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 2012:

Information relating to the branch Balances Opening Closing

£000 £000 Branch bank account (positive balance) 3 12 Branch accounts receivable 66 81 Branch inventory (at transfer price) 75 90 Transactions during the year £000 Bad debts written off 15 Branch general expenses (paid from bank branch account) 42 Cash received from credit customers and banked 390 Cash sales banked 120 Cash transferred from branch to head office bank account 459 Credit sales 437 Discounts allowed to credit customers 9 Goods returned by credit customers 8 Goods returned from branch (at transfer-price from head office) 30 Goods sent to branch (at transfer price from head office) 600 Information relating to head office Balances Opening Closing

£000 £000 Inventory 180 220 Transactions during the year £000 Bad debts written off 24 Cash sales 1,500 Credit sales 2,000 Discounts allowed to credit customers 29 General expenses 410 Goods returned by credit customers 40 Purchases 2,780 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 2012, 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 2012.°°" es :

(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 inventory account.