REQUIREMENT NO.

1 Prepare a reconciliation of the Branch Account and Home Office Account,

showing the corrected book balances

Branch Home Office

Current Account Current Account

Unadjusted balance, 12/31/20x4 P 60,000 P 51,500

Add (Deduct): Adjustments

Cash Remittance (1,700 )

Cash in transit (Reimbursement Checks) 1,800

Shipments in transit 5,800

Adjusted balance, 12/31/20x4 P 57,300 P 57,300

REQUIREMENT NO. 2 Prepare Income Statements for the Branch and for the Home Office for the year
ended December 31, 20x4

THE ALLEN COMPANY BRANCH

Income Statement
For the year ended December 31, 20x4

Sales P 140,000
Cost of goods sold:
Merchandise Inventory, January 1, 20x4 P 10,550
Shipments from home office 100,000
Freight-in 5,750
Merchandise available for sale 116,300
Less: Merchandise Inventory, December 31, 20x4 14,770 P 101,530
Gross Profit 38,470
Operating expenses 24,300

Net income P 14,170

Supporting Solutions:

Merchandise Inventory - Jan 1, 20x4 Shipments from Home Office Freight in

11,550 105,000 5,500

(1,000) 5,000 250
10,000
10,550 5,750
100,000

THE ALLEN COMPANY HOME OFFICE

Income Statement
For the year ended December 31, 20x4

Sales P 155,000
Cost of goods sold:
Merchandise Inventory, January 1, 20x4 P 23,000
Purchases 190,000

Merchandise available for sale 213,000

Less: Shipments to Branch 100,000
Merchandise available for own sales 113,000
Less: Merchandise Inventory, December 31, 20x4 30,000 P 83,000
Gross Profit 72,000
Operating expenses 42,000

Net income from own operations 30,000

Add: Branch Net Income 14,170

Combined Net Income P 44,170

REQUIREMENT NO. 3 Prepare combined Income Statement

THE ALLEN COMPANY

Combined Income Statement
For the year ended December 31, 20x4

Sales P 295,000
Cost of goods sold:
Merchandise Inventory, January 1, 20x4 P 33,550
Purchases 190,000
Freight - in 5,750
Merchandise available for sale 229,300
Less: Merchandise Inventory, December 31, 20x4 44,770 P 184,530
Gross Profit 110,470
Operating expenses 66,300

Net Income P 44,170

Supporting Solutions

Merchandise Inventory, Jan 1, 20x4 Merchandise Inventory, Dec 31, 20x4 Operating Expenses
Branch 10,550 Branch 14, 770 Branch 24,300
Home Office 23,000 Home Office 30,000 Home Office 42,000
Total 33,550 Total 44,770 Total 66,300