Packer and Stringer were in partnership as retail traders sharing profits and losses: Packer 3/4, Stringer 1/4. The partners were credited annually with interest at the rate of 6% per annum on their fixed capitals; no interest was charged on their drawings.

Stringer was responsible for the buying department of the business. Packer managed the head office and Paper was employed as the branch manager. Packer and Paper were each entitled to a commission of 10% of the net profits (after charging such commission) of the shop managed by him.
All goods were purchased by head office and goods sent to the branch were invoiced at cost. The following was the trial balance as on 31 December 2017.

You are given the following additional information:
(a) Inventory on 31 December 2017 amounted to: head office £14,440, branch £6,570.
(b) Administrative expenses are to be apportioned between head office and the branch in proportion to sales.
(c) Depreciation is to be provided on furniture and fittings at 10% of cost.
(d) The allowance for doubtful debts is to be increased by £50 in respect of head office accounts receivable and decreased by £20 in the case of those of the branch.
(e) On 31 December 2017 cash amounting to £2,400, in transit from the branch to head office, had been recorded in the branch books but not in those of head office; and on that date goods invoiced at £800, in transit from head office to the branch, had been recorded in the head office books but not in the branch books.

Any adjustments necessary are to be made in the head office books. 

You are required to:
(a) Prepare statements of profit or loss and the appropriation account for the year ending 31 December 2017, showing the net profit of the head office and branch respectively;
(b) Prepare the statement of financial position as on that date; and

(c) Show the closing entries in the branch current accounts giving the make-up of the closing balance. 

Income tax is to be ignored.

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Drawings accounts and fixed capital accounts: Packer Stringer Furniture and fittings, at cost Furniture and fittings, provision for depreciation as at 31 December 2016 Inventory on 31 December 2016 Purchases Goods sent to branches Sales Allowance for doubtful debts Branch and head office current accounts Salaries and wages Paper, on account of commission Carriage and travelling expenses Administrative expenses Trade and general expenses Sundry accounts receivable Sundry accounts payable Bank balances Head Office Books Dr Cr £ 2,500 1,200 1,500 13,000 37,000 6,800 4,500 2,200 2,400 3,200 7,000 £ 14,000 4,000 500 18,000 39,000 600 Branch Books Dr Cr £ 1,100 4,400 17,200 3,200 240 960 1,800 3,000 5,800 600 81,900 81,900 31,900 £ 350 26,000 200 3,600 400 1,350 31,900