QUIZ 1: HOME-BRANCH ACCOUNTING

A.1 Beginning Inventory 12,000.00 SQUEEZED

Shipment from HO 64,000.00
Ending Inventory (3840/1.20) (3,200.00)
COS (14560/.20) 72,800.00

C.2 Sales(87360 x 1.25) 109,200.00

COS(72800 x 1.20) (87,360.00)
Net Income 21,840.00

B.3 Sales 109,200.00

COS (72,800.00)
True Net Income 36,400.00

C.4

5 Shipment from Namise Branch

Let x = cost
16,125= 0.04x+ x/.80
16,125=1.29x
x=12,500

12500x.04= 500 Freight Charged

Freight that must be included in the inventory is 300, interbranch shipment are always recorded as if s
The excess of 500 less than 300 is expensed.

Shipment from Namiseon ( For illustration purpose,s Shipement from Namiseon is used instead of Shipment from
12500x.50 6,250.00
300x.50 150.00 6,400.00
Shipment from HO
((23,400-(6250/.80)+150)x .80 12,350.00
Actual Ending Inventory for Seoul Branch 2017 18,750.00

6 Beginning Inventory (46000+17800x.75) 59,350.00

Shipment from HO 84,000.00
Shipment from Namiseon 12,500.00
Freight- In 300.00
Ending Inventory (18750+57000) (75,750.00)
Actual COS for HO and Seoul 2017 80,400.00

7 Sales (424000+126000) 550,000.00

COS (80,400.00)
GI 469,600.00
Expenses(152800+40600) (193,400.00)
Excess of Freight Charged as Expense (500-300) (200.00)
Combined Net Income of HO and Branch 2017 276,000.00
8 COS with Mark- up
Beg. Inventory(46000+17800) 63,800.00
Shipment from HO(84000/.80) 105,000.00
Shipment from Namiseon
((12500/.80)+300) 15,925.00
Ending Inventory(57000+23400) (80,400.00) 104,325.00

COS Actual (80,400.00)

Realized Allowance for Overvaluation 2017 23,925.00

9 Shipment from HO (86700/.85) 102,000.00

Freight Paid 1,600.00
Total Credit to HO for 2018 103,600.00

10 0.00

BONUS: Statement of Affairs or Statement of Financial Liquidation

NOTE FOR BUSINESS COMBINATION: This will come out in your prelims
During our discussion regarding business combination, when I said that it is for external financial reporting purpo
Consolidation of Financial Statements only occurs for Consolidation definitely not on Mergers.

Consolidation
> has 2 separate legal entities, the parent and subsidiary
> Financial Statements are consolidated for external reporting purposes

Merger
> only one legal entity remains, the others are dissolved
> NOT CONSOLIDATED since only one remaining entity which is the acquirer
are always recorded as if shipment came directly from HO

d instead of Shipment from HO Account title)

l financial reporting purposes, what I meant was the consolidation of Financial Statements.