WAEC Accounting 2012 Theory — Question 8

8. Magoro Enterprises has its head-office in Kano and operates a branch in Ibadan. All purchases are made by the head-office and invoiced to the branch at cost plus 20 per cent. All branch transactions are recorded in the books at head-office from where branch expenses are also paid. All cash received by the branch is sent to the head-office. Branch sales are strictly on cash basis. On 1st January 2009, the stock of goods held by the branch amounted to ₦21,600 at invoice price. On the same date, the balance of the branch stock Adjustment Account was ₦3,600. During the year ended 31st December 2009, the following transactions took place at the branch: Goods received from head office at invoice price ₦194,760 Goods returned to head office at invoice price ₦3,852 Sales ₦200,556 Expenses ₦24,162 On 31st December, 2009, the stock of goods at the branch at invoice price amounted to ₦11,952. You are required to prepare: (a) Branch Stock Account; (b) Branch Stock Adjustment Account; (c) Branch Profit and Loss Account. [15 marks]