b.com – ii – advanced accounting · pdf filecompiled & solved by: s.hussain...

The workings under the heading of “Additional Working” are not required according to the requirement of the examiner. These are only for understanding the solutions. For more help, visit www.a4accounting.net

2002

Compiled and Solved by:

S.Hussain

B.COM – II – ADVANCED ACCOUNTING

REGULAR /

PRIVATE

http://www.a4accounting.net/

Compiled & Solved by: S.Hussain [email protected]

B . C o m – I I – A d v a n c e d A c c o u n t i n g – 2 0 0 2 ( R e g u l a r / P r i v a t e )

ADVANCED ACCOUNTING – 2002

REGULAR / PRIVATE Instructions: Attempt any five questions.

Q.No.1 FINANCIAL STATEMENT

GIVEN Pak. Company Ltd. was registered with an authorized capital of Rs.5,000,000 divided into 500,000 ordinary shares of Rs.10 each. The company’s books showed the following balances on June 30, 2002:

Title of Accounts Debit Credit Cash in bank 63,000 Accounts receivable 100,000 Allowance for bad debts 3,000 Office supplies 12,000 Merchandise inventory 1.7.01 150,000 Prepaid insurance 8,000 Machinery – cost 1,200,000 Allowance for depreciation – Machinery 120,000 Preliminary expenses 6,000 Accounts payable 30,000 10% Bonds payable 200,000 Paid up capital 800,000 Retained earnings 210,000 Sales revenue 700,000 Interest revenue 7,000 Sales return & allowance 20,000 Purchases 400,000 Transportation – in 40,000 Purchases returns & allowances 30,000 Salaries expenses 50,000 Rent expenses 36,000 Income tax expenses 10,000 Advertising expenses 5,000

2,100,000 2,100,000

Data for Adjustments on June 30, 2002: (a) Rent expenses for the year amounted to Rs.30,000. (b) Merchandise inventory was valued on June 30, 2002 at Rs.160,000. (c) Provide allowances for depreciation on machinery for the year Rs.80,000. (d) Allowance for bad debts Rs.5,000 for the year. (e) Appropriate Rs.50,000 for plant extension and Rs.40,000 for contingencies. (f) Declared cash dividend @ 10% on capital.

REQUIRED (a) Prepare a classified income statement for the year ended June 30, 2002 and also a statement of

retained earnings. (b) Prepare a balance sheet as of June 30, 2002 in classified form.



SOLUTION 1 (a) PAK. COMPANY LTD. INCOME STATEMENT

FOR THE PERIOD ENDED 30 JUNE 2002 Sales revenue 700,000 Less: Sales return and allowance (20,000)

Net sales 680,000 Less: Cost of Goods Sold: Merchandise inventory (beg) 150,000 Add: Net Purchases: Purchases 400,000 Add: Transportation in 40,000

Delivered purchases 440,000 Less: Purchase return and allowances (30,000)

Net purchases 410,000

Merchandise available for sale 560,000 Less: Merchandise inventory (end) (160,000)

Cost of goods sold (400,000)

Gross profit 280,000 Less: Operating Expenses: Salaries expense 50,000 Rent expense (36,000 – 6,000) 30,000 Income tax expenses 10,000 Advertising expenses 5,000 Depreciation expense –Machinery 80,000 Bad debts expense 2,000

Total operating expenses (177,000)

Profit from operation 103,000 Add: Other Income: Interest income 7,000

Net income 110,000

PAK. COMPANY LTD.

STATEMENT OF RETAINED EARNINGS FOR THE PERIOD ENDED 30 JUNE 2002

Retained earnings (opening balance) 210,000 Add: Net income for the period 110,000

Total retained earning 320,000 Less: Dividends and Reserves: Reserve for plant extension 50,000 Reserve for contingencies 40,000 Cash dividend (800,000 x 10%) 80,000

Total dividend and reserves (170,000)

Retained earnings (ending balance) 150,000



SOLUTION 1 (b) PAK. COMPANY LTD.

