Chap008

CHAPTER 8 SUGGESTED ANSWERS EXERCISES Exercise 8 - 1 (a) (b) (c) (d) (e) (f)

Working Fund - Agency Cash

5,000 5,000

Accounts Receivable - Agency Sales - Agency

50,000

Cash Accounts Receivable - Agency

35,000

50,000 35,000

Expenses - Agency Cash

4,500

Expenses - Agency Cash

2,250

Cost of Sales - Agency Shipments to Agency

4,500 2,250 36,000 36,000

Exercise 8- 2 (a)

(b) (c) (d)

(e)

(f) (g)

Working Fund - Makati Agency Samples - Makati Agency Cash Shipments to Makati Agency

10,000 60,000 10,000 60,000

Accounts Receivable - Makati Agency Sales - Makati Agency

200,000

Cost of Sales - Makati Agency Shipments to Makati Agency

116,000

200,000 116,000

Salaries and Commission - Makati Agency Furniture and Fixtures - Makati Agency Cash

20,000 45,000

Delivery Expense - Makati Agency Office Supplies Expense - Makati Agency Cash

6,200 1,000

Samples Expense - Makati Agency Samples - Makati Agency Office Supplies - Makati Agency

65,000

7,200 25,000 25,000 300

AA1- Chapter 8 (2008 edition)

page 2

Office Supplies Expense (h) (I)

(j)

300

Depreciation Expense - Makati Agency Accumulated Depr. - Furniture & Fixtures Sales - Makati Agency Agency Income Cost of Sales - Makati Agency Salaries and Commission - Makati Agency Delivery Expense - Makati Agency Samples Expense - Makati Agency Office Supplies Expense - Makati Agency Depreciation Expense - Makati Agency Agency Income Income Summary

1,250 1,250 200,000 30,850 116,000 20,000 6,200 25,000 700 1,250 30,850 30,850

Exercise 8-3 Home Office Books (a) (b) (c) (d) (e) (f) (g) (h)

Cash Iloilo Branch

20,000 20,000

Iloilo Branch Cash

3,500

Expenses Iloilo Branch

1,200

3,500 1,200

Iloilo Branch Shipments to Iloilo Branch

32,000

Shipments to Iloilo Branch Iloilo Branch

15,000

32,000 15,000

Furniture and Fixtures Cash

5,500 5,500

Iloilo Branch Accumulated Depr. - Furniture & Fixtures Branch Income Branch

550 550 2,600 2,600

Branch Office Books

AA1- Chapter 8 (2008 edition)

(a)

Home Office

page 3

20,000

AA1- Chapter 8 (2008 edition)

page 4

Cash (b) (c) (d) (e)

Expenses Home office

3,500

Home Office Cash

1,200

3,500 1,200

Shipments from Home Office Home Office

32,000

Home Office Shipments from Home Office

15,000

(f)

Memo entry

(g)

Depreciation Expense Home Office

(h)

20,000

32,000 15,000

550 550

Home Office Income Summary

2,600 2,600

Exercise 8-4 Home Office Books (a) (1) (5)

Dagupan Branch Shipments to Branch

300,000

Cash Dagupan Branch

150,000

300,000 150,000 Branch Office Books

(1) (2) (3)

(4)

(5)

Shipments from Home Office Home Office

300,000

Accounts Receivable Sales

390,000

Expenses Cash Accrued Expenses

74,000

300,000 390,000 72,000 2,000

Cash Sales Discount Accounts Receivable

288,000 6,000

Home Office Cash

150,000

294,000 150,000

AA1- Chapter 8 (2008 edition)

(6) (7)

page 5

Furniture and Fixtures Cash

40,000 40,000

Expenses Accumulated Depr. - Furniture & Fixtures

8,000 8,000

(b) Merchandise Inventory Sales Shipments from Home Office Expenses Sales Discounts Income Summary

60,000 390,000 300,000 82,000 6,000 62,000

Income Summary Home Office

62,000 62,000

(c) Honda Sales, Inc. Statement of Recognized Income and Expenses - Branch For the Year Ended December 31,2008 Sales Less: Sales Discount Cost of sales: Shipment to Home Office Less: Inventory, end 240,000 Gross Profit Expenses 82,000 Net Profit (d)

