Home Office and Branch Accounting

PAMANTASAN NG CABUYAO  ADVANCED  ADVANCED ACCOUNTING ACCOUNTING HOME OFFICE AND BRANCH ACCOUNTING

1. Leila Co's Clark branch submitted the following data for 2011, its first year of operation: Sales. P203, 500 Cr Shipments from home office. 186, 120 Dr Operating expenses. expenses. 18, 755 Dr Home office current. 48, 125 Cr Shipments to the branch are billed at cost. The December December 31 inventory of the branch was P25, 245. What is the correct balance on December 31, 2011 of the Branch Account current as per home office books? a. P46, 750. c. P65, 505 b. 48, 125. d. 71, 995 2. The following information pertains to shipments of merchandise from home home office to branch during 2011: Home office's cost of merchandise. merchandise. P160, 000 Intra company billing. 200, 000 Sales by branch 250, 000 Unsold merchandise of branch on Dec 31, 2011. 20, 000 In the combined income statement of home office and branch for for the year ended December 31, 2011; what amount of the above transactions should should be included in sales? a. P250, 000 c. P200, 000 b. 230, 000 d. 80, 000 3. Barros Corporation's shipments to and from its Brazil city branch are billed at 120% of cost. On December 31, Brazil branch reported the following data, at billed prices; inventory, inventory, January 1, of P33, 600; shipments received from home office office of P840, 000; shipments returned of P48, 000; and inventory, inventory, December 31, of P36, 000. What is the balance of the allowance for over valuation of branch inventory inventory on December 31 before adjustments? a. P5, 600. c. P6, 000 b. 137, 600. d. 145, 600 4. The clark branch of freeport freepor t corporation submitted the following following trial balance as of June 2011: Debit. Cash  Accounts receivable receivable

Credit P28, 600

173, 800

Shipments from home office 462, 000 Home office current 324, 500 Sales 369, 600 Expenses 29, 700 Clark reported an ending inventory inventory of P138, 600. Shipments are billed at a mark-up of 40% on cost. What is the real net income of Clark branch? a. P92, 400. b. 138, 600.

c. P70, 600 d. 108, 900

5. Tillman textile company has a single branch in Bulacan on March 1, 2011, the home office accounting records included an allowance for overvaluation of inventoriesinventories- Bulacan branch ledger account with a credit balance of P32, 000. During March, merchandise merchandise costing P36, 000  was shipped to the Bulacan branch billed billed at a price representing a 40% 40% markup on the billed price. On March 31, 2011, the branch prepared an income income statement indicating a net loss of P11, 500 for March and ending ending inventories inventories at billed prices of P25, 000. What is the amount of adjustment for allowance for for overvaluation of inventories to reflect the true branch net income? a. P39, 257 debit c. P39, 333 debit b. P46, 000 credit. d. P46, 000 debit 6. The Gift co. has a branch in Dipolog City. During 2011, the home office shipped to the branch merchandise billed at P150, 000 including a mark-up of 20% on cost. The branch reports opening and closing inventories inventories of P90, 000 and P120, P120 , 000, respectively, respectively, while the home office offi ce has a closing inventories of P210, 000 which includes merchandise which are held on consignment valued at P10, 000. Both location use the periodic inventory system. What closing inventory would be reported in the combined statement statement of income for the year 2011? a. P296, 000. c. P320, 000 b. 300, 000. d. 330, 000 7. The Manila branch of the Great co. is billed for merchandise by the home office at 20% a bove cost. The branch in turn prices merchandise for sales purposes at 25% above billed price. On February 16, all of the branch merchandise is destroyed destroyed by fire. No insurance was maintained. Branch accounts show the following information: Merchandise inventory, inventory, January 1 (at billed price). P 26, 400 Shipments from home office (Jan. 1 - Feb. Feb. 16). 20, 000 Sales. Sales returns. Sales allowances. allowances.  What was the cost of the merchandise merchandise destroyed by by fire? a. P36, 000. C. P36, 800 b.

30, 667.

d.

15, 000 2, 000 1,000

30, 000

8. Trial balances for the home office and the branch of the Tony Tony co. show the following accounts accounts before adjustment, on December December 31, 2011. The home office policy of billing the branch for merchandise is 20% above cost. Home office P10, 800 24, 000

Unrealized intercompany inventory profit Shipments to branch Purchase (outsiders)

Branch

P7, 500

Shipments from home office 28, 800 Merchandise inventory, inventory, Dec. 1, 2011 45, 000  What part of the branch inventory inventory as of Dec. 1, 2011 represent purchases purchases from outsiders outsiders and  what part represents goods acquired from the home office? Outsiders Home office a. P12, 000. P33, 000 b. c. d.