BALANCE SHEET AS ON 30 JUNE 2002

Equities Assets

Shareholder’s Equity: Fixed Assets: Authorized Capital: Machinery 1,200,000 500,000 ordinary shares Less: All for dep. (200,000) 1,000,000

@ Rs.10 each 5,000,000 Preliminary expenses 6,000

Issued & Paid-up Capital: Total fixed assets 1,006,000 80,000 ordinary shares @ Rs.10/- each 800,000 Current Assets: Reserve for plant extension 50,000 Office supplies 12,000 Reserve for contingencies 40,000 Prepaid insurance 8,000 Retained earnings 150,000 Prepaid rent 6,000

Total shareholder’s equity 1,040,000 Merchandise inv. 160,000 A/c. rec. 100,000 Liabilities: Less:All for b/d (5,000) 95,000 Long Term Liabilities: Cash at bank 63,000

10% Bonds payable 200,000 Total current assets 344,000 Current Liabilities: Accounts payable 30,000 Cash dividend payable 80,000

Total liabilities 310,000

Total equities 1,350,000 Total assets 1,350,000

Q.No.2 ANALYSIS OF FINANCIAL STATEMENTS

(a) GIVEN The following items are taken from the financial statements of Shalimar Company Ltd. at June 30, 2002.

Cash 50,000 Marketable securities 30,000 Notes receivable (due in six months) 20,000 Prepaid expenses 20,000 Accounts receivable – Net 300,000 Merchandise inventory 200,000 Land 200,000 Machinery – Net 600,000 Accounts payable 250,000 Notes payable (due in three months) 50,000 10% Debentures payable 260,000 Share capital (Rs.10 per share) 600,000 Retained earnings 140,000 Reserve for plant extension 100,000 Sales (including cash sales Rs.200,000) 2,000,000 Gross profit on sales 30% Advances from customers 5,000 Operating expenses 240,000 Market price per share is Rs.15/=



REQUIRED Compute the following:

(i) Working capital (ii) Current ratio (iii) Acid test ratio (iv) Earnings per share (v) Earnings ratio (vi) Inventory turnover (vii) Receivable turnover (viii) Rate of net income on sales

(b) GIVEN The following data are taken from the Fast Company:

Year 2002 2001 2000 1999

Sales Rs.450,000 360,000 330,000 321,000 Net income 22,950 14,550 21,450 19,200 REQUIRED Compute trend percentages for sales and net income. SOLUTION 2 (a) Income Statement: Net sales 2,000,000 Less: Cost of goods sold (2,000,000 x 70%) (1,400,000)

Gross profit 600,000 Less: Operating expenses (240,000)

Net income 360,000

(i) Working Capital:

Cash 50,000 Marketable securities 30,000 Notes receivable 20,000 Accounts receivable 300,000

Total quick assets 400,000 Prepaid expenses 20,000 Merchandise inventory 200,000

Total current assets 620,000 Less: Total Current Liabilities: Accounts payable 250,000 Notes payable 50,000 Advances from customers 5,000

Total current liabilities (305,000)

Working capital 315,000

(ii) Current Ratio:

Current ratio = Total current assets

Total current liabilities Current ratio = 620,000

305,000 Current ratio = 2.03 : 1



(iii) Acid Test Ratio: Acid test ratio = Total quick assets

Total current liabilities Acid test ratio = 400,000

305,000 Acid test ratio = 1.31 : 1

(iv) Earnings per Share: Earnings per share = Operating income

Number of shares Earnings per share = 360,000

60,000 Earnings per share = Rs.6

(v) Earnings Ratio: Earnings ratio = Earnings per share X 100

Market price per share Earnings ratio = 6 X 100

15 Earnings ratio = 40%

(vi) Inventory Turnover: Inventory turnover in times = Cost of goods sold

Average inventory Inventory turnover in times = 1,400,000

200,000 Inventory turnover in times = 7 times Inventory turnover in days = 365

Inventory turnover in times Inventory turnover in days = 365

7 Inventory turnover in days = 52 days

(vii) Receivable Turnover: Receivable turnover in times = Net credit sales

Average receivable Receivable turnover in times = 1,800,000

300,000 Receivable turnover in times = 6 times Receivable turnover in days = 365

Receivable turnover in times Receivable turnover in days = 365

6 Receivable turnover in days = 61 days



(viii) Rate of Net Income on Sales: Rate of net income on sales = Net income X 100

