B.COM II ADVANCED ACCOUNTING

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ADVANCED ACCOUNTING 2014 PRIVATE Instructions: (1) Attempt any FIVE questions in all. (2) All questions carry equal marks. (3) Answers without necessary computations will not be accepted. Q.No.1 FINANCIAL STATEMENTS Xerox Ltd. has an authorized capital of Rs.2,000,000 divided into shares of Rs.100 each. Following is the pre-closing trial balance as on December 31, 2014: Cash Rs.34,000 Paid up capital Rs.1,600,000 Accounts receivable 60,000 Allowance for bad debts 3,000 Inventory (January 1, 2014) 280,000 Accounts payable 50,000 Machinery 800,000 Retained earnings 400,000 Building 1,400,000 Sales 1,000,000 Purchases 600,000 Commission income 7,000 Carriage in 4,000 10% Bonds payable 200,000 Salaries expense 36,000 Director s fee 20,000 Rent expense 16,000 Office supplies 4,000 Prepaid insurance 6,000 Rs.3,260,000 Rs.3,260,000 Additional Information as on December 31, 2014: (i) Depreciation is estimated on machinery @ 10% and on building @ 15%. (ii) Unexpired insurance was nil. (iii) Rent expense for the year Rs.12,000. (iv) Provision for bad debts to be estimated @ 6% of accounts receivable. (v) Bonds are issued on October 1, 2014. (vi) Merchandise inventory Rs.140,000. (vii) The company decided to declare cash dividend of Rs.2 per share and appropriated a sum of Rs.80,000 for building extension. Prepare: (a) Income statement (b) Statement of retained earnings (c) Balance sheet SOLUTION 1 (a) XEROX LTD. INCOME STATEMENT FOR THE PERIOD ENDED DECEMBER 31, 2014 Sales 1,000,000 Less: Cost of Goods Sold: Merchandise inventory beginning 280,000 Add: Net Purchases: Purchases 600,000 Add: Carriage in 4,000 Net purchases 604,000 Merchandise available for sale 884,000 Less: Merchandise inventory ending (140,000) B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 2

Cost of goods sold (744,000) Gross profit 256,000 Less: Operating Expenses: Salaries expense 36,000 Director s fees 20,000 Rent expense (16,000 4,000) 12,000 Insurance expense 6,000 Depreciation expense Machinery (800,000 x 10%) 80,000 Depreciation expense Building (1,400,000 x 15%) 210,000 Interest expense (200,000 x 10% x 3/12) 5,000 Bad debts expense (60,000 x 6% - 3,000) 600 Total operating expenses (369,600) Loss from operation (113,600) Add: Other Income: Commission income 7,000 Net loss (106,600) SOLUTION 1 (b) XEROX LTD. STATEMENT OF RETAINED EARNINGS FOR THE PERIOD ENDED 31 DECEMBER 2014 Retained earnings (opening balance) 400,000 Less: Net loss for the period (106,600) Total retained earning 293,400 Less: Dividends and Reserves: Reserve for building extension 80,000 Cash dividend (16,000 x 2) 32,000 Total dividend and reserves (112,000) Retained earnings (ending balance) 181,400 SOLUTION 1 (c) XEROX LTD. BALANCE SHEET AS ON 31 DECEMBER 2014 Equities Assets Shareholder s Equity: Fixed Assets: Authorized Capital: Machinery 800,000 20,000 ordinary shares @Rs.100 each 2,000,000 Less: All for dep. (80,000) 720,000 Building 1,400,000 Issued & Paid-up Capital: Less: All for dep. (210,000) 1,190,000 16,000 ordinary shares @ Rs.100 each 1,600,000 Total fixed assets 1,910,000 Retained earnings 181,400 Reserve for building extension 80,000 Current Assets: Total shareholder s equity 1,861,400 Office supplies 4,000 Prepaid rent 4,000 Liabilities: Merchandise inventory 140,000 Long Term Liabilities: A/c. receivable 60,000 10% Bonds payable 200,000 Less: All for b/d (3,600) 56,400 Cash 34,000 B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 3

