PAMANTASAN NG LUNGSOD NG VALENZUELA

HOME OFFICE AND BRANCH

Quiz 4

Trauma 1. Springfield Clothing operates a branch in BGC. At close of the business on December 31,
2013, the capital account in the books of the BGC branch showed a normal balance of 2,784,300. The
interoffice accounts were in the agreement at the beginning of the year. For purposes of reconciling the
interoffice accounts, the following facts were ascertained:
a. On December 27, 2013, the BGC branch released a check for P13,500 to Fabric Warehouse
trading. The branch inadvertently recorded the transaction as a remittance to Springfield Clothing
and sent a copy of the memo to notify the home office. Springfield recorded this upon receiving
thee said memo on January 2, 2014.
b. Springfield Clothing allocated promotions and advertising expense totaling P18,000 to BGC
branch. The home office erroneously charged the said expense to Eastwood branch. BGC branch
was not yet informed of the said allocation as of year-end.
c. A memo from Springfield Clothing for P20,700 regarding transfer of funds was recorded twice by
the BGC branch by debiting its interoffice account.
d. Coat and Ties, a BGC branch customer remitted P15,000 to Springfield Clothing. The home
office this as cash collection of its own receivable on December 28, 2013. Upon notification the
following day, the branch debited the amount to Receiveble from home Home Office and credited
its reciprocal account.
e. A P105,000 shipment, charged by home office to BGC branch, was actually sent to and retained
by the Rockwell branch.
f. The home office failed to take up P12,000 credit memo from the branch.
g. BGC branch store insurance premiums of P9,600 were paid by Springfield. The home office
debited Insurance expense and credited cash in its books. The branch recorded the amount of
P96,000 as a liability.
h. Merchandise costing P39,000 was sent to BGC branch by Springfield on December 12, 2013. The
branch recognized a liability by crediting Accounts Payable upon the receipt of the inventory.
i. Freight charge of 12,600v on merchandise shipped to BGC branch was paid by Springfield and
was recorded in the branch books as P1,260.
j. Elite designs, a BGC branch customer remitted P63,000 to Springfield. The home office recorded
this cash collection on December 23, 2013. Upon receiving a notification, the BGC branch
recorded the transaction twice on December 27, 2013.
1. The unadjusted balance of the Investment in BGC branch account as of December 31, 2013 is:

Trauma 2. Makati Garment Company operates a branch in Bacolod City. At the end of the year, the
branch account in the books of the home office at Makati shows a balance of P600,000. The following
information was ascertained:
a. The branch made a profit of P40,400 for the month of December but the home office erroneously
recorded it as P44,720
b. The branch has not received the cash in the amount of P100,000 sent by the home office on
December 31. This was charged to General Expense account by the home office.
c. The home office has billed the branch the amount of P150,000 for merchandise, which was in
transit on December 31.
d. Supplies of P18,000 was returned by the branch to the home office but the home office has not
yet reflected in its records the receipt of the supplies.
e. A home office accounts receivable for P42,000 saw collected by the branch. Sai1d collection was
not reported to the home office by the branch.

2. What is the unadjusted balance of the Home Office account of Bacolod branch?

Trauma 3. On October 1, 2013, the Greenbelt Main Office established a sales agency in Ortigas.
a. 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.
b. The samples sent were intended to last until June 1, 2014. During the first two months of
operations, the agency transmitted to the home office sale of goods costing P291,600, but the
home office were not able to fill up 25% of the said transmitted sales orders.
c. Collections from the home office amounted to P73,941, net of 2% sales discount

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 d. Payments made by the agency during October and November were as follows: annual rent of
P57,600, advertising expense worth P5,600 and utilities amounting to P7,200
e. It also purchased an equipment worth P9,000 which will be depreciated at 20% per annum.
f. The gross profit rate on sales agency order is 20% of gross sales.

3. Net income of the agency for the two months ended November 30, 2013 is?

Trauma 4. Fire Company has branch in Baguio and Davao. The reciprocal accounts between the home
office and the branches were in the agreement at the beginning of 2013. However at December 31, 2013,
the following reciprocal balances are found in the home office books:
Investment in Baguio 186,500
Investment in Davao 84,000

Data for reconciliation of the reciprocal accounts are as follows:

a. On December 29, 2013, the home office has instructed Baguio to transfer for P74,000 cash to
Davao. Baguio recorded this transaction immediately. Upon receipt, Davao has recorded this
transfer at P47,000. The home office however has not yet recorded this inter-branch transaction as
of the end of the year.
b. Fire has transferred goods costing P28,900 to Baguio branch and paid P2,500 of shipping cost on
December 16, 2013. Baguio has shipped all of these goods to Davao upon instruction of the home
office on December 30, 2013. Shipping cost is P3,600 freight collect. Had the goods were
shipped directly to the Davao, P5000 of freight cost should have been incurred. The inter-branch
shipment was not recorded by the branches and the home office as well.
c. Baguio has collected cash of P5,750 from the Davao’s customer. This transaction is not yet
recorded by Davao and the home office.
d. The home office has already allocated P11,000 and P9,000 of administrative expenses to Baguio
and Davao respectively. The branches are not yet notified.
e. Baguio remitted P14,300 cash to the home office on December 12, 2013. The home office has
failed to record the said remittance.
f. Davao returned goods costing P6,850 to the home office. The goods were shipped on December
19 and received on December 24 but no entries have been made in the home office books.