Net sales Rate of net income on sales = 360,000 X 100

2,000,000 Rate of net income on sales = 18% SOLUTION 2 (b)

FAST COMPANY TREND PERCENTAGE

(1999 BASE YEAR)

Year Sales Percentage

2002 450,000 450,000 / 321,000 x 100 = 140.19%

2001 360,000 360,000 / 321,000 x 100 = 112.15%

2000 330,000 330,000 / 321,000 x 100 = 102.80%

1999 321,000 321,000 / 321,000 x 100 = 100.00%

FAST COMPANY

TREND PERCENTAGE (1999 BASE YEAR)

Year Net Income Percentage

2002 22,950 22,950 / 19,200 x 100 = 119.53%

2001 14,550 14,550 / 19,200 x 100 = 75.78%

2000 21,450 21,450 / 19,200 x 100 = 111.72%

1999 19,200 19,200 / 19,200 x 100 = 100.00%

Q.No.3 FUND FLOW ANALYSIS – CASH AND WORKING CAPITAL CONCEPTS GIVEN The comparative balance sheet of Faisal Corporation at June 30, 2001 and 2002 are as follows:

Debit Balances 30.6.2002 30.6.2001

Cash 9,000 5,000 Accounts receivable 29,000 35,000 Merchandise inventories 50,000 57,500 Prepaid expenses 7,000 4,000 Machinery 100,000 90,000 Land 50,000 60,000 Goodwill 15,000 20,000

260,000 271,500

Credit Balance 30.6.2002 30.6.2001

Accounts payable 28,000 35,000 Accrued expenses 26,000 20,000 Accumulated depreciation – Machinery 30,000 22,000 10% Bonds payable 40,000 50,000 Share capital 100,000 100,000 Retained earnings 36,000 44,500

260,000 271,500



The following additional data are given: (a) Land costing Rs.10,000 was sold for Rs.20,000. (b) Machinery costing Rs.20,000 was sold for Rs.9,000. At the time of sale the book value of

machinery was Rs.12,000. (c) Cash dividend Rs.20,000 was paid during the year.

REQUIRED (a) Compute the working capital provided by operating activities. (b) Compute net cash flow from operating activities. (c) Prepare a statement of sources and application of fund for the year ended June 30, 2002. (d) Assuming net sales for the year 2002 to be Rs.250,000, calculate the cash collection from

customers during 2002. SOLUTION 3 (a)

FAISAL CORPORATION STATEMENT OF CHANGES IN WORKING CAPITAL

FOR THE PERIOD ENDED 30 JUNE 2002

Particular 2002 2001 Changes in Working

Capital

Current Assets: Cash 9,000 5,000 4,000 Accounts receivable 29,000 35,000 (6,000) Merchandise inventories 50,000 57,500 (7,500) Prepaid expenses 7,000 4,000 3,000

Total current assets 95,000 101,500 (6,500) Less: Current Liabilities: Accounts payable (28,000) (35,000) 7,000 Accrued expenses (26,000) (20,000) (6,000)

Total current liabilities (54,000) (55,000) 1,000

Decrease in working capital 41,000 46,500 (5,500)

SOLUTION 3 (b)

FAISAL CORPORATION NET CASH FLOW FROM OPERATING ACTIVITIES

FOR THE PERIOD ENDED 30 JUNE 2002 Net profit 11,500 Adjustments: Depreciation expense (8,000 + 8,000) 16,000 Amortization of goodwill 5,000 Gain on sale of land (10,000) Loss on sale of machinery 3,000

Profit before changes in working capital 25,500 Add: Decrease in accounts receivable 6,000 Add: Decrease in merchandise inventory 7,500 Less: Increase in prepaid expenses (3,000) Less: Decrease in accounts payable (7,000) Add: Increase in accrued expenses 6,000