Current Liabilities: Total current assets 238,400 Accounts payable 50,000 Interest payable 5,000 Cash dividend payable 32,000 Total liabilities 287,000 Total equities 2,148,400 Total assets 2,148,400 Additional Working: XEROX LTD. ADJUSTING ENTRIES FOR THE PERIOD ENDED DECEMBER 31, 2014 1 Depreciation expense 290,000 Allowance for depreciation Machinery 80,000 Allowance for depreciation Building 210,000 (To adjust the depreciation expenses for the period) 2 Insurance expense 6,000 Unexpired insurance 6,000 (To adjust the prepaid insurance) 3 Prepaid rent 4,000 Rent expense 4,000 (To adjust the rent expense) 4 Bad debts expense 600 Allowance for bad debts 600 (To adjust the bad debts expense for the period) 5 Interest expense 5,000 Interest payable 5,000 (To adjust the unpaid interest on bonds payable) 6 Merchandise inventory 140,000 Expense and revenue summary 140,000 (To close the ending inventory) 7 Retained earnings 112,000 Cash dividend payable 32,000 Reserve for building extension 80,000 (To record the declaration of cash dividend and reserve for building extension) Q.No.2 ISSUANCE OF SHARES AND DEBENTURES Given entries in General Journal standard form to record the following independent cases with brief narrations assuming the par value of shares and debentures are Rs.10 each and Rs.100 each respectively: 1. Issued 20,000 shares at a premium of Rs.2 per share for cash. 2. Issued 14,000 shares to the promoters at par for the services rendered by them. 3. Issued 6,400 shares against stock dividend at Rs.12.50 per share. 4. Purchase equipment costing Rs.450,000 and issued sufficient shares in full settlement at the market value of Rs.9 per share. 5. Issued 10,000, 8% debentures at Rs.90 each repayable after 10 years at Rs.105 each. B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 4

SOLUTION 2 M/S. GENERAL JOURNAL 1 Cash (20,000 x 12) 240,000 Ordinary shares capital (20,000 x 10) 200,000 Ordinary shares premium (20,000 x 2) 40,000 (To record the shares issued to public at par) 2 Preliminary expenses (14,000 x 10) 140,000 Ordinary shares capital (14,000 x 10) 140,000 (To record the issue of shares to promoters) 3 (a) Retained earnings (6,400 x 12.50) 80,000 Stock dividend payable 80,000 (To record the declaration of stock dividend) 3 (b) Stock dividend payable 80,000 Ordinary shares capital (6,400 x 10) 64,000 Ordinary shares premium (6,400 x 2.50) 16,000 (To record the issue of shares in settlement of stock dividend) 4 Equipment 450,000 Ordinary shares discount (50,000 x 1) 50,000 Ordinary shares capital (50,000 x 10) 500,000 (To record the issue of shares for purchase of equipment) 5 Cash (10,000 x 96) 960,000 Discount on debentures (10,000 x 4) 40,000 Loss on redemption (10,000 x 5) 50,000 8% Debentures payable (10,000 x 100) 1,000,000 Premium on redemption (10,000 x 5) 50,000 (To record the issue of debentures at discount and payback at premium after 10 years) Q.No.3 INSTALLMENT SALES (a) Blue Star Company Sells merchandise income on installment basis and sues perpetual inventory system. The following information is available: Sales Year Gross Profit Rate Installment Receivable January 1, 2014 Collection During 2014 Installment Receivable December 31, 2014 2012 30% 60,000? 20,000 2013 32% 110,000? 30,000 2014 34% 90,000 210,000 Record only gross profit realized during 2014. (b) Consider the following information: January 1, 2014 December 31, 2014 Installment accounts receivable (2013) Rs.160,000 Rs.40,000 Unrealized gross profit (2013) 64,000 60,000 Record the cancellation of installment accounts receivable assuming that the merchandise sold was not repossessed. B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 5

