixtures 2,585 576 .. .. .. .. .. 3,161
Unrealized Intercompany Inventory .. .. (b) 1,700 .. .. .. .. ..
Profit . 3,700 .. (c) 2,000 .. .. .. .. ..
Accounts Payable 36,400 4,200 .. .. .. .. .. 39,000
Accrued Expenses ... 260 105 .. .. .. .. .. 365
Home Office .. .. 32,250 (a) 32,260 .. .. .. .. ..
Capital Stock 65,000 .. .. .. .. .. .. 65,000
Sales 44,850 20,000 .. .. .. 64,850 .. ..
Shipments to Branch ... 8,500 .. (b) 8,500 .. .. .. .. ..
P160,295 57,141 .. .. .. .. .. ..
Merchandise Inv, Dec 31 .. 24,200 14,600 (d) 1,950 .. .. 36,850 .. ..
46,410 46,410 99,326 101,700 110,500 108,126
Net Income to Balance . 2,374 .. .. 2,374
101,700 101,700 .. ..
.. ..
110,500 110,500
Explanation of adjustments and eliminations:

(a) To eliminate reciprocal accounts, Home Office and Branch.

(b) To eliminate shipments to Branch and Shipments to Home Office. Difference between the two balances is debited to Unrealized Intercompany Inventory profit
(20% of P8,500, or P1,700).
(c) To eliminate unrealized profit in beginning inventory balances : P3,700 balance per trial balance, less P1,700 adjustment per entry (b) or P2,000
(d) To reduce ending inventory cost: Branch inventory form home office at billed price . P11,700
Branch inventory from home office at cost, P11,700/1.20 9,750
Inventory reduction .. P 1,950