Net cash flow from operating activities 35,000



FAISAL CORPORATION STATEMENT OF NET INCOME

FOR THE PERIOD ENDED 30 JUNE 2002 Retained earnings (2002) 36,000 Less: Retained earnings (2001) (44,500)

Retained earnings for the period (8,500) Add: Dividends: Cash dividend 20,000

Total dividends 20,000

Net profit 11,500

SOLUTION 3 (c)

FAISAL CORPORATION STATEMENT OF SOURCES AND APPLICATION OF FUND

FOR THE PERIOD ENDED 30 JUNE 2002 Sources of Fund: Net income 11,500 Add: Expenses not Required Fund: Depreciation expense (8,000 + 8,000) 16,000 Amortization of goodwill 5,000 Gain on sale of land (10,000) Loss on sale of machinery 3,000

Total expenses not required fund 14,000

Funds received from business operation 25,500 Add: Sale of land 20,000 Add: Sale of machinery 9,000

Total sources of fund 54,500 Less: Applications of Fund: Purchases of machinery 30,000 Payment of bonds payable 10,000 Cash dividend paid 20,000

Total applications of fund (60,000)

Decrease in working capital (5,500)

SOLUTION 3 (d) Computation of Cash Collection from Customers: Accounts receivable (beginning) 35,000 Add: Net sales 250,000

285,000 Less: Accounts ending (ending) (29,000)

cash collection from customers 256,000

Q.No.4 ACCOUNTING FOR BRANCH GIVEN The trial balance of Pindi branch of Ashraf Corporation on December 31, 2001 is given below. The head office bills the branch for merchandise at cost plus 25%.



Title of Account Debit Credit Cash 5,000 Office supplies 800 Merchandise inventory January 1 16,000 Accounts receivable 15,000 Land 12,000 Office equipment 8,000 Allowance for depreciation – Office equipment 500 Accounts payable 7,000 Notes payable 3,000 Head office 53,100 Sales 60,000 Sales returns & allowances 3,000 Purchases 5,000 Transportation – in 400 Purchases returns & allowances 600 Merchandise received from head office 50,000 Merchandise returned to H.O. 2,000 Selling expenses 5,000 General expenses 6,000

Total 126,200 126,200

Additional Information on December 31, 2001 (a) Office supplies used Rs.500. (b) Prepaid selling expenses Rs.700. (c) Accrued general expenses Rs.800. (d) Depreciation on office equipment Rs.500. (e) Merchandise inventories: 1.1.2001 31.12.2001

Received from head office at bill price Rs.12,000 Rs.15,000 Purchase from outsiders at cost 4,000 3,800 Total 16,000 18,800

REQUIRED (a) Prepare adjusting and closing entries in the books of Pindi branch. (b) Prepare entries in the journal of head office to incorporate Pindi branch profit or loss and to

adjust the allowance for overvaluation account and also close out the Pindi branch profit & loss account.

SOLUTION 4 (a)

ASHRAF CORPORATION PINDI BRANCH

ADJUSTING ENTRIES FOR THE PERIOD ENDED 31 DECEMBER 2001

Date Particulars P/R Debit Credit

1 Office supplies expense 500 Office supplies 500 (To adjust the office supplies used)

2 Prepaid selling expenses 700 Selling expenses 700 (To adjust the prepaid selling expenses)




3 General expenses 800 General expenses payable 800 (To adjust the accrued general expenses)

4 Depreciation expense 500 Allowance for depreciation – Office equipment 500 (To adjust the depreciation expense for the period)

ASHRAF CORPORATION

PINDI BRANCH CLOSING ENTRIES

FOR THE PERIOD ENDED 31 DECEMBER 2001


1 Expense and revenue summary 86,500 Merchandise inventory 16,000 Sales return and allowances 3,000 Purchases 5,000 Transportation – in 400 Merchandise received from head office 50,000 Selling expenses 4,300 General expenses 6,800 Office supplies expense 500 Depreciation expense 500 (To close the various expense accounts)

