Chapter 12 Guerrero Advanced Accounting solution

CHAPTER 12 MULTIPLE CHOICES - COMPUTATIONAL

12-1:

d. This is recorded when the working fund is replenished.

12-2:

c. Sales Cost of goods sold: Purchases Merchandise inventory, end Gross profit Expenses Net income (loss)

12-3:

P800,000 180,000

620,000 P 80,000 198,000 P (118,000)

b Sales Cost of goods sold (P70,000 / 140%) Gross profit Less: Samples (P8,000 – P6,000) Expenses Net income

12-4:

P 700,000

P 70,000 50,000 P 20,000 P 2,000 2,800

4,800 P 15,200

a Sales Cost of goods sold Gross profit Expenses (P9,000 + P4,500) Net income

12-5:

a

12-6:

a

12-7:

c

12-8

a Shipment of merchandise to home office Equipment sent to home office Expenses assigned to branch by the home office Cash remittance to home office Home office account balance

P 100,000 72,000 P 28,000 13,500 P 14,500

P 80,000 50,000 8,000 (40,000) P 98,000

1

12-9: d 12-10: a Home Office account balance before closing, Dec. 32, 1008 P 35,000 Net income (loss) Sales P147,000 Cost of cost goods sold Shipment to branch P135,000 Inventory, 12/31 18,500 116,500 Gross profit P 30,500 Expenses 13,500 17,000 Home Office account balance (Investment in Branch account balance) P 52,000 Shipment to Branch account has no beginning balance, because this was closed at the end of 2011. 12-11: b Jan. 1, 2011 P 6,000 86,000 74,000 P166,000

Petty cash fund Accounts receivable Inventory Home Office account balance

Jan. 1, 2012 P 6,000 98,000 82,000 P186,000

12-12: d

Unadjusted balances, Dec. 31 Remittance in transit Shipment in transit Cash collections of home office Adjusted balances, Dec. 31

(Branch Books) Home Office P 21,320 7,280 400) P 28,200

(Home Office Books) Investment in Branch P 38,600 (10,400)

(

P 28,200

12-13: a Unadjusted balance – Investment in Branch account, 12/31 Charge for advances by president Erroneous entry for merchandise allowance Share in advertising expense Unadjusted balance – Home Office account, 12/31

P430,000 (5,500) ( 600) (9,000) P414,900

2

12-14: a

Unadjusted balances, 12/31 Shipment in transit Collection of HO A/R by branch Error in recording of branch profit Returns of merchandise in transit Adjusted balances, 12/31

(Branch Books) Home Office P 97,350 6,150

P103,500

(Home Office Books) Investment in Branch P 84,000 25,000 900 ( 6,400) P103,500

12-15: a (Branch Books) Home Office P27,350

Unadjusted balances Error in recording shipment to Cavity branch Error in recording shipment to Tagaytay branch Branch AR collected by home office (3,600) Merchandise returns in transit Error in recording branch profit Adjusted balances P23,750 12-16: c Unadjusted balance- Investment in Branch account Remittance in transit Shipment in transit Expenses allocated Error in recording remittance Error in recording shipments Unadjusted balance – Home Office account

Unadjusted balances, Remittance in transit Shipment in transit Expenses allocated Unrecorded HO collection of AR Error in recording shipments Adjusted balances

( Branch Books) Home Office P 44,000 20,000 5,000 (3,000) 9,000 P 75,000

(Home Office Books) Investment in Branch P25,550 (12,000) 15,000 ( 1,200) ( 3,600) P23,750

P 85,000 (10,000) (20,000) ( 5,000) 3,000 ( 9,000) P 44,000 (HomeOffice Books) Investment in Branch P 85,000 (10,000)

P 75,000

12-17 a

Unadjusted balances Branch AR collected by Home Office Shipments in transit Acquisition of furniture Merchandise returns Cash remittance in transit Adjusted balances

