Star Stores has its head office and main store in Crewe, and a branch store in Leek. All goods are purchased by the head office. Goods are invoiced to the branch at cost price plus a profit loading of 20 per cent. The following trial balances have been extracted from the books of account of both the head office and the branch as at 31 December 2009:

Additional information:
1 The stocks in hand at 31 December 2009 were estimated to be as follows:

In addition, £60,000 of stocks at invoiced price had been despatched to the branch on 28 December 2009. These goods had not been received by the branch until 5 January 2010 and so they had not been included in the branch books of account.
2 On 31 December 2009, the branch had transferred £15,000 of cash to the head office bank, but this was not received in Crewe until 2 January 2010.

Required:

(a) Prepare in adjacent columns and using the vertical format: (i) the head office, and (i/) the branch trading accounts and profit and loss accounts for the year ending 31 December 2009 (note: a combined profit and loss account is NOT required); and

(b) Prepare in the vertical format, Star Stores’ balance sheet as at 31 December 2009 (note: separate balance sheets for the head office and the branch are NOT required).

Transcribed Image Text:

Head Office Books Branch Books Dr Cr Dr Cr 000 000 000 000 Administrative expenses 380 30 Distribution costs 157 172 Capital (at 1 January 2009) 550 Cash and bank 25 2 Creditors and accruals 176 Current accounts 255 180 Debtors and prepayments 20 20 130 76 Motor vehicles: at cost 470 230 accumulated depreciation at 31 December 2009 Plant and equipment: 280 120 at cost 250 80 50 accumulated depreciation at 31 December 2009 Proprietor's drawings during the year 120 30 64 Provision for unrealised profit on branch stocks at 1 January 2009 5 Sales Purchases Stocks at cost/invoiced amount at 1 January 2009 Transfer of goods to the branch/from 880 1,200 80 the head office 570 30 360 300 2,691 2,691 920 920 30