2 Sales 60,000 Purchase return and allowances 600 Merchandise returned to head office 2,000 Merchandise inventory 18,800 Expense and revenue summary 81,400 (To close the various income accounts)

3 Head office 5,100 Expense and revenue summary 5,100 (To close the expense and revenue summary account)

SOLUTION 4 (b) Computation of Allowance for Overvaluation:

Particulars Billed Cost Allowance for over valuation

Merchandise inventory opening (12,000 x 25/125) 12,000 9,600 2,400 Add: Merchandise supplied (50,000 x 25/125) 50,000 40,000 10,000

62,000 49,600 12,400 Less: Merchandise returned (2,000 x 25/125) (2,000) (1,600) (400)

Unadjusted allowance for overvaluation 60,000 48,000 12,000 Less: Merchandise inventory ending (15,000 x 25/125) (15,000) (12,000) (3,000)

Adjusted allowance for overvaluation 45,000 36,000 9,000



ASHRAF CORPORATION HEAD OFFICE

GENERAL JOURNAL FOR THE PERIOD ENDED 31 DECEMBER 2001


1 Profit and loss account 5,100 Pindi branch 5,100 (To record the net profit reported by Pindi branch)

2 Allowance for overvaluation 9,000 Profit and loss account 9,000 (To adjust the allowance for overvaluation)

3 Profit and loss account 3,900 Retained earnings 3,900 (To record the net loss transferred to retained earnings)

Q.No.5 ACCOUNTING FOR INSTALLMENT SALES GIVEN Umair & Company sells merchandise on installment basis. The transactions for the year ended December 31, 2001 are as under:-

1. Merchandise inventory Jan. 1, 2001 150,000. 2. Purchased merchandise on account 400,000. 3. Purchased merchandise for cash 200,000. 4. Sold merchandise on installment basis 800,000. 5. Collection of installment accounts receivable of 2001 300,000. 6. Collection of installment accounts receivable 1999 50,000. 7. Collection of installment accounts receivable of 2000 100,000. 8. Payment made to creditors 250,000. 9. Installment accounts receivable of 1999 in the amount of Rs.8,000 was

cancelled because of default but the merchandise could not be repossessed. 10. Expenses paid 25,000. 11. Merchandise inventory Dec. 31, 2001 270,000.

Note: Gross profit rate 1999 – 42%, 2000 – 44%. REQUIRED Record the above transactions in the general journal and also give adjusting and closing entries at December 31, 2001 assuming the company follows the perpetual inventory system. SOLUTION 5 Computation of Cost of Installment Sales: Merchandise inventory beginning 150,000 Add: Credit purchases 400,000 Add: Cash purchases 200,000

Merchandise available for sales 750,000 Less: Merchandise inventory ending (270,000)

Cost of installment sales 480,000



Computation of Unrealized Gross Profit (2001): Unrealized gross profit (2001) = Installment sales – Cost of installment sales Unrealized gross profit (2001) = 800,000 – 480,000 Unrealized gross profit (2001) = 320,000 Computation of Unrealized Gross Profit Rate (DGP%): Unrealized gross profit rate (2001) = Unrealized gross profit x 100

Installment sales Unrealized gross profit rate (2001) = 320,000 x 100

800,000 Unrealized gross profit rate (2001) = 40% Computation of Realized Gross Profit: Realized gross profit = Cash collection X DGP% Realized gross profit (2001) = 300,000 x 40% 120,000 Realized gross profit (2000) = 100,000 x 44% 44,000 Realized gross profit (1999) = 50,000 x 42% 21,000

Total realized gross profit = 185,000

Computation of Loss on Default: Installment accounts receivable cancelled (1999) 8,000 Less: Unrealized gross profit (8,000 x 42%) (3,360)

Loss on default 4,640

UMAIR & COMPANY GENERAL JOURNAL


1 Merchandise 400,000 Accounts payable 400,000 (To record the goods purchased on account)

2 Merchandise 200,000 Cash 200,000 (To record the merchandise purchased for cash)

3 Installment accounts receivable (2001) 800,000 Installment sales 800,000 (To record the goods sold on installment basis)

