Advanced Accounting Part 2 Dayag 2015 Chapter 12

Chapter 12 Problem I (a)Working Fund – Agency ……………………………… ……………………….. 5,000 Cash …………………………………………………………………………. 5,000 (b)Accounts Receivable …………………………………..................................... 50,000 Sales-Agency ………………………………………………………………. 50,000 (c)Cash ………………………………………………………..................................... 35,000 Accounts Receivable …………………………………………………….. 35,000 (d)Expenses-Agency ……………………………………………………………….. Cash ………………………………………………………………………….

4,500

(e)Expenses-Agency ……………………………………………………………….. Cash ………………………………………………………………………….

2,250

4,500 2,250

(f) Cost of Goods Sold-Agency …………………………………………………… 36,000 Merchandise Inventory - Agency ………………………………………. 36,000 2. Sales……………………………………………………………………………….P 50,000 Less: CGS………………………………………………………………………… 36,000 GP………………………………………………………………………………….P 14,000 Less: Expenses (P4,500 + P2,250)…………………………………………….. 6,750 Net income – agency………………………………………………………….P 7,250 Problem II (a) Branch Books: (a) Cash ………………………………………………………….. Home Office ……………………………………………

42,500

(b) Shipments from Home Office …………………………… Home Office …………………………………………...

50,200

(c) Accounts Receivable ……………………………………. Sales ……………………………………………………..

60,000

(d) Purchases …………………………………………………… Accounts Payable ……………………………………

22,500

(e) Home Office ……………………………………………….. Accounts Receivable …………………………..

53,400

(f) Accounts Payable ………………………………………... Cash ……………………………………………………..

12,250

(g) Furniture & Fixtures ………………………………………… Cash ……………………………………………………..

8,000

(h) Expenses ……………………………………………………..

18,000

42,500 50,200 60,000 22,500 53,400 12,250 8,000

Cash ……………………………………………………..

18,000

(b) Home Office Books: (a) Branch ………………………………………………………. Cash …………………………………………………….

42,500

(b) Branch ……………………………………………………… Shipments to Branch ………………………………..

50,200

(c) Accounts Receivable …………………………………... Sales ……………………………………………………

105,000

(d) Purchases …………………………………………………. Accounts Payable ………………………………….

122,500

(e) Cash ……………………………………………………….. Accounts Receivable ………………………………

113,600

(f) Accounts Payable ………………………………………. Cash ……………………………………………………

124,000

(g) Expenses …………………………………………………… Cash ……………………………………………………

26,600

(h) Cash ……………………………………………………….. Branch ………………………………………………...

53,400

(i) Retained Earnings ………………………………………. Cash …………………………………………………...

10,000

42,500 50,200 105,000 122,500 113,600 124,000 26,600 53,400 10,000

BARTON CO. Balance Sheet for Branch December 31, 20x4

Assets

Liabilities

Cash …………………………… Accounts Receivable ……… Merchandise Inv……………... Prepaid Expenses …………… Furnitures & Fixtures …. P 8,000 Less accum. Depr …… 650 Total Assets ……………………

P 4,250 12,600 23,500 750 7,350 P48,450

Accounts Payable ………… P 10,250 Accrued Expenses …………… 300 Home Office ………………….. 37,900

Total Liabilities ………………….P48,450

BARTON CO. Income Statement for Branch For Year Ended December 31, 19X6 Sales …………………………………………………………………………… Cost of Goods Sold: Purchases ……………………………………………………………

P66,000 P22,500

Shipments for home office ………………………………………. Merchandise available for sale ………………………………… Less merchandise inv, December 31 ………………………….. Cost of Goods Sold ……………………………………………….. Gross Profit ……………………………………………………………………. Expenses ……………………………………………………………………… Net loss ………………………………………………………………………... BARTON CO. Income Statement for Branch For Year Ended December 31, 20x4 Assets Cash …………………………….. Accounts Receivable ……….. Merchandise Inventory……… Prepaid Expenses ……………. Furniture & Fixtures …. P 20,000 Less accum. Depr….. 5,580 Branch ………………………… Total Assets …………………...

