Sierra Corporation - Home Office and Branch

Reconciliation of Reciprocal Accounts

December 31, 2002

Balances before adjustments

Additions:
Merchandise shipped to Branch Still in Transit
Expenses not yet recorded by the Branch
Freight paid by Home Office
Total
Deductions:
Remittances by the Branch
Short term loan of the Home Office paid by the Branch
Adjusted Balances before Branch Income
Branch Income
Adjusted Balances
Adusting Entries
Investment in Branch
Cash

50,000.00
Investment in Branch- Sacramento

50,000.00

Loans Payable
Investment in Branch- Sacramento

95,000.00

Investment in Branch- Sacramento

Branch Income- Sacramento

71,765.00

Allowance for Overvaluation of Branch Inventory

Branch Income- Sacramento

99,800.00

95,000.00

71,765.00

PHP 99,800.00

Branch Income- Sacramento

Retained Earnings

171,565.00

Sales

856,750.00

171,565.00

Allowance for Overvaluation

Shipments to Branch- Sacramento

111,750.00
745,000.00

Home Office
Shipment from Home Office
Home Office

51,750.00
51,750.00

Inventory, end
Inventory

51,750.00

Expenses
Home Office

17,500.00

Freight-In
Home Office

17,135.00

51,750.00

17,500.00

17,135.00

Sales
Merchandise Inventory- end
Merchandise Inventory- Beg
Shipment from Home Office
Purchases
Freight-In
Expenses
Income Summary

PHP 920,000.00
345,950.00
184,300.00
856,750.00
40,000.00
17,135.00
96,000.00
PHP 71,765.00

Income Summary
Home Office

PHP 71,765.00
PHP 71,765.00

Sacramento Branch
Income Statement
For the year ended December 31, 2001
Sales
Less Cost of Goods Sold
Beginning Inventory
Shipment from Home Office
Purchases
Freight-In
Less Ending Inventory
Gross Profit
Less Expenses
Branch Profit
Realized Profit
True Branch Profit

MI- Beginning
Add Shipments
Less MI- End
Cost of Goods Sold

Billed Price
145,000.00
856,750.00
313,950.00
687,800.00

PHP 920,000.00
184,300.00
856,750.00
40,000.00
17,135.00
(345,950.00)

Cost
116,000.00
745,000.00
273,000.00
588,000.00

Allowance
29,000.00
111,750.00
40,950.00
99,800.00

752,235.00
167,765.00
96,000.00
71,765.00
99,800.00
PHP 171,565.00

(Home Office Books)

Investment in Branch
Php352,985.00

352,985.00
50,000.00
95,000.00
Php207,985.00
71,765.00
Php279,750.00

(Branch Books)
Home Office
Php121,600.00
51,750.00
17,500.00
17,135.00
207,985.00

Php207,985.00
71,765.00
Php279,750.00

Corrected trial balances of Sierra Corporation and its Sacramento Branch as of December 31, 2002:
Sierra
Debits
Cash
Receivables
Inventories, January 1
Investment in Branch
Plant Assets
Other Assets
Purchases
Expenses
Freight-In
Shipments from Home Office
Total
Credits
Accounts Payable
Short term Loans
Capital Stock
Retained Earnings
Home Office Equity
Sales
Shipments to Branch
Allowance for Overvaluation of Inventory
Total

Php175,200.00
510,565.00
341,000.00
207,985.00
1,172,600.00
229,000.00
2,000,000.00
381,000.00

Php5,017,350.00

300,000.00
16,100.00
1,900,000.00
322,250.00
1,593,250.00
745,000.00
140,750.00
Php5,017,350.00

Sacramento
Php17,600.00
75,000.00
184,300.00

40,000.00
96,000.00
17,135.00
856,750.00
Php1,286,785.00

158,800.00

207,985.00
920,000.00

Php1,286,785.00

Sierra Corporation
Working Paper for Combined Financial Statements
For Year Ended December 31, 2002
Adjusted Trial Balance
Home Office
Branch
Debits
Cash
Receivables
Inventories, January 1
Investment in Branch
Plant Assets
Other Assets
Purchases
Expenses
Freight-In
Shipments from Home Office
Total
Inventory, December 31 (SFP)
Credits
Allowance for Overvaluation of Inventory
Accounts Payable
Short term Loans
Capital Stock
Retained Earnings
Home Office Equity
Sales
Shipments to Branch
Total
Inventory, December 31 (IS)
Net Income (SFP)

Php175,200.00
510,565.00
341,000.00
207,985.00
1,172,600.00
229,000.00
2,000,000.00
381,000.00

Php5,017,350.00
810,000.00

140,750.00
300,000.00
16,100.00
1,900,000.00
322,250.00

Php17,600.00
75,000.00
184,300.00

40,000.00
96,000.00
17,135.00
856,750.00
Php1,286,785.00
345,950.00

158,800.00

207,985.00
920,000.00

1,593,250.00
745,000.00
5,017,350.00

1,286,785.00

810,000.00

345,950.00

381,000.00
(381,000.00)

Eliminations
Dr

Cr

Combined Income Statement

Dr
Cr

Combined SFP
Dr
Php192,800.00
585,565.00

29,000.00
207,985.00

496,300.00
1,172,600.00
229,000.00
2,040,000.00
477,000.00
17,135.00

856,750.00

40,950.00

1,115,000.00

140,750.00

207,985.00
2,513,250.00
745,000.00

40,950.00
1,134,685.00

1,134,685.00

3,030,435.00
597,815.00
Php3,628,250.00

1,115,000.00
3,628,250.00
Php3,628,250.00

Php3,294,965.00
Php3,294,965.00

Combined SFP
Cr

458,800.00
16,100.00
1,900,000.00
322,250.00

2,697,150.00
597,815.00
Php3,294,965.00