Question

Question 3 (30 marks)

A- The following transactions occurred between the home office and the Mason Branch of Smaldino Company:

1. Cash of $1,000 was forwarded by the home office to Mason Branch.
2. Merchandise with a home office cost of $60,000 was shipped by the home office to

Mason Branch.

3. Equipment was acquired by Mason Branch for $500, to be carried in the home office accounting records.
4. Credit sales by Mason Branch amounted to $80,000; the branch’s cost of the merchandise sold was $45,000.
5. Collections of trade accounts receivable by Mason Branch amounted to $62,000.
6. Payments for operating expenses by Mason Branch totaled $20,000.
7. Cash of $37,500 was remitted by Mason Branch to the home office.
8. Operating expenses incurred by the home office and charged to Mason Branch totaled $3,000.

Required:

Prepare journal entries for these transactions in the accounting records of the Home office and the Mason Branch.                                                                                                                       (17 marks)

Answer 1

Credit Credit Home Office S.No. Account Titles 1 Mason Branch Cash Debit 1,000 Mason Branch S.No. Account Titles Cash Home Office Debit 1,000 1,000 1,000 2 60,000 2 60,000 Mason Branch Merchandise Merchandise Home Office 60,000 60,000 3 500 3 500 Mason Branch Cash Equipment Home Office 500 500 4 80,000 4 80,000 Purchase Mason Branch Home Office Credit Sales 80,000 80,000 5 45,000 Trade accounts receivable 62,000 Mason Branch Cost of Goods Sold Inventory 62,000 45,000 6 20,000 5 62,000 Operating Expenses Mason Branch Cash Home Office 20,000 62,000 7 37,500 6 20,000 Cash Mason Branch Home Office Cash 37,500 20,000 8 3,000 7 37,500 Mason Branch Operating Expenses Home Office Cash 3,000 37,500 8 3,000 Operating Expenses Home Office 3,000

Answer 2

Credit Credit Home Office S.No. Account Titles 1 Mason Branch Cash Debit 1,000 Mason Branch S.No. Account Titles Cash Home Office Debit 1,000 1,000 1,000 2 60,000 2 60,000 Mason Branch Merchandise Merchandise Home Office 60,000 60,000 3 500 3 500 Mason Branch Cash Equipment Home Office 500 500 4 80,000 4 80,000 Purchase Mason Branch Home Office Credit Sales 80,000 80,000 5 45,000 Trade accounts receivable 62,000 Mason Branch Cost of Goods Sold Inventory 62,000 45,000 6 20,000 5 62,000 Operating Expenses Mason Branch Cash Home Office 20,000 62,000 7 37,500 6 20,000 Cash Mason Branch Home Office Cash 37,500 20,000 8 3,000 7 37,500 Mason Branch Operating Expenses Home Office Cash 3,000 37,500 8 3,000 Operating Expenses Home Office 3,000