SOLUTION 3 (a) Computation of Cash Collection: Cash collection = Installment accounts receivable (beg) Installment accounts receivable (end) Cash collection (2012) = 60,000 20,000 Cash collection (2012) = Rs.40,000 Cash collection (2013) = 110,000 30,000 Cash collection (2013) = Rs.80,000 Computation of Realized Gross Profit: Realized gross profit = Cash collection X DGP% Realized gross profit (2012) = 40,000 x 30% 12,000 Realized gross profit (2013) = 80,000 x 32% 25,600 Realized gross profit (2014) = 90,000 x 34% 30,600 Total realized gross profit = Rs.68,200 BLUE STAR COMPANY ADJUSTING ENTRY 1 Unrealized gross profit (2012) 12,000 Unrealized gross profit (2013) 25,600 Unrealized gross profit (2014) 30,600 Realized gross profit 68,200 (To adjust the realized gross profit) Additional Working: Computation of Installment Sales (2014): Installment accounts receivable ending (2014) 210,000 Add: Cash collection (2014) 90,000 Installment sales Rs.300,000 Computation of Unrealized Gross Profit (2014): Unrealized gross profit (2014) = Installment sales x Unrealized gross profit rate Unrealized gross profit (2014) = 300,000 x 34% Unrealized gross profit (2014) = Rs.102,000 Computation of Cost of Installment Sales (2014): Installment sales (2014) 300,000 Less: Unrealized gross profit (2014) (102,000) Cost of installment sales Rs.198,000 SOLUTION 3 (b) Computation of Unrealized Gross Profit Rate: Unrealized gross profit rate = Unrealized gross profit (beg) x 100 Installment accounts receivable (beg) Unrealized gross profit rate = 64,000 x 100 160,000 Unrealized gross profit rate = 40% B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 6

Computation of Installment Accounts Receivable Cancelled: Unrealized gross profit forego (64,000 60,000) 4,000 Unrealized gross profit rate x 100/40 Installment accounts receivable cancelled Rs.10,000 Computation of Loss on Default: Installment accounts receivable cancelled 10,000 Less: Unrealized gross profit (64,000 60,000) or (10,000 x 40%) (4,000) Loss on default Rs.6,000 M/S. GENERAL JOURNAL 1 Unrealized gross profit 4,000 Loss on default 6,000 Installment accounts receivable 10,000 (To adjust the loss on default of merchandise) Q.No.4 CASH FLOW STATEMENT The comparative balance sheets of Al Qasim Corporation at December 31, 2014 and 2013 are as follows: Assets: 2014 2013 Cash Rs.40,000 Rs.96,000 Marketable securities --- 64,000 Accounts receivable 76,000 104,000 Merchandise inventory 80,000 120,000 Prepaid expenses 21,600 16,000 Land 32,000 --- Building 400,000 --- Rs.649,600 Rs.400,000 Equities: 2014 2013 Accounts payable Rs.100,000 Rs.68,000 Accrued expenses 60,000 52,000 Long term bonds payable 160,000 --- Share capital 240,000 240,000 Retained earnings 89,600 40,000 Rs.649,600 Rs.400,000 During the year 2014 the corporation declared and paid cash dividend Rs.22,400. Prepare a cash flow statement for the year ended December 31, 2014 using indirect method showing: (a) Cash flow from operating activities. (b) Cash flow from investing activities. (c) Cash flow from financing activities. B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 7

SOLUTION 4 Computation of Net Income: Retained earnings (2014) 89,600 Less: Retained earnings (2013) (40,000) Net increase in retained earnings 49,600 Add: Cash divided 22,400 Net income Rs.72,000 AL QASIM CORPORATION CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 DECEMBER 2014 Cash Flow from Operating Activities: Net income 72,000 Add: Decrease in accounts receivable 28,000 Add: Decrease in merchandise inventory 40,000 Less: Increase in prepaid expenses (5,600) Add: Increase in accounts payable 32,000 Add: Increase in accrued expenses 8,000 Net cash flow from operating activities 174,400 Cash Flow from Investing Activities: Purchase of land (32,000) Purchase of building (400,000) Sale of marketable securities 64,000 Net cash flow from investing activities (368,000) Cash Flow from Financing Activities: Issue of long term bonds payable 160,000 Cash dividend paid (22,400) Net cash flow from financing activities 137,600 Net decrease in cash and cash equivalents (56,000) Add: Opening cash and cash equivalents balance 96,000 Closing cash and cash equivalents balance Rs.40,000 Compiled & Solved by: Sameer Hussain Q.No.5 FINANCIAL STATEMENT ANALYSIS (a) At the end of financial year, selected information from the books of Leo Company Ltd. is given below: Cash Rs.26,000; Notes payable short term Rs.60,000; Accounts receivable Rs.90,000; Accounts payable Rs.100,000; Merchandise inventory Rs.200,000; Prepaid expenses Rs.10,000; Equipment Rs.399,000; Other plant assets Rs.25,000; Long term loan Rs.140,000; Share capital Rs.200,000 (Rs.10 par); Retained earnings Rs.250,000. During the year the company earned total gross profit of Rs.324,000 which is equal to 30% of net sales. Compute: (a) Current ratio (b) Quick ratio (c) Working capital (d) Equity ratio (e) Total days of operating cycle (b) Years 2014 2013 2012 2011 2010 2009 Net sales (Rs.) 900,000 720,000 660,000 642,000 624,000 600,000 Net income (Rs.) 45,900 29,100 42,900 38,400 31,200 30,000 Compute the trend percentages from above information. B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 8