(Branch Books) Home Office P 440,000 ( 8,000) 32,000

P 464,000

(Home Office Books) Investment in Branch P 496,000

(12,000) (15,000) ( 5,000) P 464,000

3

PROBLEMS Problem 12-1 Home Office Books 1. Investment in branch Cash

30,000

2. Investment in branch Shipment to branch

75,000

Branch Books Cash 30,000

75,000

3. No entry

4. No entry

5. Shipment to branch Investment in branch

30,000 Home office

Shipment from home office Home office

75,000

Purchases Accounts payable

10,000

Accounts receivable Sales 2,000 2,000

6. No entry

30,000

75,000

10,000 125,000 125,000

Home office 2,000 Shipment from home office Cash

105,000 Accounts receivable

7. No entry

8. No entry

9. Investment in branch Accumulated dep’n

10. Cash Investment in branch 11. Cash

7,500 7,500

65,000 65,000 3,000

Investment in branch 12. Investment in branch Branch income

3,000 10,000 10,000

2,000

105,000

Accounts payable Cash

7,000

Salaries Rent Utilities Other operating expenses Cash

10,000 5,000 2,000 12,500

Depreciation Rent Insurance Home office Home office Cash Home office Accounts receivable

7,000

29,500 1,500 5,000 1,000 7,500 65,000 65,000 3,000

Sales 125,000 Inventory, end 5,000 Shipment from HO Purchases Salaries Rent Utilities Other operating expenses Home office

3,000

73,000 10,000 10,000 10,000 2,000 12,500 10,000

4

Problem 12-2 a.

Books of the Branch 1.

2.

3.

Cash Merchandise inventory Home office

200,000 350,000

Merchandise inventory Accounts payable

400,000

Accounts receivable Sales

650,000

Cost of goods sold Merchandise inventory

425,000

Cash

600,000

550,000

400,000

650,000

425,000

Accounts receivable 4.

5.

b.

Advertising expense Sales commission Other expense Cash

40,000 65,000 45,000 150,000

Accounts payable Home office Cash

370,000 120,000 490,000

Manila Sales – Naga Branch Income Statement Year Ended December 31, 2011 Sales Cost of goods sold Gross profit Expenses: Advertising expense Sales commissions Other expenses Net income

c.

600,000

P650,000 425,000 225,000 P40,000 65,000 45,000

150,000 P 75,000

Manila Sales – Naga Branch Statement of Financial Position December 31, 2011 Cash Accounts receivable Merchandise inventory Total assets

P160,000 50,000 325,000 P535,000

Accounts payable Home office

P

Total liabilities and capital

30,000 505,000 P535,000

5

Problem 12-3 Home Office Books

Branch Books (1) Adjusting Entries

a. Investment in branch Cash

63,750

b. Investment in branch Shipment to branch

75,300

c. Accounts receivable Sales

157,500

d. Purchases Accounts payable

183,750

e. Cash

170,400

Cash

f. Accounts payable Cash g. Expenses Cash Furniture & fixtures – branch Investment in branch h. Cash

Home office Shipment from HO Home office

75,300

73,300

Accounts receivable Sales

99,000

157,500

183,750

Purchases 33,750 Accounts payable 33,750 Cash

Accounts receivable

63,750

63,750

170,400

186,000 186,000 39,900

75,300

99,000

80,100 Accounts receivable

Home office Cash

80,100

Accounts payable Cash

18,375

80,100

80,100

18,375

39,900

12,000 12,000 80,100

Investment in branch

Home office Cash

12,000 12,000

80,100 Expenses Cash

i. Retained earnings Cash

63,750

27,000 27,000

15,000 15.000

(2) Adjusting Entries j. Expenses Acc. Depreciation

1,750 1,750

k. Investment in branch Acc. Dep’n – Br. F & F

975

l. Prepaid expenses Expenses

375

m. Expenses Accrued expenses

150

975

Expenses Home office

375

Prepaid expenses Expenses

150

Expenses Accrued expenses

975 975 1,125 1,125 450 450

6

Closing Entries Home Office Books n. Sales Shipments to branch Merchandise inv., 12/31 Merchandise inv. 1/1 Purchases Expenses Income summary

157,500 75,300 72,750

o. Branch loss Investment in branch

2,100

p. Income summary Branch loss

2,100

q. Income summary Retained earnings

3.