P 390,000 6,000

P384,000

P 300,000 60,000 P 144,000 P 62,000 Honda Sales, Inc. Statement of Financial Position - Branch December 31,2008 Assets

Cash (-720,00 + 288,000 - 150,000 - 40,000) Accounts Receivable (390,000 – 294,000) Merchandise Inventory Furniture and Fixture Less: Accumulated Depreciation Total Assets

P 26,000 96,000 60,000 P

40,000 8,000

32,000 P 214,000

Liabilities Accrued Expenses Home Office (300,000 - 150,000 + 62,000) Total Liabilities 214,000

P P

2,000 212,000

AA1- Chapter 8 (2008 edition)

page 6

Exercise 8- 5 Home Office Books (a) (b) (c) (d)

(a) (b) (c) (d)

Furniture and Fixtures Branch

24,500

Branch Cash

24,500

24,500 24,500

Branch Accumulated Depr. - Furniture & Fixtures Furniture & Fixtures - new Accumulated Depr. - Furniture & Fixtures Branch Income Furniture & Fixtures - old Cash Branch Office Books

2,450 2,450 40,000 2,450 7,050 24,500 25,000

Home Office Accounts Payable

24,500

Accounts Payable Home Office

24,500

Depreciation Expense Home Office

24,500 24,500 2,450 2,450

Memo entry

Exercise 8-6 Jan.

10 10 16

16 20 25

Notes Payable Home Office Furniture and Fixtures Home Office

2,500 2,500 10,000 10,000

Shipments from Home Office Home Office

6,500

Home Office Cash

2,000

Home Office Shipments from Home Office

1,200

Home Office Accounts Receivable

6,500

2,000 1,200 150 150

AA1- Chapter 8 (2008 edition)

30 31

page 7

Expenses Home office

800

Home Office Income Summary

750

800 750

Exercise 8 -7 Honda Company Reconciliation of Home Office and Branch Accounts December 31,2008 HO Books Unadjusted balances Adjustments; (a) Merchandise in transit (b) Collection of home office accounts rec’l (c) Error in recording the net income of branch (P1,215 - P1,125) (d) Merchandise returned by branch still in transit Adjusted balances

Branch Books HO Acct. P 9,735

Branch Acct. P 8,400

615 2,500 90 ( 640) P 10,350

_______ P 10,350

Requirement 2 Home Office Books (b) (c) (d)

Branch Accounts Receivable

2,500 2,500

Branch Branch Income

90 90

Shipments to Branch Branch

640 640 Branch Books

(a)

Shipments from Home Office Home Office Exercise 8-8

615 615 Home Office Books

(a) (b) (c)

Allowance for Doubtful Accounts Makati Branch

600 600

Makati Branch General and Administrative Expense

1,250

Manila Branch Makati Branch

1,200

1,250 1,200

AA1- Chapter 8 (2008 edition)

(d)

page 8

Makati Branch Allowance for Uncollectible Accounts

850 850

Branch Books (a) (b)

Home Office Accounts Receivable

600 600

General and Administrative Expenses Home Office

(c)

No entry

(d)

Uncollectible Accounts Expense Home office

1,250 1,250

850 850

PROBLEMS Problem 8-1 (a)

(b) (c)

(d)

(e)

(f)

Samples - Cebu Agency Advertising Materials - Cebu Agency Shipments to Cebu Agency Advertising Materials

60,000 35,000

Working Fund - Cebu Agency Cash

30,000

60,000 35,000 30,000

Accounts Receivable - Cebu Agency Sales - Cebu Agency

330,000

Cost of Sales - Cebu Agency Shipments to Cebu Agency

250,000

Cash Sales Discounts - Cebu Agency Accounts Receivable - Cebu Agency

245,000 5,000

330,000 250,000

250,000

Rent Expense - Cebu Agency Delivery Expense - Cebu Agency Repairs and Maintenance - Cebu Agency Cash

15,000 3,000 2,200

Salaries and Wages - Cebu Agency Commission Expense - Cebu Agency Salaries and Wages Commission Expense

10,200 33,000

20,200

10,200 33,000

AA1- Chapter 8 (2008 edition)

