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Problem 1. Fire Co. has a branch in Baguio and Davao. The reciprocal accounts between the home office and the branches were in 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:  On December 29, 2013, the home office has instructed Baguio to transfer P 74,000 cash to Davao. Baguio recorded this transaction immediately. Upon receipt, Davao has recorded this transfer at P 47,000. The home office however has not yet recorded this interbranch transaction as of the end of the year.  Fire has transferred goods costing P 28,900 to Baguio branch and paid P 2,500 of shipping cost on December 16, 2013. Baguio shipped all of these goods to Davao upon instruction of the home office on December 30, 2013. Shipping cost is P 3,600 freight collect. Had the goods were shipped directly to the Davao, P 5,000 of freight cost should have been incurred. The interbranch shipment was not recorded by the branches and the home office as well.  Baguio has collected cash of P 5,750 from Davao’s customer. This transaction is not yet recorded by Davao and the home office.  The home office has already allocated P 11,000 and P 9,000 of administrative expenses to Baguio and Davao respectively. The branches are not yet notified.  Baguio remitted P 14,300 cash to the home office on December 12, 2013. The home office has failed to record the said remittance.  Davao returned goods costing P 6,850 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. Compute for the following: 1. Adjusted balance of investment in Baguio account 2. Adjusted balance of investment in Davao account 3. Unadjusted balance of Home Office Current account in Baguio’s books 4. Unadjusted balance of Home Office Current account in Davao’s books Problem 2. The following transactions were entered in the branch current account of Makati Head Office for the year 2013:

2         5. 6. 7. 8.

Shipments to the branch during the year were made at 20% above cost. The balance of the Allowance for Overvaluation of Branch Inventory account was P 21,300 at the beginning, and the allowance was written down to P 14,700 at year-end. On December 10, 2013, the home office purchased a piece of equipment amounting to P 36,000 for its branch in Ortigas. The said equipment has a useful life of five years and will be carried in the books of the branch, but the home office recorded the purchase by debiting equipment. The branch recorded the depreciation of the equipment by debiting the Home Office Current account and crediting Accumulated Depreciation. Debit memo regarding the allocation of operating expenses to the Ortigas branch was received by the branch on January 2, 2014. The Ortigas branch reported net income of P 197,730. It also remitted cash to the home office on December 31, 2013 amounting to P 33,000, which the home office received and recorded on January 1, 2014. The interoffice accounts were in agreement at the beginning of the year. How much is the adjusted balance of the Branch Current account on December 31, 2013 before the necessary closing entries were made? What is the amount of adjustment in the Allowance for Overvaluation of Branch Inventory account? How much is the net income of Ortigas branch that will be reported in the combined income statement of Makati Company? What is the amount of the Home Office Current account that will be reported in the books of Ortigas branch after closing entries are made?

Problem 3. Spidey Co. maintains a branch in Pampanga. Selected account balances taken from the books of the Home Office and its branch as of December 31, 2014 was as follows: Home Office Branch Sales 1,200,000 540,000 Inventory, 1/1/15 80,000 122,100 Purchases 500,000 Shipments to branch 315,000

Shipment from Home Office 346,500 Inventory, 12/31/13 350,000 157,500 Expenses 113,000 89,000 In 2013, the Home Office billed its branch at 120% of cost which was higher by 5% than the previous year. All of the units in the beginning inventory of the branch were acquired from the home office in 2013. By what amount will the retained ear0nings of SPIDEY Co. increase for the year 2014? Problem 4. The following were found in your examination of the interplant accounts between the Home Office and the Ironman Branch:  Transfer of fixed assets from Home Office amounting to P 53,960 was not booked by the Ironman branch.  P 10,000 covering marketing expense of another branch was charged by the Home Office to Ironman.  Ironman recorded a debit note on inventory transfers from Home Office of P 75,000 twice.  Home Office recorded cash transfer of P 65,700 from Ironman branch as coming from Thor branch.  Ironman reversed a previous debit memo from Hulk branch amounting to P 10,500. Home Office decided that this charge is approximately Thor branch’s cost.  Ironman recorded a debit memo from Home Office of P 4,650 as P 4,560. The net (debit)/credit adjustment in Ironman’s books related to the Home Office account is? Problem 5. On June 1, 2015, EliteFum Co. established an agency in Davao, sending samples costing P 4,200,000 which are useful until May 31, 2016 and have a salvage value of 20% of cost. A working fund of P 3,412,500 is to be maintained using the imprest basis. During 2015, the agency submitted to the home office sales order amounting to P 35,437,500. Sales per invoice were P 27,562,500 which was duly approved by the home office. Collections during the year amounted to P 14,784,000 net of 4% sales discount. The cost of merchandise sold during the year is equal to 70% of the gross selling price. Vouchers for expenses amounted to P 1,837,500. How much net income would be reported by the BGC agency on December 31, 2015? Problem 6. A home office ships inventory to its branch at a mark-up of 125% above cost. The required allowance for the overvaluation account is P 1,425,000. During the year, the home office sent merchandise to the branch costing P 9,000,000. At the start of the year, the branch’s Statement of Financial Position shows, P 1,800,000 of inventory on hand that was acquired from the home office. By what amount will the Allowance for Unrealized Gross Margin in Branch inventory account be debited at the end of the year? Problem 7. During the year 2015 goods billed at P 3,250,000 were shipped to the branch at 130% of cost. The account Loading in Branch Inventory has a balance of P 1,225,000 before adjustment. The beginning inventory of the branch from the home office at cost is P 2,375,000; the beginning inventory of the branch from outsiders is P 540,000; purchases from outsiders are P 1,450,000. How much is the total goods available for sale of the branch from the home office? Problem 8. Shipments received from the home office are billed at 120% above cost. During the year, the branch received shipments billed at P 360,000 and returned damaged goods with billed price of P 24,000. The branch has an ending inventory of P 72,000, at billed price. The branch reported loss of P 10,000. How much us the balance of the allowance for markup account before year-end adjustments? Problem 9. Jeremy Lin, Inc. established a branch in Antipolo to distribute part of the goods purchased by the home office. The home office prices inventory shipped to the branch at 25% above cost. The following account balances were taken from the ledger maintained by the home office and the branch. Sales Beginning inventory Purchases Shipments to Branch Shipments from HO Operating expenses Ending inventory

Jeremy Lin, Inc. 336,000 69,000 222,000 66,000 68,000 48,000

Antipolo Branch 144,000 (20% still uncollected) 38,400 (1/3 FROM HO) 40,000 (30% unpaid) 82,500 11,200 (4/5 unpaid) 21,600 (10% from outsiders)

Calculate the combined net income for the home office and the branch. Problem 10. On December 31, 2014, the home office of Tony Company recorded a shipment of merchandise to its Calamba branch as follows: Calamba branch 30,000 Shipment to Calamba branch Unrealized profit in branch inventory Cash (for freight charges)

25,000 4,000 1,000

The Calamba branch sells 40% of the merchandise to outside entities during the rest of December 2014. The books of the home office and Calamba branch are closed on December 31 of each year. At what amount should the 60% f the merchandise remaining unsold at December 31, 2014 should be included in the published statement of financial position of Tony Company at December 31, 2014?