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REGULAR TRANSACTIONS
I. January 1, 2016, the BAL Company opened the Arren Branch in neighboring city. The statement of
financial position for the home office on January 1 and a summary of the transactions for the home
office and branch for 2016 are given below. Taxes are ignored.
Assets
Cash P296,500
Accounts receivable 138,250
Merchandise Inventory 200,600
Prepaid expenses 9,000
Equipment P100,000
Less: Accumulated Depreciation 22,000 78,000
Total Assets P722,350
Branch Transactions
a. Cash received from the home office, P212,500
b. Merchandise received from the home office, P251,000
c. Sales on account, P400,000
d. Purchases on account, P112,500
e. Collections on account deposited to the credit of the home office, P267,000.
f. Payment on accounts, P61,250
g. Purchases of equipment for cash, P40,000.
h. Expenses paid, P90,000.
II. On December 31, 2014 the Investment in Branch account on the home office books of the Strygwyr
Company shows a balance of 84,000, and the Home Office account on the books of the branch
shows a balance of 97,350. The following data are determined in accounting for the difference.
a. Merchandise billed at 6,150 was shipped by the home office to the branch on December 28. The
merchandise is in transit and had not been recognized on the books of the branch.
b. The branch collected a home office accounts receivable of 25,000, but failed to notify the home
office of this collection.
c. The home office recorded incorrectly the branch net income at 11,250. The branch reported net
income of 12,150.
d. The home office was charged 6,400 when the branch returned merchandise to the home office
on December 31. The merchandise is in transit.
III. Just before the books are closed on December 31, 2014, the trial balances for the home office and
branch contained the following account balances:
Information follows:
a. On December 26, the branch remitted 10,400 in cash to the home office that was not received
until January 3.
b. Merchandise that was billed to the branch at 7,280 was in transit at December 31.
c. A cash payment of 400 on an open accounts receivable was received by the home office. The
account, however, was carried on the books of the branch; the home office did not notify the
branch of the cash collection.
6. Compute for the adjusted balance of the reciprocal accounts at December 31, 2014.
a. 29,000 b. 49,000 c. 39,000 d. 28,200
IV. At the end of 2016, the following records were taken from the books of the home office and the
branch:
Branch Books
Home Office-current account
2016 2016
Dec. 1 Cash remitted to home office 80,000 Jan. 1 Balance 60,000
Dec. 28 Cash remitted to home office 30,000 Dec. 5 Shipments from home office 120,000
Dec. 28 Mdse returned to home office 12,000 Dec. 28 Expenses from home office 45,200
Balance 103,200
Except for the error by the branch in recording its share of allocated expenses, all differences are timing
differences, Compute for the correct balances of the reciprocal accounts.
V. Binay Company located in Makati, operates a branch in Taguig City. At close of business on
December 31, 2016, the Home Office account in the books of the Taguig branch showed a credit
balance of 2,784,300. The interoffice accounts were in agreement at the beginning of the year. For
purposes of reconciling the interoffice accounts, the following facts were ascertained:
a. On December 29, 2016, the branch sent a check for 13,500 to its suppliers. The branch
erroneously recorded the transaction as a remittance to the home office and sent a copy of the
debit memo to the home office. The home office recorded this upon receiving the debit memo
on January 4, 2017.
b. The home office allocated promotions and insurance expense totalling 13,000 to Taguig
Branch. The home office inadvertently charged the said expense to Manila branch. Taguig
branch had not entered the allocation at year – end.
c. Home office debit memo for 20,700 regarding transfer of funds was recorded twice by the
branch by debiting its reciprocal account.
d. A branch customer remitted 15,000 to home office. The home office recorded this is a cash
collection of its own receivable on December 23, 2016. Upon notification on the same year, the
branch debited the amount to Receivable from Home Office and credited its reciprocal
account.
e. A 105,000 shipment, charged by home office to Taguig branch, was actually sent to and
retained by Mandaluyong branch.
f. The home office failed to take up a 12,000 credit memo from the branch.
g. Branch store insurance premiums of 9,600 were paid by the home office. The home office
debited insurance expense and credited Cash in the books. The branch recorded the amount of
96,000 as a liability.
h. Inventory costing 39,000 was sent to the branch by the home office on December 12, 2016.
The branch recognized a liability by crediting Accounts Payable upon the receipt of the
inventory.
i. Freight charge of 12,600 on merchandise shipped to the branch was paid by the home office
and was recorded in the branch books as 1,260.
j. A branch customer remitted 63,000 to the home office. The home office recorded this cash
collection on December 28, 2016. Upon receiving a credit memo, the branch recorded the
transaction twice on December 30, 2016.
7. The unadjusted balance of the branch current account as of December 31, 2016 is:
a. 2,970,840 b. 3,075,240 c. 3,051,240 d. 2,962,140
II. The following records were taken from the books of the Company and its branch on December 31,
2016:
Home Office Books Branch Books
Sales P 920,000 P 800,000
Shipments to branch 600,000
Beginning inventory 96,000 64,000
Purchases 1,200,000 240,000
Shipments from home office 750,000
Allowance for overvaluation 158,000
Ending inventory 112,000 82,800
Expenses 40,000 20,000
III. The following records were taken from the books of the Company and its branch on December 31,
2016:
Home Office Books Branch Books
Sales P 1,060,000 P 315,000
Shipments to branch 210,000
Beginning inventory 115,000 44,500
Purchases 820,000
Shipments from home office 252,000
Ending inventory 142,500 58,500
Expenses 382,000 101,500
In 2016, home office billed the branch at 120% of cost which was lower by 5% than last year’s.
a. What is the combined net income?
b. Compute for the total beginning and ending inventory at cost.
c. What is the balance of the allowance for overvaluation of inventory of the branch after
closing entries have been made?
