Accounting for Branches You are required to prepare the combined financial statements of the head office and its branch based on the following transactions: 1. The HO sent $1,000 cash to the branch. 2. HO sent goods of $60,000 to the branch for sale. 3. HO collected $500 cash from the branch. 4. The branch sold goods that cost $45,000 for $80,000 on account 5. The branch collected $62,000 of the credit sales. 6. The branch paid $20,000 cash for operating expenses. 7. The branch transferred $37,500 cash to the HO. 8. The HO charged the branch by $3,000 of its operating expenses. Working Paper for Combined Financial Statements of Head Office and Branch For the Year Ended December 31, 2019 (Perpetual Inventory System) HO Branch Income Statements Sales $400,000 Cost of goods sold (235,000) Operating expenses (90,000) Net income $75,000 Retained Earnings Retained earnings 1/1 $ 70,000 Add: Net income 75,000 Deduct: Dividends (40,000) Retained earnings Dec. 31 5 105.000 Balance Sheet Cash $ 25,000 Accounts receivables 39,000 Inventories 45,000 Plant assets-net 140,000 Investment in Branch 26,000 Total assets $275,000 Notes payable 20,000 Head Office Capital stock 150,000 Retained earnings 105,000 Total equities $275.000