3. OM Ltd. Delhi invoices goods to its Mumbai and Kolkata branch offices at 20% less than the list price which is cost plus 50%
wanth instructions that cash sales are to be made at invoice price and credit sales at list price.
Opening Stock at Mumbai at its cost 76,800.
Goods Sent to Mumbai (at cost to Delhi) 1,10,000.
Cash Salas 74.8% of Net Credit Sales,
Goods retumed by Credit Customers to Mumbai + 45.000.
Goods retumed by Mumbai to Delhi 36,000.
Loss of Goods by fire (at invoice price) 3,000 against which 80% of cost was recovered from the insurance Company.
Loss of Goods at Mumbai through normal pilferage (at list price) 3.000.
Debtors at Mumbai: Opening < 10,000, Closing 11,000
Cash remitted by Mumbai Branch to HO: 1,62,435.
Discount Allowed to Debtors * 13.365.
Goods received by Mumbai till close of the year 1,27,000.
Provision is to be made for discount on Debtors at 15% on prompt payments at year end on the basis of year's trend of prompt
payments.
1
Answers
Consider the images
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Question: OM Ltd. Delhi invoices goods to its Mumbai and Kolkata branch offices at 20% less than the list price which is cost plus 50% with instructions that cash sales are to be made at invoice price and credit sales at list price. Opening Stock at Mumbai at its cost * 76,800. Goods Sent to Mumbai (at cost to Delhi) 1,10,000. Cash Sales 74.8% of Net Credit Sales. Goods returned by Credit Customers to Mumbai 45,000. Goods returned by Mumbai to Delhi * 36,000. Loss of Goods by fire (at invoice price) { 3,000 against which 80% of cost was recovered from the insurance Company. Loss of Goods at Mumbai through normal pilferage (at list price) *3,000. Debtors at Mumbai: Opening + 10,000, Closing ? 11,000 Cash remitted by Mumbai Branch to HO: 1,62,435. Discount Allowed to Debtors 13,365. Goods received by Mumbai till close of the year 1,27,000. Provision is to be made for discount on Debtors at 15% on prompt payments at year end on the basis of year's trend of prompt payments. 1 Cash remitted by HO to Branch for Expenses9,000. ₹ Branch Expenses still outstanding 741. Manager is entitled to a commission @ 6% of net profits after charging such commission. Required: Prepare Mumbai Branch Debtors A/c, Mumbai Branch Stock Account, Mumbai Branch Adjustment A/c, Mumbai Branch Expenses Account and Mumbai Branch Profit & Loss Account under Stock & Debtors Method.
Answer:
The question requires us to create the following accounts which are linked in the image below:-
Reason: The account created with all the additional settlements made please refer to the images for the samt
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