50,200 P72,700 23,500 49,200 P16,800 18,200 P 1,400

Liabilities & Stockholders’ Equity P 23,200 19,050 48,500 2,050 14,420 37,900 P145,120

Liabilities Accounts payable ………… P 21,300 Accrued Expenses …………. 1,350 Stockholders Equity Capital stock, P20 par……… P50,000 Retained Earnings …………. 72,740 Total liabilities and stockholders’ equity …………………

P22,650 122,470 P145,120

BARTON CO. Income Statement for Home Office For Year Ended December 31, 20x4 Sales ……………………………………………………………………………....... Cost of goods sold: Merchandise inventory, January 1 …………………………………. Purchases ………………………………………………………………... Merchandise available for sale ……………………………………… Less shipments to branch ……………………………………………... Merchandise available for own sale ……………………………….. Less merchandise inventory, December 31 ………………………. Cost of Goods Sold ……………………………………………………. Gross Profit ………………………………………………………………………… Expenses …………………………………………………………………………… Net income from own operations …………………………………………….. Deduct branch net loss …………………………………………………………. Total Income ……………………………………………………………………….

P105,000 P 40,120 122,500 P162,620 50,200 P112,420 48,500 63,920 P 41,080 27,630 P 13,450 1,400 P 12,050

BARTON CO. Income Statement for Home Office For Year Ended December 31, 20x4 Sales …………………………………………………………………………………. Cost of goods sold: Merchandise inventory, January 1 ………………………………….. Purchases ………………………………………………………………… Merchandise available for sale ……………………………………… Less merchandise inventory, December 31 ……………………….. Cost of goods sold ……………………………………………………….

P171,000 P 40,120 145,000 P185,120 72,000 113,120

Gross profit ………………………………………………………………………….. Expenses …………………………………………………………………………….. Net Income …………………………………………………………………………. (a) Branch Books: Expenses ………………………………………………………………. Accumulated Depreciation – F&F………………………. Sales …………………………………………………………………… Merchandise Inventory ……………………………………………. Income summary ………………………………………….. Income Summary …………………………………………………… Shipments from Home Office …………………………… Purchases …………………………………………………… Expenses …………………………………………………….. Home Office ………………………………………………………… Income Summary ………………………………………… (b) Home Office Books Expenses ………………………………………………………………. Accumulated Depreciation – F&F……………………….

P 57,880 45,830 P 12,050 650 650 66,000 23,500 89,500 90,900 50,200 22,500 18,200 1,400 1,400 1,180 1,180

Sales …………………………………………………………………… Merchandise Inventory ……………………………………………. Shipments to Branch ……………………………………………….. Income summary …………………………………………..

105,000 48,500 50,200

Income Summary …………………………………………………… Merchandise Inventory …………………………………… Purchases ……………………………………………………. Expenses ……………………………………………………..

190,250

Branch Income ……………………………………………………… Branch ……………………………………………………….

1,400

Income Summary ………………………………………………….. Branch Income ……………………………………………

1,400

Income Summary ………………………………………………….. Retained Earnings ………………………………………..

12,050

203,700 40,120 122,500 27,630 1,400 1,400 12,050

Problem III Journal and Adjusting Entries – Home Office and Branch Home Office Books INTERCOMPANY 1/1 a

Branch Current . . . . . . . Cash . . . . . . . . . . . . . . .

1,500

b

Shipment to branch, cost Branch Current . . . . . .

10,200

/

Branch Books INTER-OFFICE Transactions

1,500

Cash . . . . . . . . . . . . . . . . . . . . . . Home Office Current. . . . . .

1,500

Home Office Current . . . . . . . . Shipments from Home Office

10,200

10,200

1,500 10,200

c

d.

