Unity University

Department of Accounting and Finance

Advanced Financial Accounting
Worksheet – Chapter One

1. On September 1, year 9 , Parrot Company established an Ostrich branch in Awassa. Following are the first
three transactions between the HO and Ostrich branch of Parrot Company
September 1 : HO sent Br 10,000 to the branch for an imprest cash fund
2: HO shipped merchandise costing Br 60,000 to the branch, billed at a markup of 20% on
billed price.
3: Branch acquired office equipment for Br 3,000, to be carried in the HO accounting records.

Both use perpetual inventory system.

Required:
Prepare journal entries in the books of account of both companies.
2. On September 1 year 9 , Western Company established the Eastern Branch. Separate accounting records
were set up for the branch. Both the HO and the Eastern branch use the periodic system. Among the intra-
company transactions were the following.

September 1: Ho mailed a check for Br 50,000 to the branch. The check was received by the branch on
September 3
4: HO shipped merchandise costing Br 95,000 to the branch at a billed price of Br 125,000.
The branch received the merchandise on September 8
11: The branch acquired a truck for Br 34,200. The HO maintains the plant assets of the branch
in its accounting records.
Required:
Prepare the journal entries in the accounting records of both.
3. Among the journal entries of the HO of Wax Corporation for the month of January , Year 9 were the
following:
Jan. 2 Investment in Star Branch 100,000
Inventories 80,000
AFOVI 20,000
18 Equipment: Star Brach 5,000
Investment in Star Brach 5,000
31 Investment in Star Branch 8,000
Operating Expense 8,000
Required:
Prepare the related journal entries for the Star Branch. Both uses perpetual system..
4. Among the journal entries for business transactions and events of the Best branch of Use Company during
January year 9 were the following.
Jan. 12 Inventories 60,000 ( to record receipt of Merch. From HO at 20% mark up)
HO 60,000
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 25 Cash 25,000 ( to record collection of A/R of HO)
HO 25,000
31 Operating Expense 18,000 ( to record operating expense allocated by HO)
HO 18,000
Required:
Prepare the appropriate journal entries for the HO of Use Company.
5. Among the journal entries of the HO of Tools Company for the month ended April 31, year 9 were the
following :
Aug. 6 Investment in Loza Branch 10,000 ( to record payment of A/P of Branch)
Cash 10,000
14. Cash 6,000 ( to record collection of A/R of branch)
Investment in Loza Branch 6000
22. Equipment: Loza Branch 20,000 ( to record the branch acquisition of equipment for cash)
Investment in Loza Branch 20,000
Required:
Prepare the appropriate journal entries for Loose branch of Tools Company.
6. The HO- of FOX Company ships merchandise to Wolf Branch at a billed price that includes a markup on HO
cost of 20%.The inventories ledger account of the branch ,under the perpetual inventory system, showed
the a December 31, year 9 , debit balance, Br 120,000 ; a debit for a shipment received January 16, year
10 , Br 500,000 ; total credits for goods sold during January , year 10 , Br 520,000 and January 31, year 10 ,
debit balance , Br 100,000. ( All amounts are HO billed prices).

Required:
Prepare a working paper for the HO of Fox Company to analyze the flow of merchandise to Wolf Branch
during January year10.
7. The flow of merchandise from the HO of Southern Company to its Northern Branch during the month of
April year 9 may be analyzed as follows.
Southern Company
Flow of Merchandise for Northern Branch
For Month Ended April 30, Year 9
Billed Price Cost Markup
Beginning Inventories Br 180,000 Br 150,000 Br 30,000
Add: Shipment from HO ( Apr. 16) 540,000 450,000 90,000
COGAS 720,000 600000 120,000
Less: Ending Inventories 120,000 100,000 20,000
CGS 600,000 500,000 100,000

Required: From the above information, reconstruct a ledger account (use T account) for AFOVI:
Northern Branch for the HO of Southern Company , beginning with March 31, year 9 ,
balance, Br 30,000 credit .
8. Tools Textile Company has a single branch in Adama. On March 1,Year 9 , the HO accounting records
included an AFOVI. Adama Branch ledger account with a credit balance of Br 32,000. During March,
merchandise costing Br 36,000 was shipped to the Adama Branch and billed at a price representing a 40%
markup on the billed price. On March 31, the branch prepared an income statement indicating a net loss of
Br 11,500 for March and ending inventories at billed prices of Br 25,000.
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 a) Prepare a working paper to compute the HO of the branch inventories on March 1, assuming a uniform
markup on all shipments to the branch.
b) Prepare a journal entries to adjust the AFOVI
9. The HO of Good Company, which uses the perpetual inventory system bills shipments of merchandise to
the Moon Branch at a markup of 25% on the billed price. On August, year 9 the credit balance of the HO’s
AFVOI : Moon Branch ledger accounts was Br 60,000. On sepetber17, year 9, HO shipped merchandise to
the branch at a billed price of Br 400,000. The branch reported an ending inventory, at billed price, of Br
160,000 on September 30, year 9.
Required:
Prepare journal entries involving the AFVOI : Moon Branch ledger account of the HO of Good Company on
September 17 and 30 , year 9.
10. On January 31, year 9 , the unadjusted credit balance of the AFVOI : Venture Branch of the HO of Supply
Company was Br 80,000. The branch reported a net income of Br 60,000 for January year 9 and ending
inventory on January 31, year 9 , of Br 81,000 , at billed prices that included a markup on HO cost of 50%.
Required:
Prepare journal entries for the HO Supply Company of January 31, year 9 for the above facts.
11. The HO of Glory Company bills its only branch at a markup of 25% above HO cost for all merchandise
shipped to that Park Branch. Both the HO and the branch use the periodic inventory system. During year 9 ,
the HO shipped merchandise to the branch at a billed price of Br 30,000. Park Branch inventories for year 9
were as follows:

Jan1 Dec 31
Purchased from HO ( at billed price ) Br 15,000 Br 19,500
Purchased from Branches 6,500 8,670

Required:
Prepare journal entries for the HO of Glory Company for year 9 to reflect the above information
12. On May 31, year 9 , the unadjusted balances of the investment in Truth Branch ledger account of the HO of
Amen Company and the HO account of the Truth Branch of Amen Company were Br 380,000 debit and Br
140,000 credit, respectively.

Additional Information:
1. On May 31, year 9, the HO had shipped merchandise to the branch at a billed price of Br 280,000 ; the
branch did not receive the shipping until June 3. Both the HO and the branch use the perpetual
inventory system.
2. On May 31, year 9 , the branch had sent a Br 10,000 “ dividend” to the HO which did not receive the
check until June 2.
3. On May 31, year 9, the HO had prepared the following entry , without notifying the branch:

Cash 50,000 ( to record the collection of A/R of the branch )

Investment in Truth Branch 50,000

Required: Prepare journal entries on May 31, year 9 for

a) The Ho and
b) The Truth Branch of Amen Company to reconcile the reciprocal ledger accounts.
c) Prove ( using a “T” account ) that the two reciprocal ledger accounts are equal