(g) (g) (h)

(I)

page 9

Samples Expense - Cebu Agency Samples - Cebu Agency

15,000

Advertising Materials Expense - Cebu Agency Advertising Materials - Cebu Agency

10,500

15,000

Sales - Cebu Agency Agency Income Cost of Sales - Cebu Agency Sales Discounts - Cebu Agency Rent Expense - Cebu Agency Delivery Expense - Cebu Agency Repairs and Maintenance - Cebu Agency Salaries and Wages - Cebu Agency Commission Expense - Cebu Agency Samples Expense - Cebu Agency Advertising Materials Expense - Cebu Agency Income Summary Agency Income

10,500 330,000 13,900 250,000 5,000 15,000 3,000 2,200 10,200 33,000 15,000 10,500 13,900 13,900

Problem 8- 2 Home Office Books (a) (b)

Branch Cash

No entry

(d)

Branch Cash Equipment Gain on Transfer of Equipment No entry

(f)

150,000

Branch Shipments to Branch

(c)

(e)

150,000 90,000 90,000

90,000 3,000 75,000 12,000

Expenses Cash

(g)

and (h) no entry

(I)

Cash Branch

7,500 7,500

52,500 52,500 Branch Books

(a)

Cash Home Office

150,000 150,000

AA1- Chapter 8 (2008 edition)

(b) (c) (d) (e)

Shipments from Home Office Home Office Purchases Cash Equipment Home Office

page 10

90,000 90,000 120,000 120,000 90,000 90,000

Accounts Receivable Sales

250,000

Cash Accounts Receivable

100,000

250,000 100,000

(f)

No entry

(g)

Depreciation Expense - Equipment Accumulated Depr. - Equipment

9,000

Selling and Administrative Expenses Cash

45,000

Home Office Cash

52,500

(h) (I)

9,000 45,000 52,500

Problem 8-3 Requirement 1 a. b. c. d. e. f. g.

Accounts Receivable Sales

80,000

Purchases Accounts Payable

21,000

Shipments from Home Office Home office

40,000

Cash Accounts Receivable

76,000

Accounts Payable Cash

20,200

Allowance for Uncollectible Accounts Accounts Receivable Home Office Cash

80,000 21,000 40,000 76,000 20,200 1,200 1,200 30,000 30,000

AA1- Chapter 8 (2008 edition)

h. I. j.

k.

l.

page 11

Expenses Cash

24,800 24,800

Expenses Home Office

1,600

Prepaid Expenses Accrued Expenses Expenses Allowance for Doubtful Accounts Accumulated Depreciation

200 400 1,700

1,600

Merchandise Inventory, end Sales Income Summary Merchandise Inventory, beg. Shipments from Home Office Purchases Expenses Home Office Income Summary

1,100 1,200 38,800 80,000 3,300 33,000 40,000 21,000 28,100 3,300 3,300

Requirement 2 Volvo Company Statement of Recognized Income and Expenses - Branch For the Year Ended December 31, 2008 Sales Cost of goods sold: Inventory, January 1 Purchases Shipments from home office Cost of goods available for sale Less Inventory, December 31 Gross profit Operating expenses Net loss Volvo Company Statement of Financial Position - Branch December 31, 2008

P80,000 P33,000 21,000 40,000 P94,000 38,800

55,200 P24,800 28,100 P 3,300

AA1- Chapter 8 (2008 edition)

page 12

Assets Cash (7,000 + 76,000 + 20,200 - 30,000 - 24,800) Accounts Receivable (24,400 + 80,000 - 76,000 -1,200) Less Allowance for Uncollectible Accounts Merchandise Inventory Prepaid Expenses Furniture and Fixtures Less Accumulated Depreciation Total Assets Liabilities

P 8,000 P27,200 1,600 P 7,700 6,600

Accounts Payable (4,000 + 21,000 - 20,200) Accrued Expenses Home Office (60,500 + 40,000 - 30,000 + 1,600 - 3,300) Total Liabilities

25,600 38,800 900 1,100 P74,400 P 4,800 800 68,800 P74,400

Volvo Company Statement of Changes in Home Office Account For the Year Ended December 31, 2008 Home office account balance, January 1 Add: Shipments from home office Expenses paid by home office Total Deduct: Remittance to home office Net loss Home office account balance, December 31 Requirement 3 c. g. i.

