Nion is a retail stock outlet operating from a head office in London and a branch in Brighton. The following trial balances have been extracted from the books of account as at 31 October 20X1.

Additional information:

1. All goods are purchased by the head office. Those goods sent to the branch are invoiced at cost plus 25 per cent.

2. Stocks were valued at 31 October 20X1 as being at head office, £12,000; and at the branch, £15,000 at their invoiced price.

3. Depreciation is to be provided for the year on the fixed assets at a rate of 10 per cent on the historic cost.

4. The provision for doubtful debts is to be maintained at a rate of 5 per cent of outstanding trade debtors as at the end of the financial year.

5. As at 31 October 20X1, there was £50,000 cash in transit from the branch to the head office; this cash was received in London on 3 November 20X1. There was also £5,000 of goods in transit at invoice price from the head office to the branch; the branch received these goods on 10 November 20X1.

Required:

Prepare in adjacent columns: 

(a) The head office, 

(b) The branch trading and profit and loss accounts for the year to 31 October 20X1; and a combined balance sheet for Nion as at that date.

Transcribed Image Text:

Drawings Fixed assets: at cost accumulated depreciation (at 1 November 20X0) Stock (at 1 November 20X0) Provision for unrealised profit Purchases Goods sent to branch at invoiced value Sales Provision for doubtful debts Head office/branch current accounts Distribution expenses Administrative expenses Trade debtors Trade creditors Cash and bank balances Capital Head Office Books Dr £ 40,000 350,000 8,000 914,000 175,000 80,500 200,000 60,000 15,500 £1,843,000 Cr £ 140,000 4,000 380,000 850,000 9,000 50,000 410,000 £1,843,000 Branch Books Dr £ 100,000 20,000 375,000 5,000 16,500 60,000 13,000 £589,500 Cr £ 30,000 437,000 2,500 120,000 £589,500