Enugu Head Office operates a dependent branch in Aba, supplying all goods at cost price. For the year ended 31 December 2025, the following details were extracted from the books:
| Transaction | Amount (₦) |
|---|---|
| Stock at branch (1 January 2025) | 15,000 |
| Goods sent to branch | 120,000 |
| Goods returned to head office | 5,000 |
| Cash sales | 85,000 |
| Credit sales | 40,000 |
| Branch operating expenses | 12,000 |
| Stock at branch (31 December 2025) | 18,000 |
What is the net profit earned by the Aba branch for the year ended 31 December 2025?
Answer: 1000 ₦
Answer
The net profit earned by the Aba branch for the year ended 31 December 2025 is ₦1,000.
Total revenue is ₦125,000 (cash sales ₦85,000 + credit sales ₦40,000). Cost of goods sold is ₦112,000 (opening stock ₦15,000 + net goods sent ₦115,000 - closing stock ₦18,000). Gross profit is ₦13,000 (₦125,000 - ₦112,000). Subtracting branch expenses of ₦12,000 gives a net profit of ₦1,000.
Step-by-Step Solution
Key Concept
Branch Trading and Profit Calculation at Cost Price