The following are the transaction of s company will in branch for 2(two) year they follow periodic inventory system.
1. Beginning inventory balance with in birr 10000
2. S company shipped merchandise is birr costing 80000 cash 20000
3. Birr sold merchandise costing 60000 for 100000
4. Operation expenses paid by birr 150000
5. Cash remittance by birr to home office 50000
6. Ending inventory with in birr 30000
Required
1. Record the journal entry both the home office and branch
2. Close the income statement
3. Find the net income of home office and branch
To answer the question, we need to understand the different transactions and their impact on both the home office and the branch.
1. Beginning inventory balance within birr 10000:
This transaction indicates that at the start of the 2-year period, the branch had inventory worth 10,000 Birr. To record this in the journal entry:
Branch's Journal Entry:
Inventory (Asset) 10,000
To Beginning Inventory (Equity) 10,000
2. S company shipped merchandise costing 80000, cash 20000:
This transaction shows that the branch received merchandise with a cost of 80,000 Birr, and it paid 20,000 Birr in cash. To record this in the journal entry:
Branch's Journal Entry:
Inventory (Asset) 80,000
Cash (Asset) 20,000
To Accounts Payable (Liability) 100,000
3. Birr sold merchandise costing 60000 for 100000:
This transaction indicates that the branch sold merchandise with a cost of 60,000 Birr for a total of 100,000 Birr. To record this in the journal entry:
Branch's Journal Entry:
Cash (Asset) 100,000
To Sales (Revenue) 100,000
Cost of Goods Sold (Expense) 60,000
To Inventory (Asset) 60,000
4. Operation expenses paid by birr 150000:
This transaction shows that the branch paid 150,000 Birr for operating expenses. To record this in the journal entry:
Branch's Journal Entry:
Operation Expenses (Expense) 150,000
To Cash (Asset) 150,000
5. Cash remittance by birr to home office 50000:
This transaction indicates that the branch remitted 50,000 Birr in cash to the home office. To record this in the journal entry:
Branch's Journal Entry:
Cash (Asset) 50,000
To Home Office (Equity) 50,000
Now, to close the income statement and find the net income for both the home office and branch, we need the information about the operating expenses and the sales.
2. Close the income statement:
To close the income statement, we need to transfer the revenue and expense accounts to the income summary account. Let's assume the revenue and expense accounts are:
Revenue Account: Sales
Expense Account: Cost of Goods Sold + Operation Expenses
Branch's Journal Entry:
Sales (Revenue) XXXX
Cost of Goods Sold (Expense) XXXX
Operation Expenses (Expense) XXXX
To Income Summary (Equity) XXXX
3. Find the net income of home office and branch:
To find the net income of the home office and branch, we need to know the income summary and owners' equity balances.
Home Office Net Income:
Home Office Net Income = Net Income of Branch - Cash Remitted
Branch Net Income:
Branch Net Income = Revenue - Expense (excluding cash remitted)
By using the information provided and the calculated values, you can determine the net income of both the home office and the branch.