Kano Head Office operates a dependent branch in Kaduna, supplying all goods at cost price. For the year ended 31 December 2025, the following records were extracted:
| Details | Amount (₦) |
|---|---|
| Branch stock (1 January 2025) | 15,000 |
| Goods sent to branch | 120,000 |
| Goods returned to head office | 5,000 |
| Cash sales at branch | 80,000 |
| Credit sales at branch | 45,000 |
| Branch stock (31 December 2025) | 20,000 |
| Branch operating expenses paid by head office | 4,000 |
What is the net profit of the Kaduna branch for the year in Naira (₦)?
Answer: 11000 ₦
Answer
The net profit of the Kaduna branch for the year is ₦11,000.
The net profit is calculated by subtracting total cost of goods sold and operating expenses from total sales (cash + credit sales). Total sales equal ₦125,000, cost of goods sold equals ₦110,000 (Opening stock ₦15,000 + Net goods sent ₦115,000 - Closing stock ₦20,000), leaving a gross profit of ₦15,000. Deducting branch expenses of ₦4,000 yields the net profit of ₦11,000.
Step-by-Step Solution
Key Concept
Accounting for Dependent Branches at Cost Price