P 60,500 P 40,000 1,600 P 30,000 3,300

Davao Branch Shipments to Branch

40,000

Cash Davao Branch

30,000 30,000

Davao Branch Cash

1,600 1,600 3,300 3,300

Problem 8-4 Requirement 1 Branch Books Cash Shipments from Home Office Accounts Receivable

33,300 P 68,800

40,000

Branch Income Davao Branch

a.

41,600 P102,100

15,000 102,000 26,000

AA1- Chapter 8 (2008 edition)

page 13

Home Office

143,000

Home Office Cash b. c. d. e. f. g.

h. I.

9,000 9,000

Accounts Receivable Sales

62,000

Cash Accounts Receivable

26,000

Purchases Accounts Payable

30,000

Accounts Payable Cash

14,500

Expenses Cash

12,500

Cash Home Office Accounts Receivable

16,000 1,500

Shipments from Home Office Home Office

12,500

Home Office Cash

10,000

62,000 26,000 30,000 14,500 12,500

17,500 12,500 10,000 Home Office Books

a.

Bacolod Branch Cash Shipments to Branch Accounts Receivable Store Furniture and Fixtures Bacolod Branch

b. c. d. e.

143,000 15,000 102,000 26,000 9,000 9,000

Accounts Receivable Sales

346,000

Cash Accounts Receivable

400,000

Purchases Accounts Payable

316,000

Accounts Payable

362,000

346,000 400,000 316,000

AA1- Chapter 8 (2008 edition)

page 14

Cash f.

g. h. I.

362,000

Expenses Accrued Expenses Cash

89,500 2,500 92,000

Allowance for Uncollectible Accounts Bacolod Branch

1,500 1,500

Bacolod Branch Shipments to Branch

12,500

Cash Bacolod Branch

10,000

12,500 10,000

Requirement 2 Jazz Company Statement of Recognized Income and Expenses - Bacolod Branch For the Month Ended January 31, 2008 Sales Cost of goods Sold: Shipments from Home Office (102,000 + 12,500 + 6,000) Purchases Cost of Goods Available for Sale Less Merchandise Inventory, December 31 (9,800 + 600) Gross Profit Expenses (12,500 + 4,750 + 350+ 3,500) Net Loss

P 62,000 P120,500 30,000 P150,500 104,000

46,500 P 15,500 21,100 P 5,600

Jazz Company Statement of Financial Position - Bacolod Branch January 31, 2008 Assets Cash (15,000 - 9,000 + 26,000 - 14,500 - 12,500 + 16,000 - 10,000) Accounts Receivable (62,000 + 26,000 - 26,000 – 17,500) Merchandise Inventory (98,000 + 6,000) Total Assets Liabilities Accounts Payable (30,000 - 14,500) Accrued Expenses

P 11,000 44,500 104,000 P159,500 P 15,500 3,500

AA1- Chapter 8 (2008 edition)

page 15

Home Office (143,000-9,000-1,500+12,500-10,000+6,000+4,750+350 -5,600) Total Liabilities

140,500 P159,500

Jazz Company Statement of Recognized Income and Expenses - Home Office For the Month Ended January 31, 2008 Sales Cost of Goods Sold: Merchandise Inventory, January 1 Purchases Cost of Goods Available for Sale Less Shipments to Branch (102,000 + 12,500 + 6,000) Cost of Goods Available for Own Sale Less Merchandise Inventory, December 31 Gross Profit Expenses (89,500 - 4,750 + 1,000 + 7,500) Net Income from Own Operations Less Branch Net Loss Net profit Income Tax Net Profit