SOLUTION 5 (a) Computation of Total Assets: Cash 26,000 Accounts receivable 90,000 Total quick assets 116,000 Merchandise inventory 200,000 Prepaid expenses 10,000 Total current assets 326,000 Add: Fixed Assets: Equipment 399,000 Other plant assets 25,000 Total fixed assets 424,000 Total assets Rs.750,000 Computation of Total Current Liabilities: Notes payable 60,000 Accounts payable 100,000 Total current liabilities Rs.160,000 Computation of Cost of Goods Sold: Sales (324,0000 x 100/30) 1,080,000 Less: Gross profit (324,000) Cost of goods sold Rs.756,000 Computation of Total Shareholders Equity: Share capital 200,000 Add: Retained earnings 250,000 Total shareholders equity Rs.450,000 1. Computation of Current Ratio: Current ratio = Total current assets Total current liabilities Current ratio = 326,000 160,000 Current ratio = 2.0375 : 1 2. Computation of Quick Test Ratio: Quick test ratio = Total quick assets Total current liabilities Quick test ratio = 116,000 160,000 Quick test ratio = 0.725 : 1 3. Computation of Working Capital: Current assets 326,000 Less: Current liabilities (160,000) Working capital Rs.166,000 B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 9

4. Computation of Equity Ratio: Equity ratio = Total shareholders equity Total assets Equity ratio = 450,000 750,000 Equity ratio = 0.60 : 1 Compiled & Solved by: Sameer Hussain 5. Computation of Inventory Turnover: Inventory turnover in times = Cost of goods sold Average inventory Inventory turnover in times = 756,000 200,000 Inventory turnover in times = 3.78 times Inventory turnover in days = 365 Inventory turnover in times Inventory turnover in days = 365 3.78 Inventory turnover in days = 97 days 6. Computation of Receivable Turnover: Receivable turnover in times = Net credit sales Average receivable Receivable turnover in times = 1,080,000 90,000 Receivable turnover in times = 12 times Receivable turnover in days = 365 Receivable turnover in times Receivable turnover in days = 365 12 Receivable turnover in days = 31 days 7. computation of Total Days of Operating Cycle: Days of operating cycle = Receivable turnover in days + inventory turnover in days Days of operating cycle = 31 + 97 Days of operating cycle = 128 days SOLUTION 5 (b) TREND PERCENTAGE (2009 BASE YEAR) Year Sales Percentage 2009 600,000 600,000/600,000 x 100 = 100% 2010 624,000 624,000/600,000 x 100 = 104% 2011 642,000 642,000/600,000 x 100 = 107% 2012 660,000 660,000/600,000 x 100 = 110% 2013 720,000 720,000/600,000 x 100 = 120% 2014 900,000 900,000/600,000 x 100 = 150% B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 10

TREND PERCENTAGE (2009 BASE YEAR) Year Net Income Percentage 2009 30,000 30,000/30,000 x 100 = 100% 2010 31,200 31,200/30,000 x 100 = 104% 2011 38,400 38,400/30,000 x 100 = 128% 2012 42,900 42,900/30,000 x 100 = 143% 2013 29,100 29,100/30,000 x 100 = 97% 2014 45,900 45,900/30,000 x 100 = 153% Q.No.6 COMPANY ABSORPTION The balance sheet of Waris Company Ltd. as on December 31, 2014 was as under: Authorized Capital: 100,000 Ordinary shares of Rs.10 each Rs.1,000,000 Paid up Capital: Building Rs.300,000 40,000 Ordinary shares of Rs.10 each Rs.400,000 Inventory 100,000 Profit and loss account 40,000 Accounts receivable 100,000 General reserves 80,000 Cash 90,000 Long term loan 100,000 Preliminary expenses 80,000 Accounts payable 20,000 Allowance for depreciation 20,000 Allowance for bad debts 10,000 Rs.670,000 Rs.670,000 The above company was absorbed by Kainat Company Ltd. on the following terms: 1. All the assets and liabilities (other than cash and long term loan) were taken over by absorbing company at book value. 2. The liquidating company received 40,000 shares of Rs.10 each and cash Rs.100,000 from absorbing company. 3. Waris Company paid liquidation expenses amounting to Rs.20,000 and long term loan at book value. (1) Compute purchase consideration. (2) Give General Journal entries in the books of: (a) Waris Company Ltd. (b) Kainat Company Ltd. SOLUTION 6 (a) Computation of Purchase Consideration: 40,000 Ordinary shares @ Rs.10 each 400,000 Cash 100,000 Purchase consideration Rs.500,000 B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 11