SFF - Branch Store Furniture & Fixt

3,000

Acc. Depreciation – SFF Acc. Deprec. SFF – Br. P3,000 x 10% x 2.5 yrs

750

SFF – Branch . . . . . . . . . . Branch Current . . . . . .

900

Branch Current . . . . . . . Accounts Receivable

2,600

1/1 – 1/31

No entry – eqpt accounts maintained in the HO books

750

No entry – eqpt accounts maintained in the HO books

900

Home Office Current . . . . . . . . Cash . . . . . . . . . . . . . . . . . . .

900 2,600

2,600

Accounts Receivable - HO Home Office Current. . . . . .

900 2,600

Transaction with Outsiders

Accounts Receivable . . . Sales.. . . . . . . . . . . . . . .

34,600

Cash. . . . . . . . . . . . . . . . . . Accounts Receivable

40,000

Purchases . . . . . . . . . . . . Accounts Payable . .

31,600

Accounts Payable . . . . . Cash. . . . . . . . . . . . . . .

36,200

Accrued expenses . . . . . Expenses. . . . . . . . . . . . . . Cash. . . . . . . . . . . . . . .

250 8,950

1/1 – 1/31

3,000

34,600

Accounts Receivable . . . Sales.. . . . . . . . . . . . . . .

6,200

Cash . . . . . . . . . . . . . . . . . . . . . . Accounts Receivable . . . . .

2,600

40,000

Purchases. . . . . . . . . . . . . . . . . . Accounts Payable. . . . . . . .

3,000

31,600 36.200

Accounts Payable . .. . . . . . . . Cash. . . . . . . . . . . . . . .

1,450

Expenses . .. . . . . . . . . . . . . . . . Cash. . . . . . . . . . . . . . .. . . . .

1,250

9,200

6,200 2,600 3,000 1,450 1,250

Intercompany / INTER-OFFICE Transactions

Allowance for D/A. . . . . Branch Current . . . . . .

150

Shipment to branch ,cost Branch Current . . . . . .

1,250

Cash. . . . . . . . . . . . . . . . . Branch Current . . . . . .

1,000

Cash . . . . . . . . . . . . . . . . . . . . . . Accts. Rec. – HO…………….

1,600

Home Office Current . . . . . . . . Accts. Rec. – HO…………….

150

150 1,250

Home Office Current . . . . . . . . Shipments from Home Office

1,250 1,000

1,000

Home Office Current . . . . . . . . Cash. . . . . . . . . . . . . . . . . . .

1,600 150 1,250 1,000

Adjusting Entries a. b. c.

Shipment to branch, cost Branch Current . . . . . .

600

Branch Current . . . . . . .. Expenses. . . . . . . . . . .

475

Expenses. . . . . . . . . . . . . . . . . . . Home Office Current . . . . . .

475

475

600 475

Branch Current.. . . . . . .. 35 Expenses. . . . . . . . . . . . . . . . . . . 35 Acc. Deprec. SFF – Br. 35 Home Office Current . . . . . . 35 P3,000/10 years x 1/12 = P25 (depreciation for one month; Asset life, 10 years); P900 / 7.5 years, remaining life = P120 x 1/12= P10) Expenses. . . . . . . . . . . . . . 100 Acc. Deprec. – SFF [(P15,000 – P3,000)/10 x 1/12]

d. e.

Home Office Current . . . . . . . . Shipments from Home Office

600

600

Included in closing entries Expenses. . . . . . . . . . . . . . Accrued expenses. . .

750

100

750

Expenses. . . . . . . . . . . . . . Accrued expenses. . .

350

350

Closing Entries Sales. . . . . . .. . . . . . . . . . . Merch. inventory, ending Shipments to branch Merch. Inv. , beg……. Purchases. . . . . . . . . . Expenses (9,200 – 250 - 475 + 100 + 750)…..