P346,000 P460,000 316,000 P776,000 120,500 P655,500 445,000

210,500 P135,500 93,250 P 42,250 5,600 P 36,650 12,828 P23,822

Jazz Company Statement of Financial Position - Home Office January 31, 2008 Assets Cash (150,000 - 15,000 + 400,000 – 362,000 - 92,000 + 10,000) Accounts Receivable (420,000 - 26,000 + 346,000 - 400,000) Less Allowance for Uncollectible Accounts (12,000 - 1,500) Merchandise Inventory Branch (143,000 - 9,000 - 1,500 + 12,500 - 10,000 + 6,000 + 4,750+ 350 - 5,600) Store Furniture and Fixtures (150,000 + 9,000) Less Accumulated Depreciation (46,000 + 1,350) Total Assets

P 91,000 P340,000 10,500

329,500 445,000 140,500

P159,000 47,350

111,650 P1,117,650

Liabilities and Shareholders’ Equity Accounts Payable (337,500 + 316,000 - 362,000) Accrued Expenses Income Tax Payable Ordinary Share Capital (282,000 + 36,650) Retained Earnings (282,000 + 23,822 Total Liabilities and Shareholders’ Equity

P 291,500 7,500 12,828 500,000 305,822 P1,117,650

Requirement 3 Jazz Company Combined Statement of Recognized Income and Expenses for Home Office and Branch For the Month Ended January 31, 2008

AA1- Chapter 8 (2008 edition)

page 16

Sales Cost of Goods Sold: Merchandise Inventory, January 1 Purchases Cost of Goods Available for Sale Less Merchandise Inventory, December 31 Gross Profit Expenses Net Profit Income Tax Net profit

P408,000 P460,000 346,000 P806,000 549,000

257,000 P151,000 114,350 P 36,650 12,828 P 23,822

Jazz Company Combined Statement of Financial Position for Home Office and Branch January 31, 2008 Assets Cash Accounts Receivable Less Allowance for Uncollectible Accounts Merchandise Inventory Store Furniture and Fixtures Less Accumulated Depreciation Total Assets

P 102,000 P384,500 10,500 P159,000 47,350

374,000 549,000 111,650 P1,136,650

Liabilities and Shareholders’ Equity Accounts Payable Accrued Expenses Income Tax Payable Ordinary Share Capital Retained Earnings Total Liabilities and Shareholders’ Equity

P 307,000 11,000 12,828 500,000 305,822 P1,136,650

Requirement 4 Branch Books a. b.

Shipments from Home Office Home Office

6,000

Expenses

4,750

6,000

AA1- Chapter 8 (2008 edition)

page 17

Home Office c.

d. e.

4,750

Expenses Home Office P22,500 + P9,000 = P31,500/7.5 yrs x 1/12 Expenses Accrued Expenses

350 350 3,500 3,500

Sales Merchandise Inventory, end Income Summary Shipments from Home Office

62,000 104,000 5,600 120,500 30,000 21,100

Purchases Expenses f.

Home Office Income Summary

5,600 5,600 Home Office Books

a. b. c.

d. e. f.

Bacolod Branch Shipments to Branch

6,000

Bacolod Branch Expenses

4,750

Expenses Bacolod Branch Accumulated Depreciation ( 150,000 - 30,000 = 120,000 x 10% x 1/12 = 1,000 ) Expenses Accrued Expenses

1,000 350

Branch Income Bacolod Branch

5,600

Sales Shipments to Branch Merchandise Inventory, end Income Summary Merchandise Inventory, beg. Purchases Expenses Branch Income

6,000 4,750

1,350 7,500 7,500 5,600 346,000 120,500 445,000 36,650 460,000 316,000 93,250 5,600

Income Tax Income Tax Payable

12,828

Income Summary

12,828

12,828

AA1- Chapter 8 (2008 edition)

page 18

Income Tax g.

12,828

Income Summary Retained Earnings

23,822 23,822

Problem 8-5 Requirement 1 Feroza Company Working Paper for Combined Financial Statement For the Year Ended December 31,2008

Debits Cash NR AR Inventories F&E Branch Cur. CGS OE Credits AP CS HO Cur. RE Sales

HO 63,000 10,500 120,600 143,700 72,150 124,050

BR 21,900

300,750 104,250 939,000

128,700 32,850 275,700

Adjustments Eliminations Dr. Cr.

Combined Income Statement Dr. Cr.

