Required: 1. Prepare the working paper for the combined financial statements of the home office and the branch. 2. Prepare the closing journal entries on December 31, 20XX for the branch. 3. Prepare the closing journal entries on December 31, 20XX pertaining to branch operations for the home office.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
![On January 4, 20XX, Hope Company opened its first branch with instructions to its branch manager that the branch performs
the functions of granting credit, billing customers, accounting for receivables, and making cash collections. The branch pays
its operating expenses by checks drawn on its bank account. The branch obtains its merchandise solely from the home
office; billing for the shipments are at cost to the home office.
The adjusted trial balances of the home office and the branch on December 31, 20XX are as follows:
Cash
Notes Receivable
Accounts Receivable (net)
Inventories
Furniture and equipment (net)
Branch current
Accounts payable
Share Capital, P2 par
Home Office current
Retained Earnings, December 31, 20XX
Sales
Costs of Goods Sold
Operating Expenses
Hope Company
Adjusted Trial Balances
December 31, 20XX
Home Office
(Dr)
63,000
10,500
120,600
143,700
72,150
124,050
300,750
104,250
939,000
(Cr)
61,500
300,000
37,500
540,000
939,000
(Dr)
Branch
21,900
55,950
36,300
128,700
32,850
275,700
(Cr)
124,050
151,650
275,700
The physical inventories on December 31, 20XX are in agreement with the perpetual records of the home office and the
branch. The shipment to branch during the year amounts to P135,000.
Required:
1. Prepare the working paper for the combined financial statements of the home office and the branch.
2. Prepare the closing journal entries on December 31, 20XX for the branch.
3. Prepare the closing journal entries on December 31, 20XX pertaining to branch operations for the home office.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fecf99308-a413-4675-b4a5-ccc707dd3942%2Fddbd7c9c-7db6-46f8-86c4-0b8b4bb4461c%2Fkkzyhbv_processed.png&w=3840&q=75)
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