34,600 44,500 12,050 46,000 31,600 9,325

Sales. . . . . . .. . . . . . . . . . . Merch. inventory, ending (P9,800 + P600) Income Summary. . . . . . . Merch. Inv. , beg……. Purchases. . . . . . . . . . Shipments from HO

6,200 10,400 560 0 3,000

Income Summary……

4,225

Branch Income Summary Branch Current……….

560

Income Summary……….. Branch Income Sum

560

Income Summary……….. Retained Earnings…..

3.665

560

(P10,200 + P1,250 +P600) Expenses (1,250 + 475 + 35 + 350)……………. Home Office Current . . . . . . . . Income Summary . . . . . . . .

12,050 2,110 560 560

560 3,665

EAGLE CO. Balance Sheet for Branch January 31, 20x4 Assets

Liabilities

Cash …………............................ Accounts Receivable ………….. Accts. Rec.-home office ………. Merchandise Inventory ………… Merchandise in Transit …………. Total assets …………………

P 1,100 3,600 850 9,800 600 P15,950

Accounts Payable ………………. P 1,550 Accrued expenses ………………. 350 Home Office ……………………… 14,050 Total Liabilities ……………………. P15,950

EAGLE CO. Income Statement for Branch For Month Ended January 31, 20x4 Sales …………………………………………………………………………………………. Cost of Goods Sold: Merchandise inventory, beginning………………………………..P 0 Add: Purchases ………………………………………………………. 3,000 Shipments from home office (P11,450 +P600, in-transit) 12,050 Merchandise Available for Sale ……………………….. P 15,050 Less: Merchandise inv. Dec 31, 19x4 (P9,800 + P600)…. 10,400 Cost of Goods Sold ……………………………………………………………. Gross Profit ………………………………………………………………………………… Expenses …………………………………………………………………………………… Net Loss, from own operations………………………………………………………… EAGLE CO. Balance Sheet for Home Office January 31, 20x4 Assets Cash …………………………………………………………………… Accounts Receivable ……………………………………………… P34,000 Less allowance for doubtful accounts ……………….. 1,050 Merchandise Inventory ……………………………………………. Store furniture and fixtures ………………………………………… P12,000 Less accumulated depreciation ………………………. 3,950

P 6,200

4,650 P 1,550 2,110 P 560

P 9,100 32,950 44,500 8,050

Store furniture and fixtures-branch ……………………………… P 3,900 Less accumulated depreciation ……………………… 785 Branch office ………………………………………………………... Total Assets ……………………………………………………………

3,315 14,050 P111,765

Liabilities Accounts Payable …………………………………………….. P29,150 Accrued Expenses …………………………………………….. 750 Total Liabilities ………………………………………………….. Stockholders’ Equity Capital Stock …………………………………………………… P50,000 Retained earnings …………………………………………….. 31,865 Total stockholder’s equity …………………………………… Total liabilities and stockholders’ equity ……………………

P29,900

81,865 P111,765

EAGLE CO. Income Statement for Home Office For Month Ended January 31, 20x4 Sales ……………………………………………………………………………… Cost of goods sold: Merchandise inventory, January 1 …………………….. P46,000 Purchases …………………………………………………… 31,600 Merchandise available for sale ………………………… 77,600 Less shipments to branch ………………………………… 12,050 Merchandise available for own sales …………………. P65,550 Less merchandise inventory, January 31 ……………… 44,500 Cost of goods sold …………………………………………………………… Gross Profit ………………………………………………………………………… Expenses …………………………………………………………………………… Net income from own operations ……………………………………………. Deduct branch net loss ………………………………………………………… Total Income ……………………………………………………………………

