Hartman, Inc., established Reno Branch on January 2, 2005. During 2005, Hartmans home office shipped merchandise to Reno Branch that cost $300,000. Billings were made at prices marked up 20% above home office cost. Freight costs of $15,000 were paid by the home office. Sales by the branch were $450,000, and branch operating expenses were $96,000, all for cash. On December 31, 2005, the branch took a physical inventory that showed merchandise on hand of $72,000 at billed prices. Both the home office and the branch use the periodic inventory system.

Instructions Prepare journal entries for Reno Branch and the home office of Hartman, Inc., to record the foregoing transactions and events, ending inventories, and adjusting and closing entries on December 31, 2005. (Allocate a proportional amount of freight costs to the ending inventories of the branch.)