Branch Books

60,180 183,750 41,445 20,175

2,100

Sales 99,000 Merchandise inv., 12/31 35,250 Income summary 2,100 Purchases 33,750 Shipment from HO 75,300 Expenses 27,300

Home office 2,100 Income summary

2,100

2,100 18,075 18,075

Individual Financial Statements Cebu Company – Home Office Income Statement Year Ended December 31, 2011 Sales Cost of sales Merchandise inventory, 1/1 Purchases Goods available for sale Shipment to branch Goods available for own sale Merchandise inventory, 12/31 Gross profit Expenses Net operating income Branch income (loss) Net income

P157,500 P 60,180 183,750 P243,930 ( 75,300) P168,630 ( 72,750)

95,880 P 61,620 41,445 P 20,175 ( 2,100) P 18,075

Cebu Company – Branch Income Statement Year Ended December 31, 2011 Sales Cost of sales Purchases Shipments from home office Goods available for sale Merchandise inventory, 12/31 Gross profit Expenses Net income (loss)

P 99,000 P 33,750 75,300 P109,050 35,250

73,800 P 25,200 27,300 P( 2,100)

7

Problem 10-3, continued

Cebu Company – Home Office Statement of Financial Position December 31, 2011 Assets Cash Accounts receivable Merchandise inventory, 12/31 Prepaid expenses Furniture and fixtures Less: Accumulated depreciation Branch furniture and fixtures Less: Accumulated depreciation Investment in branch Total assets Liabilities and Stockholders’ Equity Liabilities Accrued expenses Accounts payable Total liabilities Stockholders’ Equity Capital stock Retained earnings Total liabilities and stockholders’ equity

P 34,800 28,575 72,750 3,075 P30,000 8,370 P12,000 975

21,630 11,025 45,825 P217,680

P 2,025 31,950 P 33,975 P 75,000 108,705

183,705 P217,680

Cebu Company – Branch Statement of Financial Position December 31, 2011 Assets Cash Accounts receivable Merchandise inventory, 12/31 Prepaid expenses Total assets

P 6,375 18,000 35,250 1,125 P61,650

Liabilities and Capital Accounts payable Home office Total liabilities and capital

P 450 15,375 P61,650

8

Problem 12-3, continued: 4. Combined Financial Statements Cebu Company Combined Income Statement Year Ended December 31, 2011 Sales Cost of sales Merchandise inventory, 1/1 Purchases Goods available for sale Merchandise inventory, 12/31 Gross profit Expenses Combined net income

P256,500 P 60,180 217,500 P277,680 108,000

169,680 P 86,820 68,745 P 18,075

Cebu Company Statement of Financial Position December 31, 2011 Assets Cash Accounts receivable Merchandise inventory Prepaid expenses Furniture and fixtures Less: accumulated depreciation Total assets Liabilities and Stockholders’ Equity Accrued expenses Accounts payable Capital stock Retained earnings Total liabilities and stockholders’ equity

P 41,175 47,475 108,000 4,200 P42,000 9,345

32,655 P233,505 P

2,475 47,325 75,000 108,705 P233,505

Problem 12-4 Branch Books

Home Office Books (a) and (b) Closing Entries Sales 145,000 Sales 560,000 Inventory, 12/31 60,000 Inventory, 12/31 90,000 Inventory, 1/1 18,000 Shipments to branch 145,000 Shipments from HO 145,000 Inventory, 1/1 Expenses 20,000 Purchases Income summary 23,000 Expenses Income summary Income summary Home office

22,000 22,000

Investment in branch Branch income

45,000 540,000 90,000 120,000

22,000 22,000

Branch income 22,000 Income summary 22,000 Income summary 142,000 Retained earnings 142,000

9

Problem 12-4, continued: (c)

CG Corporation Combined Statement Working Paper Year Ended December 31, 2011

Eliminations Home Office Debits Cash Accounts receivable Inventory, 1/1 Investment in branch Equipment (net) Purchases Shipments from HO Expenses Total debits

36,000 54,000 45,000 70,000 95,000 540,000 90,000 930,000

Branch

Debit

Credit

7,000 29,000 18,000

Income Statement Dr (Cr)

43,000 83,000 63,000 (2) 70,000 95,000 540,000

145,000 20,000 219,000

(1)145,000 110,000

Inventory 12/31 (BS) Total assets

150,000 371,000

Credits Accounts payable Home Office Capital stock Retained earnings, 1/1 Sales Shipments to branch Total credits

54,000 144,000 560,000 145,000 930,000

145,000

Inventory, 12/31 (IS)

90,000

60,000

27,000

4,000 70,000

31,000 (2) 70,000 54,000 144,000 (705,000) (1)145,000

219,000 (150,000) 215,000

Net income Total liabilities & equity 1. 2.