SOLUTION 6 (b) WARIS COMPANY LTD. GENERAL JOURNAL 1 Realization 500,000 Building 300,000 Merchandise inventory 100,000 Accounts receivable 100,000 (To record the transfer of assets to Kainat Ltd.) 2 Allowance for depreciation 20,000 Allowance for bad debts 10,000 Accounts payable 20,000 Realization 50,000 (To record the transfer of liabilities to Kainat Ltd.) 3 Receivable from Kainat Company Ltd. 500,000 Realization 500,000 (To record the purchase consideration) 4 Shares in 400,000 Cash 100,000 Receivable from Kainat Company Ltd. 500,000 (To record the cash and shares received from Kainat Ltd.) 5 Long term loans 100,000 Cash 100,000 (To record the payment of long term loan) 6 Realization 20,000 Cash 20,000 (To record the payment of liquidation expense) 7 Ordinary share capital 400,000 General reserve 80,000 Profit and loss account 40,000 Preliminary expenses 80,000 Payable to shareholders 440,000 (To record the closing of shareholders equity) 8 Realization 30,000 Payable to shareholders 30,000 (To record the closing of realization account) 9 Payable to shareholders 470,000 Cash 70,000 Shares in 400,000 (To record the cash & shares issued to the shareholders) Realization 1 Assets 500,000 2 Liabilities 50,000 6 Liquidation expense 20,000 3 Receivable from Kainat Ltd. 500,000 8 Payable to shareholders 30,000 550,000 550,000 B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 12

KAINAT COMPANY LTD. GENERAL JOURNAL 1 Building 280,000 Merchandise inventory 100,000 Accounts receivable 100,000 Goodwill 50,000 Allowance for bad debts 10,000 Accounts payable 20,000 Payable to Waris Company Ltd. 500,000 (To record the assets and liabilities taken over) 2 Payable to Waris Company Ltd. 500,000 Ordinary shares capital (40,000 x 10) 400,000 Cash 100,000 (To record the cash shares issued to Waris Company Ltd.) Q.No.7 COMPANY RECONSTRUCTION The balance sheet of Sher Afzal Ltd. as on December 31, 2014 was as under: Authorized Capital: 80,000 Ordinary shares of Rs.25 each Rs.2,000,000 Plant assets Rs.1,600,000 Paid up Capital: Goodwill 100,000 60,000 Ordinary shares of Rs.25 each Rs.1,500,000 Preliminary expenses 20,000 Long term bonds payable 400,000 Stock 240,000 Sundry creditors 140,000 Cash 10,000 Allowance for depreciation 160,000 Profit/loss 50,000 Sundry debtors 180,000 Rs.2,200,000 Rs.2,200,000 The following scheme of internal reconstruction was approved and implemented: (a) The amount of authorized capital to remain unchanged and par value of each share now to be Rs.10. (b) The holders of two shares receive three ordinary shares of Rs.10 each fully paid. (c) Bonds were redeemed by issuance of 44,000 ordinary shares of Rs.10 each to bond holders. (d) Goodwill, preliminary expenses and balance of profit/loss were completely written off. (e) Sundry debtors were estimated to realize Rs.170,000; stock valued Rs.200,000 and plant assets were assigned book value of Rs.1,100,000. Prepare: (i) Entries in the General Journal to give effect of the above scheme. (ii) Revised balance sheet. SOLUTION 7 (a) SHER AFZAL LTD. GENERAL JOURNAL 1 Ordinary shares capital (60,000 x 25) 1,500,000 Ordinary shares capital (90,000 x 10) 900,000 Capital reduction 600,000 (To record the reduction of share capital) B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 13

