Home Office and Branch Accounting

1. Home Office operates a number of branches. On December 31, 2016, its Branch B showed a Home
office account balance of P54,700. The interoffice accounts at the beginning of the year were
correct, however during the year there were errors in recording in both home office and branch.
The following errors occurred during the year:

> A P24,000 shipment charged by the home office to Branch B was actually sent to and retained by
Branch C

> A P30,000 shipment intended and charged to Branch A was shipped to Branch B and retained by the
latter

> A P4,000 emergency cash transfer from Branch C was not taken up in the home office books.

> Home office collects Branch B Customer accounts of P7,200 and fails to notify the branch

> Home office charged for P2,400 for merchandise returned by Branch B on December 30 and is in
transit

> Home office errorneously recorded Branch B's net incoe for the year at P32,550. Branch B reported
net income of P25,350

1. What is the adjusted balance of reciprocal accounts on December 31,2016?

2. What is unadjusted balance of investment in Branch B on December 31, 2016?

2. At the end of the year the Investment in Bacolod account of home office is P300,500.
However, there are transactions discovered to have errors

> Bacolod branch brought equipment on June 1, 2016 costing P63,800 for the home office's use and
the policy is to record the asset in Bacolod's books. During the time the home office recorded the
equipment and credited its reciprocal account of its Bacolod Branch

> The policy of the company regarding the equipment's depreciation is that it has a life of 8yrs with
no salvage value and the straight line method should be used. No entry has been made
by the home office and branch

> The home office ships merchandise to Bacolod amounting to P96,700. Bacolod recorded
the transaction as P97,600

> Bacolod pays the home office's creditors in the amount of P32,400 and sends a debit memo to
home office. Upon receipt of the debit memo, the home office debited its reciprocal account
in the amount of P23,000 twice

1. What is the unadjusted balance of home office current account in the books of Bacolod at the end
of the year?

2. What is the net adjustment of investment in Bacolod account at the end of the year

3. What is the net adjustment of the home office current account in the books of Bacolod Branch at
the end of the year?

3. The following transactions relating to branch AA and branch BB are the following:
> On September 30,2016, branch AA collected branch BB's accounts receivable of P80,000 less 3%
discount

> On October 31, 2016, home office shipped merchandise costing P400,000 to branch AA. Freight
of P6,000 was paid by the home office. It is the policy of the company to bill its branches at 25%
above cost.

> On November 30,2016, upon the instruction of the home office, branch AA reshipped a quarter
of the above merchandise to branch BB with freight of P3,000 (freight-collect). Had the goods been
shipped directly to branch BB, the freight would have been only P1,400.

1. What is the home office current account of branch AA as of October 31, 2016?

2. What is the investment in BB account as of November 30,2016?

4. The following information is given regarding AAA Company:

> The reciprocal amount in eh separate income statement of the home office amount to P225,000

> During the year 2016 (current year), the home office bills merchandise to the branch at 215%
of cost.

>The beginning inventory of the branch is P249,375

> During the 2016, the branch purchase from vendors merchandise amounting to P150,000

> The ending inventory of the granch as shown in the combined financial statements is P267,125

> The allowance for overvaluation before adjustment is P320,000

>The unrealized profit at the end of the year must be decrease by P55,000

1. What is the cost of goods sold in the combined financial statements at the end of 2016?
2. What is the total good available for sale recorded in the branch;s books at the end of 2016?

5. The income statement submitted by the branch to the home office for the year ended December
31, 2016 has the following balances: Beginning inventory was P80,000 (of which P10,000 came for
known suppliers). Ending inventory was P100,000 (of which P16,000 came from known suppliers).
Shipments from home office was P350,000 and purchases from known supplier was P30,000.
Operating expenses during the year was P180,000. The branch generated sales in the amount of
P600,000.

At the end of the year, after adjustments have been made, the recorded true net income of the
branch was ascertained to be P156,000

What is the balance of Unrealized profit in branch inventory account at December 31, 2016?

6. On June 1, 2016, the Greenbelt Main Office established a sales agency in Ortigas. The main office
sent samples of its merchandise amounting to P8,400 and a working fund amounting to P72,000 to
be maintend on the imprest basis. The samples sent were inteded to last until January 1, 2017.
The agency transmitted to the home office sale of goods costing P291,600 but the home office was
not able to fill up 35% of the said transmitted sales orders.

Collections from customers amounting to P82,175, net of 5% sales discount. Payments made
by the agency during June, July and August were annual rent P70,200, advertising expense P4,650
and utilities P6,300. The agency also purchased an equipment on July 1, 2016 worth P11,000
which will be depreciated at 15% per annum. The gross profit rate on sales agency order is 20%
of gross sales.

What is the income of agency for the three months ended August 31, 2016