4. Unadjusted balance of the Home Office Current account in Baguio’s books?

5. Unadjusted balance of the Home Office Current account in Davao’s books?

Trauma 5. On September 1, 2013, Ayala Mallas Main Office established two branches: Ortigas and
Makati branches.
a. The home office transferred P480,000 worth of cash and P2,100,000 worth of inventory to its
Ortigas branch. The home office transfers merchandise to its branch at a mark-up of 25% above
cost.
b. The home office instructed Ortigas to transfer 75% of t6he goods and cash received to Makati.
c. In addition, on October 1, 2013, shipments from the home office were received by the Ortigas
amounting to P750,000 at cost and the branch paid freight cost amounting to P39,000
d. 60% of the said amounts were sold to outsiders.
e. On November 1, 2013, Ortigas transferred 50% of the remaining October shipments from
Alabang to Makati, with Makati branch paying freight cost of 15,000
f. Had the merchandise been shipped from Alabang to Makati City branch, only P11,400 worth of
freight would have been incurred.

6. How much is the balance of the Makati branch account on the Home Office books?

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7. The following information is extracted from the books and record of Pinoy Company and its
branch. The balances are at December 31, 2011 the fourth year of the company’s operations.
Home Office Books Branch Books
Sales 200,000
Shipments to Branch P60,000
Shipments from Home Office 80,000
Purchases 30,000
Expenses 60,000
Inventory, January 1, 2011 20,000
Allowance for overvaluation of branch 24,000
inventory

There are no shipments in transit between the home and branch. Both shipments account properly
and recorded. The ending inventory at billed price includes merchandise acquired from home
office in the amount of P20,000 and P6,000 acquired from vendors for a total of P126,000. How
much of the branch inventory was acquired from outsiders?

8. Using the data in number 7, what is the true branch net income according to the generally
accepted accounting principles?
9. The following information are extracted from the books and records of Phil Corporation and its
branch. The balances are at December 31, 2011. The third year of the corporation’s existence.
Home Office Books Branch Books
Sales P600,000
Expenses 200,000
Shipments from Home Office 360,000
Allowance for Overvaluation of branch P72,500
inventory

The branch acquires all of its merchandise from the home office. The inventories of the branch at
billed prices are as follows:
January 1, 2011 P75,000
December 31, 2011 84,000
What is the percentage of profit on cost that the home office uses to bill merchandise shipped to
branch?
10. The following account balances were taken from the books and records of Bulacan Company and
its branch on December 31, 2011.
Home Office Books Branch Books
Sales P460,000 P400,000
Shipments to branch 300,000
Merchandise inventory, January 1 48,000 32,000
Purchases 600,000 120,000
Shipments from home office 375,000
Allowance for overvaluation of branch 79,000
inventory
Merchandise inventory, December 31 56,000 41,400

The ending inventory of the branch includes P17,500 acquired from outsiders. What is the entry
to adjust the realized profit from the sales made by the branch?
11. The partial closing entries of the Home Office and its Branch at June 30, 2011 are as follows:
Home Office Debit Credit
Sales 300,000
Inventory 6/30 60,000
Shipment to Branch 80,000
Inventory 40,000
Purchases 160,000
Expenses 120,000

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 Branch Debit Credit
Sales 150,000
Inventory 6/30 10,000
Shipment to Branch 100,000
Inventory 12,000
Expenses 30,000

What is the combined cost of goods sold?

12. Using the data in number 11, what is the combined net income of the home office and branch?
13. The following data were taken from the records of Luzon Corporation of Manila and its Rizal
branch for 2011:
Manila Office Rizal Branch
Sales P530,000 P157,500
Inventory, January 1 57,500 22,250
Purchases 410,000
Shipments to branch 105,000
Shipments from home office 126,000
Inventory, December 31 71,250 29,250
Expenses 191,000 50,750

In 2011, Manila office billed the Rizal branch at 120% of cost which was lower by 5% that last
year’s. What is the combined net income?

14. The Visayas Company operates a branch in Mindanao. Operating data from the home office and
the branch for 2011 are presented below:
Home office books Branch Books
Sales P512,000 P157,000
Purchases 420,000 40,000
Shipments to branch 60,000
Shipments from home office 80,000
Expenses 120,000 25,000
Inventories, January 1
Home office 160,000
Branch
Acquired from outsiders 15,000
Acquired from home office at billed 49,000
price of 22 ½ above cost
Inventories, December 31:
Home office 110,000
Branch
Acquired from outsiders 11,000
Acquired from home office 52,000

What is the combined net income (loss) of the home office and the branch?

-end of examination-

“Education is our passport to the future, for tomorrow belongs to the people
who prepare for it today.”
― Malcolm X

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