2 Long term bonds payable 400,000 Capital reduction 40,000 Ordinary shares capital (44,000 x 10) 440,000 (To record the shares issued in settlement of bonds) 3 Capital reduction 170,000 Goodwill 100,000 Preliminary expenses 20,000 Profit and loss account 50,000 (To record the writing off accounts) 4 Capital reduction 390,000 Allowance for depreciation 160,000 Allowance for bad debts 10,000 Stock 40,000 Plant assets 500,000 (To record the reduction in the value of assets) Capital Reduction 2 Long term bonds payable 40,000 1 Ordinary share capital 600,000 3 Writing off accounts 170,000 4 Assets 390,000 600,000 600,000 SOLUTION 7 (b) SHER AFZAL LTD. BALANCE SHEET AS ON 31 DECEMBER 2014 Equities Assets Authorized Capital: Fixed Assets: 200,000 ordinary shares @ Rs.10 each 2,000,000 Plant assets 1,100,000 Total fixed assets 1,100,000 Paid up Capital: 134,000 ordinary shares @ Rs.10 each 1,340,000 Current Assets: Total shareholders equity 1,340,000 Stock 200,000 Sundry debtors 180,000 Liabilities: Less: All for b/d (10,000) 170,000 Sundry creditors 140,000 Cash 10,000 Total liabilities 140,000 Total current assets 380,000 Total equities 1,480,000 Total assets 1,480,000 Q.No.8 BRANCH ACCOUNTING Syed & Company of Karachi opened a new branch at Islamabad. The head office and branch transactions were as under: Head Office Transactions: (i) Transfer of cash to branch Rs.30,000. (ii) Merchandise shipment to branch at cost Rs.75,000. (iii) Paid branch salaries Rs.22,500. B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 14

(iv) Paid branch accounts payable Rs.18,000. (v) Collected branch accounts receivable Rs.15,000. Branch Transactions: (i) Sold goods for cash Rs.75,000. (ii) Paid head office accounts payable Rs.9,000. (iii) Reported net profit Rs.4,000. (a) Prepare journal entries in the books of: (i) Head office (ii) Branch (b) Prepare and complete in all respect branch account in the head office ledger and head office account in branch ledger. SOLUTION 8 (a) SYED & COMPANY HEAD OFFICE BOOK GENERAL JOURNAL 1 Islamabad branch 30,000 Cash 30,000 (To record the cash remitted to branch) 2 Islamabad branch 75,000 Merchandise supplied 75,000 (To record the goods supplied to branch) 3 Islamabad branch 22,500 Cash 22,500 (To record the payment of branch salaries) 4 Islamabad branch 18,000 Cash 18,000 (To record the payment of branch liability) 5 Cash 15,000 Islamabad branch 15,000 (To record the cash collected against branch receivable) 6 No entry 7 Accounts payable 9,000 Islamabad branch 9,000 (To record the liability paid by branch) 8 Islamabad branch 4,000 Profit and loss account 4,000 (To record the net profit reported by branch) SYED & COMPANY ISLAMABAD BRANCH BOOK GENERAL JOURNAL 1 Cash 30,000 Head office 30,000 (To record the cash remitted by head office) B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 15

2 Merchandise supplied 75,000 Head office 75,000 (To record the goods received from head office) 3 Salaries expense 22,500 Head office 22,500 (To record the payment of salaries by head office) 4 Accounts payable 18,000 Head office 18,000 (To record the payment of liability by head office) 5 Head office 15,000 Accounts receivable 15,000 (To record the cash collected by head office from customer) 6 Cash 75,000 Sales 75,000 (To record the goods sold for cash) 7 Head office 9,000 Cash 9,000 (To record the payment of liability of head office) 8 Expense and revenue summary 4,000 Head office 4,000 (To record the net profit reported to head office) SYED & COMPANY HEAD OFFICE BOOK Islamabad Branch Account 1 Cash 30,000 5 Cash 15,000 2 Merchandise supplies 75,000 7 Accounts payable 9,000 3 Cash 22,500 Balance c/d 125,500 4 Cash 18,000 8 Profit and loss 4,000 149,500 149,500 Balance b/d 125,500 SYED & COMPANY ISLAMABAD BRANCH BOOK Head Office Account 5 Accounts receivable 15,000 1 Cash 30,000 7 Cash 9,000 2 Merchandise supplied 75,000 Balance c/d 125,500 3 Salaries expense 22,500 4 Accounts payable 18,000 8 Expense and revenue summary 4,000 149,500 149,500 Balance b/d 125,500 B. C o m II A d v a n c e d A c c o u n t i n g 2 0 1 4 ( P r i v a t e ) Page 16