IV. The following records were taken from the books of the Company and its branch on December 31,
2016:
V. The home office shipped merchandise costing P48,000 to Manila Branch and paid freight of P3,200.
Shortly afterward, the home office instructed Manila branch to transfer this merchandise to Baguio
branch. Freight costs of P2,400 were paid by Manila branch to carry out the order. If the
merchandise had been shipped directly from the home office to Baguio branch, the freight cost
could have been P4,000.
Prepare entries to be made on the books of the home office and the branches.
VI. The following transactions happened between the home office, branch X and branch Y during the
year:
Upon the instruction of the home office, branch Y affected a fund transfer of P 25,000 to
branch X.
Branch X collected a branch Y’s account receivable of P 35,000 less 2% discount.
Branch Y paid P 250,000 representing the traveling expenses of Mr. Jan Michael Prisoris, a
Senior Vice President, when the latter attended the regional conference in Australia. Of the
amount paid, 60% was charged to the home office, 25% to branch X and the balance to
branch Y.
Home office shipped merchandise costing P 200,000 to branch Y. Freight of P3,000 was paid
by home office. It is the policy of the company to bill its branches at 25% above cost.
Upon the instruction of the home office, branch Y reshipped the above merchandise to
branch X. Freight of P 1,500 was paid by the branch X. Had the goods been shipped directly to
branch X, the freight would have been only P 4,200.
a. Compute for the balance of Branch Y – Current in the home office books.
b. Compute for the balance of the Home Office account in the books of branch X.
VII. It is the policy of the home office to bill the branch for shipments of inventory at 20% above cost.
The branch in turn prices inventory for sale purposes at 25% above billed price. On January 10,
2016, the entire branch inventory is destroyed by fire. No insurance was maintained. Branch
account shows the following information:
VIII. On September 1, 2016, the home office established two branches in Bacolod and Cebu.
The home office transferred P 320,000 worth of cash and P 1,400,000 worth of inventory to
its Bacolod branch. The home office transfers merchandise to its branch at of 25% mark up
above cost.
The home office instructed Bacolod to transfer 75% of both the goods and cash received to
Cebu.
In addition, on October 1, 2016, shipments from home office were received by Bacolod
amounting to P500,000 at cost and the branch paid freight costs amounting to P26,000.
60% of the October shipments were sold to outsiders on account for P420,000
On November 1, 2016, Bacolod transferred 50% of the remaining October shipments from
home office to Cebu, with Cebu branch paying freight costs of P 10,000.
Had the merchandise been shipped from home office to Cebu branch, only P 7,600 worth of
freight would have been incurred.
How much is the balance of the Cebu branch account on the home office books?
AGENCY
IX. On October 1, 2016, the Home Office established a sales agency in Manila.
The home office sent samples of its merchandise amounting to P 42,000 and a working fund
amounting to P 360,000 to be maintained on an imprest basis.
The samples sent were intended to last until June 1, 2017. During the first two months of
operations,the agency transmitted to the home office sale of goods costing P 1,458,000 but
the home office were not able to fill up 25% of the said transmitted sales orders.
Collections from customers amounted to P 369,705, net of 2% sales discount.
Payments made by the agency during October and November were as follows: annual rent of
P 288,000, advertising expenses worth P 28,000 and Utilities amounting to P 36,000.
It also purchased equipment worth P 45,000 which will be depreciated at 20% per annum.
The gross profit rate on sales agency order is 20% of sales.
Net Income of the agency for two months ended November 30, 2016 is
a. P 149,375
b. P 134,330
c. P 87,135
d. P 141,830
Home office operates a number of branches. On December 31, 2019, 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’s 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 erroneously recorded branch B’s net income for the year at P32,550. Branch B
reported net income of P25,350.
1. What is the adjusted balance of the reciprocal accounts on December 31, 2016?
a. 54,700
b. 47,500
c. 40,300
d. 43,500
3. At the end of the year the investment in Bacolod account of the home office is P300,500.
However, there are transactions discovered to have errors.
Bacolod branch bought 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 that
time the home office recorded the equipment and credited its reciprocal account
of its Bacolod branch.
The policy of the company regarding the equipment 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 the home office. Upon receipt of the debit memo,the home office
debited its reciprocal account in the amount of P23,400 twice.
What is the adjusted balance of the home office current account in the books of Bacolod at the
end of the year?
a. 379,600
b. 252,000
c. 286,000
d. 315,800
4. What is the net adjustments of the investment in Bacolod account at the end of the year?
a. 20,052 debit
b. 20,052 credit
c. 19,387.5 debit
d. 19,387.5 credit
5. What is the net adjustments of the home office current account in the books of Bacolod
branch at the end of the year?
a. 4,887.5 debit
b. 4,887.5 credit
c. 5,552 debit
d. 5,552 credit
9. What is the total goods available for sale recorded in the branch’s books at the end of
2016?
a. 883,125
b. 563,125
c. 624,375
d. 821,875
10. 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 the unrealized profit in branch inventory account at December 31,
2016?
a. 16,000
b. 34,000
c. 10,000
d. 24,000
11. 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 maintained on the imprest basis. The samples sent were
intended 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.
What is the net income of the agency for the three months ended august 31, 2016?
a. 18,610
b. 14,285
c. 14,147.50
d. 10,685
A.