P 34,600

21,050 P 13,650 9,325 P 4,225 560 P 3,665

EAGLE CO. Income Statement for Home Office For Month Ended January 31, 20x4 Assets Liabilities’ and Stockholders’ Equity Liabilities Cash …………………………….. ………. P 10,200 Accounts Payable …… P30,700 Accounts receivable ……….. P38,450 Accrued Expenses …… 1,100 P 31,800 Less allow for doubtFul accounts ……….. 1,050 37,400 Merchandise Inventory ……………….. 54,900 Stockholders Equity Store furn. & fixtures ………… P15,900 Capital Stocks …………P50,000 Less accum depr 4,735 11,165 Retained earnings …… 31,865 81,865 Total assets ……………………………… P113,665 Total liab. And stockholders’ equity . P113,665 EAGLE CO. Combined Income Statement for Home Office and Branch

For Month Ended January 31, 20x4 Sales ………………………………………………………………………………….. Cost of goods sold: Merchandise Inventory, January 1 ………………. P46,000 Purchases ……………………………………………... 34,600 Merchandise available for sale …………………... P80,600 Less merchandise inventory, Jan 31 ……………... 54,900 Cost of goods sold …………………………………............................... Gross profit …………………………………………………………………………... Expenses ……………………………………………………………………………… Net Income ………………………………………………………………………….. EAGLE CO. Combined Balance Sheet January 31, 20x4 Assets Cash …………………………………………………………………… Accounts Receivable ……………………………………………… Less: Allowance for doubtful accounts ………………………… Merchandise Inventory ……………………………………………. Store furniture and fixtures ………………………………………… Less: Accumulated depreciation ……………………………….. Total Assets …………………………………………………………… Liabilities Accounts Payable …………………………………………….. Accrued Expenses …………………………………………….. Total Liabilities ………………………………………………….. Stockholders’ Equity Capital Stock …………………………………………………… Retained earnings …………………………………………….. Total stockholder’s equity …………………………………… Total liabilities and stockholders’ equity ……………………

P 40,800

25,700 P 15,100 11,435 P 3,665

P 10,200 P38,450 1,050 P15,900 4,735

37,400 54,900 _ 11,165 P113,665

P30,700 1,100 P 31,800

P50,000 31,865 81,865 P113,665

Problem IV 1. Socrates Company Home Office and Plato Branch Reconciliation of Reciprocal Ledger Accounts June 30, 20x4 Investment in Plato Branch Ledger Account (Debit) Balances prior to adjustment P85,000 Add: Merchandise shipped to branch Less: Acquisition of office equipment by branch (carried in accounting records of home office) (14,500)

Home Office Ledger Account (Credit) P33,500 24,000

Collection of branch trade accounts receivable Payment of cash by branch Adjusted balances 2.

(a)

Accounting records of home office: Office Equipment: Plato Branch Investment in Plato Branch To record acquisition of office equipment by branch. Cash in Transit Investment in Plato Branch To record cash in transit from branch.

(b)

(9,000) _______ P48,500

(22,000) P48,500 14,500

14,500 22,000 22,000

Accounting records of branch: Home Office 9,000 Trade Accounts Receivable To record collection by home office of branch accounts receivable. Inventories in Transit Home Office To record shipment of merchandise in transit from home office.

Problem V ((a) Balances before Adjustments ……………………………………….. Adjustments: Additions: Merchandise in transit to branch …………………. Collection of Home office receivable by Branch Understatement of branch net income for Nov.. Deductions: Merchandise return to home office in transit ……………. Corrected Balances ………………………………………………

9,000

24,000 24,000

BRANCH ACCOUNT P 8,400

HOME OFFICE ACCOUNT… P 9,735 615

2,500 90 P10,990

P10,350

640 P10,350

P10,350

(b) Branch Books: Shipments from Home Office-in Transit ……………………. Home Office …………………………………………...

615

Home Office Books: Branch …………………………………………………………… Accounts Receivable ………………………………..

2,500

615

2,500

Branch …………………………………………………………… Retained Earnings …………………………………….

90

Merchandise Returns from Branch – in Transit ……………. Branch …………………………………………………..