55,950 36,300 a.124,050 429,450 137,100

61,500 300,000

61,500 300,000 124,050

37,500 540,000 939,000

Net Profit

a.124,050 37,500

151,650 275,700

124,050

124,050

566,550 125,100 691,650

691,650 691,650 691,650

Requirement 2 a.

Combined Balance Sheet Dr. Cr. 84,900 10,500 176,550 180,000 72,150

Sales Income Summary

151,650 9,900

524,100

125,100 524,100

AA1- Chapter 8 (2008 edition)

page 19

Cost of Goods Sold Operating Expenses b.

128,700 32,850

Home Office Income Summary

9,900 9,900

Requirement 3 a. b.

Branch Income Branch

9,900

Income Summary Branch Income

9,900

9,900 9,900

Problem 8-6 Requirement 1 Isuzu Company Reconciliation of Home Office and Branch Accounts January 31, 2008

Unadjusted balances Add (deduct); Advertising expense charged to branch Merchandise shipment in transit Merchandise shipment for P16,560 recorded as P16,650 Collection of home office account Understatement of 1994 depreciation Remittance to home office in transit Adjusted balances

Home Office Books Branch Acct. P77,150

Branch Books Home Office Acct. P56,450 600 4,400 (

750 ( 540) (16,000) P61,360

90)

_______ P61,360

Requirement 2 Home Office Books a.

Cash Retained Earnings Accounts Receivable Iloilo Branch

16,000 540 750 15,790 Branch Books

a.

Advertising Expense Shipments from Home Office Home Office

600 4,310 4,910

AA1- Chapter 8 (2008 edition)

page 20

Problem 8-7 Requirement 1 a.

b.

c.

Shipments from Home Office Operating Expenses Home Office Current

57,600 8,100 65,700

Sales Merchandise Inventory, end Income Summary Merchandise Inventory, beg. Shipments from Home Office Operating Expenses

778,200 122,180

Income Summary Home Office Current

116,990

116,990 47,800 680,800 54,790 116,990

Requirement 2 a. b. c.

Freight-Out Branch Current

470

Cash Branch Current

19,200

Branch Current Branch Income

116,990

470 19,200 116,990

Requirement 3 Ford Company Reconciliation of Current Account December 31,2008

Balances before adjustment Shipment in transit Advertising charged to branch Rent charged to branch Error in charging freight Remittance in transit

Branch Acct. P 206,344

(470) (19,200) P 186,674

Home Office Acct. P120,974 57,600 4,200 3,900 P 186,674

AA1- Chapter 8 (2008 edition)

page 21

Problem 8-8 Mitsubishi Trading Company Reconciliation of Home Office and Branch Accounts December 31, 2008 Unadjusted balances Add (deduct): Error in recording cost of equipment Insurance premium recorded twice by branch Freight for P1,125 recorded as P1,215 Discount from home office not recorded Share of branch in advertising not recorded Error in recording remittance Adjusted balances

Branch Acct. P225,770

Home Office Acct. P220,485 3,150 675) 90) 800) 700 ________ P222,770 ( ( (

(

3,000) P222,770

Requirement 3 a.

Office Equipment Advertising Expense Insurance Expense Freight Discount from Home Office Home Office

3,150 700 675 90 800 2,285 MULTIPLE CHOICE

1.

B

2.

A

3.

A

Sales Cost of sales ( 400,0000 - 70,000) Gross profit Expenses [30,000 + 10,000 + (10,000 - 6,000) + 5,000] Net profit

4.

A

Sales Cost of sales w/o freight Add freight Cost of sales w/ freight

P400,000 330,000 70,000 49,000 P 21,000 P46,500 x 70% P32,550 1,100 P33,650

AA1- Chapter 8 (2008 edition)

5.

Sales Less Sales Discount (39,690 / 98%) - 39,690 Cost of sales Gross Profit Expenses: Selling Administrative (46,500 x 5%) Samples Expenses Net Profit

6.

page 22

P46,500 810

P 2,820 2,325 1,900

P45,690 33,650 P12,040

7,045 P 4,995

17,500 + 8,000 +9,250 + (50,000 x 60% x 1/6)

7.

C

Sales Cost of sales Gross Profit Expenses Net Income

8. 9.

