15.1

(a) (i)

(ii)

(iii)

(iv)

City Co., which has its head office in London, opened a branch in York by trans¬ ferring £500,000 from its London bank account to a new York bank account, on 1 January.

Head office purchased premises for York branch for £600,000, paying by cheque drawn on its London bank account on 1 January.

York branch paid, by cheque drawn on its bank account on 1 January, insurance for the year to 31 December of £12,000.

On 4 January York branch purchased warehouse equipment for £170,000 on credit from Prentice.

(v) On 5 January York branch purchased goods for resale from Parrott for £100,000 cash, paying by a cheque drawn on its York bank account.

(vi) On 7 January head office transferred goods for resale to York, at cost £35,000.

(vii) On 20 January York sold half the goods purchased from Parrott, on credit to Bloggs for £65,000.

(vih) On 31 January York paid salaries for the month of January of £6,000.

(ix) On 31 January York returned goods for resale to head office, at cost £3,000.

(x) On 31 January York repaid London head office £100,000 by cheque.

York branch keeps full accounting records at the branch.

Prepare the ledger accounts in the books of London (extracts) and York for the month of January.

15.1

(b) Referring to the information in 15.1

(a) above, show how the ledger accounts would appear if the records were maintained at head office. Distinguish those accounts which are:

(i) essential for preparing the financial statements of the firm;

(ii) needed in order to identify the branch assets and liabilities.

15.1

(c) Based on the information provided in exercise 15.1 (a), draw up the trial balance of York branch. Taking the following information into account, prepare the York profit and loss account for the month ended 31 January.

Amounts accrued as at 31 January:

£

Sundry expenses 1,000 Heating and lighting 700 Travel expenses 200