640

90 640

Problem VI

1. Balances before adjustments Adjustments: Additions: Advertising charged to branch but not yet recorded on branch books Merchandise in transit to branch but not yet shown on branch books Collection of home office account by branch not yet recorded by home office Deductions: Overstatement of branch profit for 20x0 on home office books Cash in transit to home office but not yet shown on home office books Overstatement of charge for merchandise from home office on branch books (home office shipped 200 units @ P37.85, or P7,570, and 200 units @ P44,95, or P8,990, a total of P16,560; branch erroneously recorded shipment at P16,650, an overstatement of P90 Corrected balances 2. Home office books: Jan. 31 Retained Earnings Wilshire Branch 31

31

Cash in Transit Wilshire Branch Wilshire Branch Accounts Receivable

Branch Books: Jan. 31 Advertising Expense Home Office 31

31

Problem VII

1.

Shipments from Home Office – In Transit Home Office Home Office Shipments from Home Office

Branch Account P 77,150

Home office Account P 56,450

600 4,400 ____750 P77,900

_______ P61,450

540 16,000

_______ P 61360

___90 P 61,360

540 540 16,000 16,000 750 750

600 600 4,400 4,400 90 90

Balances before adjustments Adjustments: Additions: Corrected branch income for January (P1,440 – P215)

Branch Account P 59,365

Home Office Account P 57,525

1,225 Understatement of branch paid by home office for December Expenses of branch paid by home office Deductions: Collection by home office of branch receivable Correction of branch income for January Merchandise transferred to Brentwood branch but incorrectly charged by Beverly Hills branch Merchandise returns to home office in transit Uncollectible accounts of branch Corrected Balances

310 _______ P 60,900

____215 P 57,740 65 215

1,400 840 __1,200 P 57,460

_______ P 57,460

2. (a) Entries to bring branch books up to date: Correction in Income of Prior Periods Home Office

215

Home Office Income Summary

215

Home Office Accounts Receivable (b) Entries to bring home office books up to date: Beverly Hills Branch Beverly Hills Branch Income Beverly Hills Branch Retained Earnings

215

215 65 65

1,225 1,225 310 310

Shipments to Beverly Hills Branch Beverly Hills Branch

1,400

Brentwood Branch Shipments to Brentwood Branch

1,400

Merchandise Returns from Branch – In Transit – Beverly Hills Branch Beverly Hills Branch Allowance for Doubtful Accounts – Beverly Hills Branch Beverly Hills Branch

1,400

1,400

840 840 1,200 1,200

Problem VIII 1. (b) Mdse. allowance by home office (f) Truck repairs charged by home office

Net credit Total

(a) Purchase of office furniture for branch (c) Branch charge for interest (d) Branch charge for labor (e) Branch charge for freight

Home Office (a) Charge for office furniture 350.00 by home office (d) Charge for labor by home 293.00 office (e) Charge for freight by home office (h) Proceeds from sale of truck 643.00 1,556.50 1,229.50 Branch (b) Mdse. allowance for 870.00 branch 325.00 (g) Proceeds from sale of truck 433.00 _785.00 2,413.00 _______ Net Debit Total 2,413.00

Balance in branch account per home office book, September 30, 20x2 Deduct net debit total per home office books for transactions that involve discrepancies Add net credit total per branch books for transaction that involve discrepancies Balance in home office account per branch books, September 30, 20x2

780.00 866.00 78.50 475.00 2,199.50 _______ 2,199.50

300.00 475.00

______ 775.00 1,638,000 _2,413.00 P 131,690.00 1,638.00 P 130,052.00 __1,556.50 P 131,608.50

2. Balance in home office account per branch books, September 30, 20x2 Add: (a) Failure by branch to take up full furniture charges (b) Recognition by branch of excess merchandise allowance (c) Failure by branch to recognize charge by home office for interest (e) Failure by branch to recognize full freight charges (f) Truck repairs charge to home office account in error Deduct: (d) Recognition by branch of excess labor charges (h) Credit entry to home office made in error on sale of truck