4 Cash 450,000 Installment accounts receivable (2001) 300,000 Installment accounts receivable (2000) 100,000 Installment accounts receivable (1999) 50,000 (To record the cash collected on installment basis)

5 Accounts payable 250,000 Cash 250,000 (To record the cash paid to supplier)

6 Expenses 25,000 Cash 25,000 (To record the expenses paid)



UMAIR & COMPANY ADJUSTING ENTRIES


1 Cost of installment sales 480,000 Merchandise 480,000 (To record the cost of installment sales)

2 Installment sales 800,000 Cost of installment sales 480,000 Unrealized gross profit (2001) 320,000 (To adjust the unrealized gross profit)

3 Unrealized gross profit (2001) 120,000 Unrealized gross profit (2000) 44,000 Unrealized gross profit (1999) 21,000 Realized gross profit 185,000 (To adjust the realized gross profit)

4 Unrealized gross profit (1999) 3,360 Loss on default 4,640 Installment accounts receivable (1999) 8,000 (To adjust the default of merchandise)

UMAIR & COMPANY CLOSING ENTRIES


1 Expense and revenue summary 29,640 Expenses 25,000 Loss on default 4,640 (To close the various expense accounts)

2 Realized gross profit 185,000 Expense and revenue summary 185,000 (To close the income accounts)

3 Expense and revenue summary 155,360 Retained earnings 155,360 (To close the expense and revenue summary account)

Q.No.6 COMPANY ACCOUNTING – ABSORPTION GIVEN The balance sheet of Bilal Company Ltd. on June 30, 2002 was as under:-

Assets Cash 15,000 Merchandise inventory 55,000 Accounts receivable 75,000 Land 100,000 Plant assets 300,000 Retained earnings 100,000

645,000

Equities Accounts payable 45,000 Allowance for depreciation – Plant 60,000 5% Debentures payable 100,000 Share capital (44,000 shares @ Rs.10 each) 440,000

645,000



The above company is absorbed by Owais Company Ltd. on the following terms:- (1) All assets and liabilities to be taken at book value. (2) Four new shares of Rs.10 each for every five shares held were issued to the shareholders of the

old company. (3) The debenture holders of the old company are issued new 10% debentures at a premium of 5%. (4) The realization expenses of old company Rs.3,000 to be paid by the new company.

REQUIRED (a) Compute the amount of purchase consideration. (b) Entries in the books of Bilal Company Ltd. (c) Entries in the books of Owais Company Ltd.

SOLUTION 6 (a) Computation of Purchase Consideration: To Shareholders: (44,000 x 4/5) 35,200 Ordinary shares @ Rs.10 each 352,000 To Debenture Holders: 10% Debentures at 5% premium 105,000 Liquidation Expense: Cash 3,000

Purchase consideration 460,000

SOLUTION 6 (b)

BILAL COMPANY LTD. GENERAL JOURNAL


1 Receivable from Owais Company Ltd. 460,000 Realization 460,000 (To record the purchase consideration)

2 Shares – in 352,000 10% Debentures – in 105,000 Cash 3,000 Receivable from Owais Company Ltd. 460,000 (To record the shares, debentures and cash received from

Owais Company Ltd.)

3 Realization 485,000 Cash 15,000 Merchandise inventory 55,000 Accounts receivable 75,000 Land 100,000 Plant assets (Net) 240,000 (To record the closing of assets accounts)

4 Accounts payable 45,000 Realization 45,000 (To record the closing of liability account)

5 5% Debentures payable 100,000 Realization 5,000 10% Debentures – in 105,000 (To record the debentures issued to the debenture

holders)




6 Realization 3,000 Cash 3,000 (To record the liquidation expenses paid)

7 Share capital 440,000 Retained earnings 100,000 Payable to shareholders 340,000 (To record the closing of shareholders’ equity)

8 Realization 12,000 Payable to shareholders 12,000 (To record the closing of realization account)

9 Payable to shareholders 352,000 Shares – in 352,000 (To record the shares issued to the shareholders)

Realization

3 Other assets 485,000 1 Receivable 460,000 5 Debentures – in 5,000 4 Accounts payable 45,000 6 Cash 3,000 8 Payable to shareholders 12.000

505,000 505,000

SOLUTION 6 (c)

OWAIS COMPANY LTD. GENERAL JOURNAL


1 Cash 15,000 Merchandise inventory 55,000 Accounts receivable 75,000 Land 100,000 Plant assets 240,000 Goodwill 20,000 Accounts payable 45,000 Payable to Bilal Company Ltd. 460,000 (To record the assets and liabilities taken over from Bilal

Company Ltd.)

