EG Company Limited, a manufacturing business, exports some of its products through an overseas branch whose currency
Question:
EG Company Limited, a manufacturing business, exports some of its products through an overseas branch whose currency is ‘florins’, which carries out the final assembly operations before selling the goods.
The trial balances of the head office and branch at 30 June 2008 were:
The following adjustments are to be made:
1 The cost of sales figures include a depreciation charge of 10 per cent per annum on cost for machinery.
2 A provision of £300 for unrealised profit in branch stock is to be made.
3 On 26 June 2008 the branch remitted 16,000 ‘FI.’; these were received by the head office on 4 July and realised £1,990.
4 During May a branch customer in error paid the head office for goods supplied. The amount due was 320 ‘FI.’ which realised £36. It has been correctly dealt with by head office but not yet entered in the branch books.
5 A provision has to be made for a commission of 5 per cent of the net profit of the branch after charging such commission, which is due to the branch manager.
The rates of exchange were:
You are required to prepare, for internal use:
(a) detailed operating accounts for the year ended 30 June 2008;*
(b) combined head office and branch balance sheet as at 30 June 2008;
(c) the branch account in the head office books, in both sterling and currency, the opening balance on 1 July 2007 being £25,136 (189,260 ‘FI.’).
Taxation is to be ignored.
Step by Step Answer:
Business Accounting Uk Gaap Volume 2
ISBN: 9780273718802
1st Edition
Authors: Alan Sangster, Frank Wood