P 131,608.50 P 90.00 50.00 325 706.50 293.00

___1,464.50 P 133,073.00

433.00 __475.00

___908.00

Corrected interoffice balance, September 30, 20x2

P 132,265.00

3. Balance in branch account per home office books, September 30, 20x2 Add credit to branch account made in error for proceeds from sale of truck Corrected interoffice balance, September 30, 20x2

P 131,690.00 _____475.00 P 132,265.00

4. Office Furniture Merchandise allowances Home office interest charges payable Interest expense Freight In Repairs on truck Labor Trucks Home Office

90.00 50.00 250.00 75.00 706.50 293.00 433.00 475.00 556.50

Multiple Choice Problem 1. d Branch A Assets: Inventory, January 1 Imprest branch fund Accounts receivable, January 1 Total Assets Less: Liabilities Home Office Current Account

P 21,000 2,000 55,000 P 78,000 -0P 78,000

Branch B P 19,000 1,500 43,500 P 64,000 -0P 64,000

2. b Branch A Assets: Inventory, December 31 Imprest branch fund Accounts receivable, December 31 Total Assets Less: Liabilities Home Office Current Account

P 19,000 2,000 70,000 P 91,000 -0P 91,000

Branch B P 12,000 1,500 53,500 P 67,000 -0P 67,000

3. d – incidentally, the entry in the books of the branch would be as follows: Profit and loss summary ………………………………………………………… xxx Home Office Current……………………………………………………. Xxx 4. c January 1,20x4 Assets: Inventory Petty cash fund Accounts receivable Total Assets Less: Liabilities Home Office Current Account

P 37,000 3,000 43,000 P 83,000 _____-0P 83,000

January 1, 20x5 P 41,000 3,000 49,000 P 93,000 _____-0P 93,000

5. a – refer to No. 4 for computations 6. a Sales Less: Cost of goods sold: SFHO…………………………………………………………… Less: Inventory, ending……………………………………… Gross profit…………………………………………………………… Less: Expenses – Net Loss………………………………………………………………..

P 74,000 P67,680 9,180

58,500 P 15,500 6,820 P 8,680

7. a January 1, 20x6 Assets: Cash Inventory Accounts receivable Total Assets Less: Liabilities Home Office Current Account

P 4,200 9,180 12,800 P 26,180 _____-0P 26,180

8. a – nominal accounts have zero beginning balance. 9. d Branch Current

H. Office Current

Unadjusted balance, 6/30/20x4 P 225,770 P 226,485* Add (Deduct): Adjustments 1 Erroneous recording of branch equipment 3150 2. Insurance premium recorded twice ( 675) 3. Erroneous recording of freight ( 90) 4. Discount on merchandise ( 800) 5. Failure by the branch to record share in advertising 700 6. error by the home office to record remittance of Cebu 3,000 ________ Adjusted balance, 6/30/20x4 P 228,770 P 228,770 * The P226,485 is compute simply by working back with P228,770 adjusted balance as the starting point.

10. c

Unadjusted balance Add (deduct) adjustments: In transit Remittance Returns Cash in transit Expenses - HO Expenses – branch Error Adjusted balance 11. d

Home Office Books (Branch CurrentDr. balance) P518,575

Branch Books (Home Office Current – Cr. balance) P452,276 10,500

( 17,000) ( 775) 25,000 (

800)

________ P 500,000

12,000 _____224 P 500,000

Unadjusted balance Add (deduct) adjustments: Excess freight Cash in transit Returns Expenses – branch Adjusted balance

Home Office Books (Branch CurrentDr. balance) P515,000

Branch Books (Home Office Current – Cr. balance) P495,750 (

750)

