PROBLEM 1

Requirement:

I. Prepare the year-end adjusting entries to bring the intra-company accounts into agreement. Be sure to adjust the other accounts in the trial balance as appropriate.

II. Complete the following analysis of the branchs inventory

Transfers above cost Transfers at cost Mark-up

Beginning inventory

Acquired from vendors

Acquired from home office

Purchases (from vendors)

Shipments from office ____________________ __________________ ________________

Goods available for sale

Ending inventory

Acquired from vendors

Acquired from home office _____________________ ___________________ _________________

Cost of goods sold

III. Prepare the following year-end adjusting entries to:

- Record the branch income on the home office books

- Adjust the deferred profit account to the proper balance

IV. Prepare the year-end closing entries for the home office and the branch

V. Prepare a combining statement worksheet as of December 31, 2020 after completing requirements I to IV

VI. From the completed worksheet, prepare:

- An income statement and balance sheet for the branch

- An income statement and balance sheet for the home office

- An income statement and balance sheet for combined for home office and branch office

Inventory per physical count on December 31, 2020: Home Office Acquired from vendors 180,000 Acquired from home office Branch 20,000 30,000 Additional information: 1. Inventory transferred to the branch from home office is billed at 125% of cost. 2. The home office received 3. The branch remitted 25,000 cash to the home office on December 31, 2020. The home office received and recorded this remittance on January 4, 2021. The pre-closing trial balance of Nicole Company and its Angeles City branch for the year ended December 31, 2020 prior to adjusting and closing entries are as follows: Home Office Branch Debit Credit Debit Credit Cash 35,000 10,000 Accounts receivable, net 80,000 50,000 Inventory, January 1, 2020 From vendors 230,000 50,000 From home office 20,000 Deferred profit 25,000 Fixed assets, net 870,000 Investment in branch 155,000 Accounts payable 221,000 45,000 Long-term debt 400,000 Common stock 300,000 Retained eamings, January 1, 2020 350,000 Home office equity 115,000 Sales 960,000 320,000 Purchases 800,000 120,000 Shipments from home office 90,000 Shipments to branch 84,000 Selling expenses 101,000 34,000 Administrative expenses 69.000 16.000 Totals 2,340,000 2,340,000 480,000 480,000 Inventory per physical count on December 31, 2020: Home Office Acquired from vendors 180,000 Acquired from home office Branch 20,000 30,000 Additional information: 1. Inventory transferred to the branch from home office is billed at 125% of cost. 2. The home office received 3. The branch remitted 25,000 cash to the home office on December 31, 2020. The home office received and recorded this remittance on January 4, 2021. The pre-closing trial balance of Nicole Company and its Angeles City branch for the year ended December 31, 2020 prior to adjusting and closing entries are as follows: Home Office Branch Debit Credit Debit Credit Cash 35,000 10,000 Accounts receivable, net 80,000 50,000 Inventory, January 1, 2020 From vendors 230,000 50,000 From home office 20,000 Deferred profit 25,000 Fixed assets, net 870,000 Investment in branch 155,000 Accounts payable 221,000 45,000 Long-term debt 400,000 Common stock 300,000 Retained eamings, January 1, 2020 350,000 Home office equity 115,000 Sales 960,000 320,000 Purchases 800,000 120,000 Shipments from home office 90,000 Shipments to branch 84,000 Selling expenses 101,000 34,000 Administrative expenses 69.000 16.000 Totals 2,340,000 2,340,000 480,000 480,000