D B

P 87,00 / 125% = Sales Cost of sales Gross Profit Expenses (350 + 250) Net Income

P70,000 P 87,500 70,000 P 17,500 6,000 P 11,500

10

A

11

C

12

B

13

A

Sales Cost of sales Shipments Less Inventory, end Gross Profit Expenses Net Profit

P74,000

14 15

A A

P17,500 + 8,680

16

D

203,500 – (186,120 – 25,245 – 18,755) = 23,870

17

D

Home Office Current Branch Income Correct branch account - current

P176,000 105,000 P 71,000 39,750 P 31,250

P67,680 9,180

58,500 P15,500 6,820 P 8,680 P 26,180

P 48,125 23,870 P 71,995

AA1- Chapter 8 (2008 edition)

18

B

Sales Cost of Sales: Shipments from home office Less Inventory, Dec. 31 Gross profit Expenses Net Profit

19

C

P90,000 + P14,400

20

A

P1,500 + 43,800 + 37,170

21

D

Net Sales (198,720 - 3,600) Cost of sales Beg. Inventory Shipments Goods available for sale End. Inventory Gross Profit Expenses (57,930 + 1,920) Net Profit

22

C Balances before adjustment Adjustments: 1. Shipments in transit 2. HO AR collected by branch 3. Supplies returned 4. Error in recording Br. net income 5. Cash to Branch in transit

23

D

24

C Balances Error in recording allowance Advances taken by Pres. Share in advertising expense

page 23

P112,500 P120,000 30,000

90,000 P 22,500 8,100 P 14,400 P104,400 P 82,470 P 195,120

P 37,170 136,000 P 173,170 41,370

131,800 P 63,320 59,850 P 3,470

BR. Acct. HO Acct. P150,000 P117,420 37,500 10,500 (4,500) (1,080) 25,000 25,000 P179,920 P 179,920 P 179,920 BR Acct. P43,500

HO. Acct. P41,900 60

(550) P42,950

25

A

Sales Cost of sales Inventory, beg. Merchandise from Home Office Merchandise available for sale Less Inventory, end Gross profit Operating Expenses Net profit of Branch A

900 P42,950 P 100,000

P21,000 61,000 P82,000 19,000

63,000 P37,000 21,000 P16,000

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26

C Imprest branch fund Accounts Receivable, Jan.1 Inventory, Jan.1 Home Office account

page 24

Branch A P 2,000 55,000 21,000 P 78,000

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

27

B

28

C

Imprest branch fund Accounts Receivable, Dec. 31 Inventory, Dec. 31 Balance of Branch account - current

P 1,500 53,000 12,000 P 67,000

29

D

Sales Cost of sales Inventory, Jan.1 Merchandise from Home office Merchandise available for sale Less Inventory, Dec.31 Gross profit Operating Expenses Net profit of Branch B

P 80,000

30

D

P 19,000 47,000 P 66,000 12,000

HO Account. Beg. Balances 1. Branch remittances 2. Shipment to branch 3. Home office expense paid by branch 4. Branch receivable collected by branch

P

30,670 (55,000) 138,000 (5,700)

P 107,970 31

D Unadjusted balances 1. Remittance in transit 2. Shipment in transit 3. Home office expense paid by branch 4. Branch receivable collected by branch 5. Branch net profit

Branch Acct. P 133,970 (7,200)

54,000 P 26,000 14,300 P 11,700 Branch Acct. P 30,670 (47,800) 160,000 (8,900) P 133,970 HO Acct. P 107,970 22,000

(5,700) 6,500 P 127,570

(8,900) 6,500 P 127,570

32

A

Marketing Expense of another branch charged to Butuan Butuan’s remittance credited to Davao Net adjustment in Home Office Banch account

P (10,000) ( 65,700) P (75,700)

33

C

Fixed account not recorded by Butuan Inventory transfer recorded twice by Butuan Error in recording debit memo

P (53,960) 75,000 ( 90)

4,650

AA1- Chapter 8 (2008 edition)

page 25

Net adjustment in Branch Books 34

20,950

D. Unadjusted balances

35

P

B.

Net adjustment in Branch Account Adjusted balances

Branch Account P165,920

Home Office Account P111,170

(75,700) P 90,220

(20,950) P 90,220