( 11,000) ( 4,000) ________

5,000

P 500,000

P 500,000

12. c – refer to No. 11 for computations 13. a – refer to No. 11 for computations 14. d – refer to No. 11 for computations 15. d - No entry should be made in the books of the home office, since the freight should chargeable to the branch and the payment of the freight was made by the branch. 16. a Home Office Books Branch Books (Branch Current(Home Office Current – Dr. balance) Cr. balance) Unadjusted balance P85,000 P33,500 Add (deduct) adjustments: Collection of branch receiv ( 9,000) Shipments in transit 24,000 Purchase by branch of office equipment ( 14,500) Remittance ( 22,000) _________ Adjusted balance P 48,500 P 48,500 17. b

Unadjusted balance Add (deduct) adjustments: Remittance Returns Error by the branch Expenses – branch Adjusted balance

Home Office Books (Branch CurrentDr. balance) P590,000

Branch Books (Home Office Current – Cr. balance) P506,700

(40,000) (15,000) ________

300 28,000

P 535,000

P 535,000

Home Office Books (Branch CurrentDr. balance) P150,000

Branch Books (Home Office Current – Cr. balance) P117,420

18. c

Unadjusted balance Add (deduct) adjustments: In transit HO A/R collected by br. Supplies returned

37,500 10,500 ( 4,500)

be

Error in recording Br. NI Cash sent to branch to General Expense by HO Adjusted balance

( 1,080) 25,000 P 179,920

25,000 P 179,920

Home Office Books (Branch Current- Dr. balance) P40,000

Branch Books (Home Office Current – Cr. balance) P31,100

19. d – refer to No. 18 for computation. 20. a

Unadjusted balance Add (deduct) adjustments: In transit HO A/R collected by br. Cash in transit Error in recording Br. NI Adjusted balance

5,800 500 2,000 ( 3,600) P38,900

2,000 _______ P38,900

Home Office Books (Branch Current- Dr. balance) P49,600

Branch Books (Home Office Current – Cr. balance) P44,00

21. a – refer to No. 20 for computations 22. a

Unadjusted balance Add (deduct) adjustments: Collection of branch A/R In transit Purchase of furniture Return of excess merchandise Remittance Adjusted balance

( ( 1,200) ( 1,500) ( 500) P46,400

800) 3,200

_______ P46,400

23. b – refer to No. 22 for computations 24. (C) Sales (P350,000 + P100,000)………………………………………………………….P 450,000 Less: Cost of goods sold: Purchases (P400,000 + P50,000)……………………………. P 450,000 Less: Inventory, ending……………………………………… 90,000 360,000 Gross profit…………………………………………………………… P 90,000 Less: Expenses – Salaries and commission…………………………………….. P 70,000 Rent……………………………………………………………… 20,000 Advertising supplies (P10,000 – P6,000)…………………… 4,000 Other expenses………………………………………………. 5,000 99,000 Net Loss……………………………………………………………….. P ( 9,000) 25. a In adopting the imprest system for the agency working fund, the home office writes a check to the agency for the amount of the fund. Establishment of the fund is recorded on the home office books

by a debit to the Agency working fund and credit cash. The agency will request fund replenishment whenever the fund runs low and at the end of each fiscal period. Such a request is normally accomplished by an itemized and authenticated statement of disbursements and the paid vouchers. Upon sending the agency a check in replenishment of the fund, the home office debits expense or other accounts for which disbursements from the fund were reported and credits cash. 26. d Normally, transactions of the agency are recorded in the books of the home office separately identified with the appropriate agency.

Theories 1. 2. 3. 4. 5. 6. 7. 8. 9. 10,

decentralized Home Office Current Branch Income Home Office intracompany True True False False True

11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

False False False True True False True False True True

21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

False True True True False C A A D A

31. 32. 33. 34. 35. 36. 37. 38. 39. 40.

E B c d A C A B B B

41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52.

A C B D D C B B C C C D