Balance Sheet

215,000 142,000

142,000 371,000

To eliminate shipments to branch and shipments from HO To eliminate reciprocal accounts.

10

Problem 12-5 (1)

Oro Company Working Paper for Combined Statements Year Ended December 31, 2011

Home Office

Branch

Debits Cash Notes receivable Accounts receivable (net) Inventories Furniture & fixtures (net) Investment in Branch Cost of goods sold Operating expenses

63,000 10,500 120,600 143,700 72,150 124,050 300,750 104,250

128,700 32,850

Totals

939,000

275,700

Credits Accounts payable Common stock Retained earnings Home Office Sales Totals

Eliminations Debit Credit

Income Statements Dr (CR)

21,900 55,950 36,300

84,900 10,500 176,550 45,000 72,150

(2)135,000 (1)124,050 (2)135,000

564,050 137,100 389,100

61,500 300,000 37,500

61,500 300,000 37,500 124,050 151,650

540,000 939,000

Balance Sheet

275,700

(1)124,050 (691,650) 289,050

289,050

Net Income

9,900

(9,900) 389,100

(1) To eliminate shipments (2) To eliminate reciprocal accounts.

Closing Entries 2.

Branch Books

Sales Income Summary Cost of goods sold Operating expenses Home Office Income summary

3. Home Office Books 151,650 9,900 128,700 32,850 9,900 9,900

Branch loss 9,900 Investment in Branch

9,900

Income summary Branch loss

9,900

9,900

11

Problem 12-6 a.

b.

Investment in Branch account (Home Office Books) Unadjusted balance Error in recording cash transfer, April 8 Cash transfer recorded in subsequent year, Dec. 31 Error in recording allocated depreciation, Dec. 31 Adjusted balance

P138,200 ( 45,000) ( 15,000) 6,000 P 84,200

Home Office account (Branch Books) Unadjusted balance Error in recording salary allocation, April 5 Error in recording inventory transfer, July 6 Unrecorded allocated depreciation, Dec. 31 Adjusted balance

P(93,000) ( 200) 12,000 ( 3,000) P(84,200)

Adjusting Entries Home Office Books

Branch Books

Other income Investment in branch – Rizal

45,000

Cash

15,000

200 200

45,000

Investment in branchRizal Investment in branch Accumulated dep’n

Salary expense Home office

Home office 12,000 Shipments from HO

12,000

Depreciation expense Home office

3,000

15,000 6,000 6,000

3,000

Problem 12-7 a.

b.

Investment in Branch account (Home Office Books) Unadjusted balance, Dec. 31 Cash remittance in transit Merchandise returns in transit Adjusted balance, Dec. 31

P166,400 (30,000) (12,000) P124,400

Home Office account (Branch Books) Unadjusted balance, Dec. 31 Error in recording expense Shipment in transit Supplies charged to branch Collection of branch receivable Adjusted balance, Dec. 31

P103,200 7,200 24,000 8,000 ( 18,000) P124,400

Adjusting Entries Home Office Books Cash 30,000 Shipment to branch 12,000 Investment in branch 42,000

Branch Books Shipment from HO 24,000 Supplies 8,000 Expenses 7,200 Accounts receivable 18,000 Home office 21,200

12

Problem 12-8 (1)

Reconciliation Statement (Home Office Books) (Branch Books) Investment in Branch Home Office Unadjusted balances, 1/31 Advertising charged to branch Home office AR collected by branch Shipment in transit Error in recording receipt of merchandise Understatement of depreciation Remittance in transit, 1/31

(2)

P59,720

P 43,268 480

600 ( ( 432) (12,800) P47,088

180)

P 47,088

Adjusting Entries Home Office Books Retained earnings Cash Accounts receivable Investment in branch

Branch Books 432 12,800

Advertising 480 Shipments from HO 3,520 600 Shipment from HO 12,632 Home office

180 3,820

Problem 12-9 (1)

Branch Books Adjusting Entries Shipment from home office Operating expenses (P4,200 + P3,900) Home office

57,600 8,100 65,700

Closing Entries Sales Inventory, 12/31 (P64,580 + P57,600) Inventory, 1/1 Shipment from HO (P623,200 + P57,600) Operating expenses Income summary

