On January 1, Super Balut Co. establishes a branch for an initial cash investment of 10,000,000. The subsequent transactions are as follows:

a. On January 3, 20x1, the home office acquires land and building to be used by the branch for a total cost of 30M. The branch records the assets in its books. The fair value of the land is 11M, while the fair value of the building is 22M. The building has an estimated useful life of 20 years and no residual value. The company uses the straight-line method of depreciation.

b. On Feb 14, 20x1, the home office transfers inventory worth 20M to the branch. The home office pays freight of 500,000.

c. On March 1, 20x1, the home office transfers additional inventory worth 5M to the branch. This time the branch pays the freight of 100,000.

d. On March 31, 20x1, the branch acquires equipment for 900,000 cash. The equipment will be carried in the home office's books. The equipment has a useful life of 5 years.

e. On July 1, 20x1, the branch acquires furniture for 600,00 cash and records the furniture in its books. The furniture has a useful life of 4 years.

f. August 30, the branch purchases inventory from a supplier of 10M, on account. No freight is paid.

g. During 20x1, the branch makes total sales of 100M, half of which is on account.

h. The branch collects 30M on its accounts receivable. The home office collects 10M accounts receivable on behalf of the branch. The home office retains the collection.

i. On Sep 30, 20x1, the branch remits 35M to the home office.

j. On Oct 20x1, the branch pays 8M accounts payable.

k. During 20x1, the branch pays expenses of 15M, 1M of which pertains to expenses of the home office.

l. The home office allocates general overhead of 3M to the branch.

Year-end:

m. Ending inventory consists 1/4 from the first shipment and 1/2 from the second shipment form home office.

n. Depreciation expenses are recorded.

o. Closing entries are recorded.

Requirements:

a. Provide the entries in each of the books of home office and the branch. Provide also the adjusting and closing entries.

b. Reconcile the reciprocal accounts at the end of the period.

c. Prepare the Statement of Financial Position and Statement of Profit or Loss of the branch.