2 Payable to Bilal Company Ltd. 460,000 Ordinary shares capital (32,500 x 10) 352,000 10% Debentures payable 105,000 Cash 3,000 (To record the shares, debentures and cash issued to Bilal

Company Ltd.)



Q.No.7 BRANCH ACCOUNTING GIVEN During April the following reciprocal transactions were performed by the head office and its Quetta branch. Apr. 6 Head office supplied merchandise to the branch at a cost Rs.10,000 which was billed at 25%

above cost. Apr. 10 Cash remitted to the head office by the Quetta branch Rs.8,000. Apr. 17 Merchandise returned by the Quetta branch to the head office at billed price Rs.1,000. Apr. 20 Branch expenses paid by the head office Rs.2,000, Apr. 26 The head office supplied furniture to the Quetta branch costing Rs.4,000. Apr. 27 The head office paid the Quetta branch accounts payable of Rs.8,000 after discount deduction

of Rs.200. Apr. 28 The Quetta branch collected the head office accounts receivable of Rs.6,000 after discount

deduction of Rs.150. Apr. 30 The Quetta branch reported a net profit accounts on the books Rs.5,000. REQUIRED Record the above transactions in the books of Quetta branch and head office. SOLUTION 7

QUETTA BRANCH GENERAL JOURNAL


6 Apr Merchandise supplied 12,500 Head office 12,500 (To record the merchandise received from head office)

10 Apr Head office 8,000 Cash 8,000 (To record the cash remitted to head office)

17 Apr Head office 1,000 Merchandise supplied returned 1,000 (To record the merchandise returned to head office)

20 Apr Expenses 2,000 Head office 2,000 (To record the operating expenses paid by head office)

26 Apr Furniture 4,000 Head office 4,000 (To record the furniture supplied by head office)

27 Apr Accounts payable 8,200 Purchase discount 200 Head office 8,000 (To record the liability paid by head office after discount)

28 Apr Cash 6,000 Head office 6,000 (To record the head office receivable collected)

30 Apr Expense and revenue summary 5,000 Head office 5,000 (To record the net profit reported to head office)



QUETTA BRANCH GENERAL JOURNAL


6 Apr Quetta branch 12,500 Merchandise supplied 10,000 Allowance for overvaluation (10,000 x 25%) 2,500 (To record the merchandise supplied to branch)

10 Apr Cash 8,000 Quetta branch 8,000 (To record the cash remitted by branch)

17 Apr Merchandise supplied returned 800 Allowance for overvaluation (1,000 x 25/125) 200 Quetta branch 1,000 (To record the merchandise returned by branch)

20 Apr Quetta branch 2,000 Cash 2,000 (To record the branch expenses paid)

26 Apr Quetta branch 4,000 Furniture 4,000 (To record the furniture supplied to branch)

27 Apr Quetta branch 8,000 Cash 8,000 (To record the branch liability paid after discount)

28 Apr Quetta branch 6,000 Sales discount 150 Accounts receivable 6,150 (To record the receivable collected by branch)

30 Apr Quetta branch 5,000 Profit and loss account 5,000 (To record the net profit reported by branch)

Q.No.8 ACCOUNTING FOR INCOMPLETE RECORDS (NOT INCLUDED IN THE NEW COURSE) Q.No.9 CONSIGNMENT ACCOUNTS (NOT INCLUDED IN THE NEW COURSE)

b.com – ii – advanced accounting · pdf filecompiled & solved by: s.hussain...

Documents