778,200 122,180

Income summary Home office

116,990

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

116,900

13

Problem 12-9, continued:

(2)

Home Office Books Accounts receivable Investment in branch Cash (P20,000 + P19,200) Investment in branch Branch income

(3)

470 330 800 116,990 116,900

Reconciliation Statement

Unadjusted balances, 12/31 Error in recording remittance to branch Shipment in transit Expenses charged to branch Branch net income Freight erroneously charged to branch Cash remittance in transit to HO Adjusted balances, 12/31

Home Office Books Branch Books (Investment in Branch) (Home Office) P 206,344 P 140,974 20,000 57,600 8,100 116,990 116,990 ( 470) ( 19,200) P 323,664 P 323,664

Problem 12-10 a.

Branch Books: Home Office account balance, January 1, 2011 Remittance to the home office Shipments received from the home office (P440,000 – P39,000) Credit memo from the home office Merchandise returned to the home office Home Office account balance, December 31, 2011

b.

P 134,000 (189,000) 401,000 12,000 ( 10,400) P 347,600

Reconciliation Statement Home Office Books (Investment in Branch)

Branch Books

Unadjusted balances, 12/31/011 Remittance in transit Shipment in transit Advertising charged to branch Accounts receivable collected by HO Error in recording remittance

P 397,100 ( 42,000)

P 347,600

12,000

39,000 17,000 (24,500) (12,000)

Adjusted balances, 12/31/011

P 367,100

P 367,100

(Home Office )

14

Problem 12-1111 a.

P 2,000 Sales (P 27,000 + P 33,000 + P 26,000) …………………. Cost of Goods Sold (P 36,000 + P 18,000) ………………. Gross Profit ……………………………………………… Rent Expense …………………………………………….. Property Tax Expense …………………………………… Depreciation Expense …………………………………… Miscellaneous Expense …………………………………. General Corporate Expense ……………………………… Net Income ………………………………………………

b.

P 86,000 (54,000) P 32,000 P 4,000 5,000 4,000 11,000 6,000 (30,000) P 2,000

P 180,000 Initial Transfers …………………………………………. June Inventory Shipment ……………………………….. Property Tax Payment ………………………………….. September Inventory Shipment ………………………… Expense Allocation …………………………………….. Cash Transfer …………………………………………... Balance in Home Office/Branch Accounts (correct) …..

c.

Journal Entries – Tarlac Branch 2011 1/10 Cash …………………………………. Inventory ……………………………. Equipment …………………………… Home Office …………………… 1/20 2/1

4/1

5/1 6/5

Rent Expense ………………………… Cash ……………………………. Cash ………………………………….. Sales ……………………………

P 188,000 18,000 5,000 26,000 6,000 (63,000) P 180,000

30,000 36,000 122,000 188,000 4,000 4,000 27,000 27,000

Cost of Goods Sold ………………….. Inventory ……………………….

18,000

Cash …………………………………. Sales …………………………...

33,000

Cost of Goods Sold …………………. Inventory ………………………

18,000

Miscellaneous Expenses ……………. Cash …………………………...

7,000

Inventory ……………………………. Home office …………………...

18,000

18,000

33,000

18,000

7,000

18,000

15

Problem 12-11, continued:

7/6 9/9 10/1

11/1 12/22 12/31 12/3

d.

Property Tax Expense ………………. Home Office …………………..

5,000

Inventory …………………………… Home Office ………………….

26,000

5,000

26,000

Cash ………………………………… Sales ………………………….

26,000

Cost of Goods Sold ……………….. Inventory ……………………..

18,000

Miscellaneous Expenses …………... Cash ………………………….

4,000

Home Office ……………………… Cash ………………………….

63,000

Depreciation Expense ……………. Accumulated depreciation …..

4,000

General Corporate Expenses ……… Home Office …………………..

6,000

26,000

18,000

4,000

63,000

4,000

6,000

TARLAC BRANCH Statement of Financial Position December 31, 2011 Assets Cash ……………………………………………. Inventory ………………………………………. Equipment ……………………………………... Accumulated Depreciation ……………………. Total Assets …………………………… Equity Home Office* …………………………………..

P 38,000 26,000 P 122,000 (4,000)

118,000 P 182,000

P 182,000

*Home office balance is P 180,000 as computed in Part b plus the P 2,000 net income for the period.

16