Paper Products has a head office in London and a branch in Bristol. The following information has been extracted from the head office books of account as at 31 March 2006:

Additional information:
1. Most of the accounting records relating to the branch are kept by the head office in its own books of account.
2. All purchases are made by the head office, and goods are invoiced to the branch at selling price, that is, at cost price plus 50%.

Required:

(a) Write up the following ledger accounts for the year to 31 March 2006, being careful to bring down any balances as at that date:
(i) branch inventory account;
(ii) goods sent to branch account;
(iii) branch inventory adjustment account;
(iv) branch accounts receivable account; and (v) branch bank account.

(b) Compile Paper Products’ income statement for the year ending 31 March 2006.4" nots

(c) Examine briefly the merits and demerits of Paper Products’ method of branch bookkeeping including comments on the significance of the ‘balancing figure’ in the branch stock account.

Transcribed Image Text:

Information relating to the branch Balances Branch bank account (positive balance) Branch accounts receivable Branch inventory (at transfer price) Transactions during the year Bad debts written off Branch general expenses (paid from bank branch account) Cash received from credit customers and banked Cash sales banked Cash transferred from branch to head office bank account Credit sales Discounts allowed to credit customers Goods returned by credit customers Goods returned from branch (at transfer price from head office) Goods sent to branch (at transfer price from head office) Opening 000 Closing 000 75 367 12 66 81 90 000 15 42 390 120 459 437 9 8 30 600