Packer and Stringer were in partnership as retail traders sharing profits and losses: Packer three-quarters, Stringer one-quarter. The partners were credited annually with interest at the rate of 6 per cent 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 per cent 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 20X4.

You are given the following additional information:

(a) Stocks on 31 December 20X4 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 per cent of cost.

(d) The provision for doubtful debts is to be increased by £50 in respect of head office debtors and decreased by £20 in the case of those of the branch.

(e) On 31 December 20X4 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 trading and profit and loss accounts and the appropriation account for the year ended 31 December 20X4, showing the net profit of the head office and branch respectively;

(b) Prepare the balance sheet as on that date; and

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

Transcribed Image Text:

Drawings accounts and fixed capital accounts: Packer Stringer Furniture and fittings, at cost Furniture and fittings, provision for depreciation as at 31 December 20X3 Stock on 31 December 20X3 Purchases Goods sent to branches Sales Provision 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 debtors Sundry creditors 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 7,000 600 81,900 £ 14,000 4,000 500 18,000 39,000 600 5,800 81,900 Branch Books Dr £ 1,100 4,400 17,200 3,200 240 960 1,800 3,000 31,900 Cr £ 350 26,000 200 3,600 400 1,350 31,900