Reference no: EM132562763

The following information relates to the branch and head office of Fish CC:

1. Balances at 1 January 20.1: R

Bank (favourable) 10 000

Inventory (at cost price) 9 200

2. Transactions of the branch during the year ended 31 December 20.1: R

Inventory sent to branch at cost 108 000

Credit sales 38 400

Cash sales 88 000

Inventory returned to head office at cost 2 400

Payments by branch debtors 20 000

Settlement discount granted to branch debtors 600

Damaged inventory written off at cost 2 000

Additional information:

1. Inventory supplied to the branch is invoiced at selling price, which is cost plus 20%.

2. An amount of R15 000, included in cash sales, was in respect of sales of inventory purchased from other suppliers and paid for by head office. The profit mark-up on inventory purchased from other supplies is also 20% on cost.

3. A sales person embezzled cash amounting to R750 received from cash sales and the transaction is still to be recorded in the books.

4. To boost the December sales, a special promotion was held at the branch where inventory was sold at selling price less 25%. Proceeds from the special promotion amounted to R22 500 and the amount is included in the cash sales figure.

5. When a physical inventory count was undertaken at the branch, it was discovered that inventory with a cost price of R4 000 was missing. The matter was investigated and it was established that inventory was stolen.

6. The branch donated inventory with a selling price of R1 800 to a local charitable organisation.

7. Inventory on hand at 31 December 20.1, according to the physical inventory count, amounted to R9 600 (at selling price).

Required:

Question 1: Prepare the following accounts in the general ledger of Fish CC:

a) Branch inventory;

b) Inventory to branch;

c) Branch adjustment;

d) Trade receivables control;

e) Bank;

f) Settlement discount granted; and

g) Branch expense.

Balance and close off all the accounts at 31 December 20.1.