16, 500. 15, 000. 9, 000.

28, 500 30, 000 36, 000

9. Swift corporation, operates a number of branches in Metro Manila. On June June 30, 2011, it's San Lorenzo branch showed showed a home office account balance of P27, 350 and the t he home office books showed a San Lorenzo Lorenzo branch account balance of P25, 550. The following information may help in reconciling both accounts: 1. A P12, 000 shipment, charged by Home office to San Lorenzo branch, was actually sent to and retained by Sto. Tomas branch. 2. A P15, 000 shipment, intended and charged to San Jose branch was shipped to San Lorenzo branch and retained by the latter. 3. A P2, 000 emergency cash transfer from Sto. Tomas Tomas branch was not taken up in the Home office books. 4. Home office collects a San Lorenzo branch branch accounts receivable of P3, 600 and fails to notify the branch. 5. Home office was charged for P1, 200 for merchandise returned by San Lorenzo branch on  June 28 the merchandise merchandise is in transit. transit. Home office erroneously recorded San Lorenzo's net income for May, May, 2011 at P16, 275. The branch reported a net income income of P12, 675.  What is the reconciled amount amount of the home office and San Lorenzo branch reciprocal accounts? a. P21, 750 b. 23, 750 c. 27, 350 d. 20, 150 10. Lakers Trading Co. Co. Operates a branch in Dagupan city, city, at close of business on December 31, 2011, Dagupan branch account in the home office books books showed a debit balance of P225, 770.  The inter office accounts were were in agreement at the beginning beginning of the year. For For purposes of reconciling the inter office accounts, the following facts were ascertained: 1. An office equipment costing the home office P3, 500 was picked up by the branch as P350. 2. Insurance premium of P675 charged by th home office was taken taken up twice by the branch. 3. Freight charge on merchandise made by the home office for P1, 125 was recorded in the branch books as P1, 215. 4. Home office credit memo representing a discount on merchandise for P800 was not recorded by the branch. 5. The branch failed to ttake ake up a P700 debit memo from the home office representing the share of the branch in advertising. advertising. 6. The home office inadvertently recorded a remittance for P3, 000 from its i ts Cebu branch as a remittance from its Dagupan branch. Compute the balance as of December 31, 2011.

a. b. c. d.

Unadjusted Balance Of the home office account. P226, 485. 228, 485. 225, 770. 226, 485.

Adjusted Balance Of the reciprocal account P225, 770 228, 770 226, 485 228, 770

11. On December 3, 2011, the home office of Kathy Office Supply Company recorded a shipment of merchandise to its Davao branch as follows: Davao branch.

30, 000

Shipments to branch. Unrealized profit in branch inventory. inventory. Cash (for freight charges).

25, 000 4, 000 1, 000

 The Davao branch branch sells 40% of the merchandise to outside during the rest rest of December 2011.  The books of the home office and and Kathy office supply are closed closed on December 31 of of each year. year. On January January 5, 2012, the Davao branch transfer transfer half of the original shipment to the Baguio branch, and e Davao branch pays P500 as the shipment.  The entry on the books of the Davao branch branch to record receipt receipt of the shipment from the home home office on December 3, 2011 would be: a. Shipments from Home office Freight-out.

29, 000 1, 000

Home office.

30, 000

b. Shipments from home office  Accounts receivable. receivable. Freight-in. Home office.

25, 000 4, 000 1, 000

c. Shipments from home office. Home office.

30, 000

d. Shipments from home office

29, 000

Freight-in. Home office.

30, 000

30, 000

1, 000 30, 000

12. Using the same information in No.11 at what amounts should the 60% of the merchandise remaining unsold at December 31, 2011 be included in (1) the inventory of the Davao branch at December 31, 2011, and (2) the published balance sheet of Kathy Office Supply Company at December 31, 2011 shows inventory of: a.

(1). P15, 600; (2) P18, 000

b. (1) P17, 400; (2) P15, 000 c. (1) P18, 000; (2) P 15,600 d. (1) P18, 400; (2) P 16, 000

13. Using the same information in No. No. 11, what is the entry on the books of Baguio branch for the January 5, 2012 transfer, assuming assuming that the freight cost of the merchandise from the the home office to Baguio branch would have been P600: a. Shipments Home office b. Shipments Freight-in. Home office. c. Shipments. Freight-in. Home office. d. Shipments Freight-in Home office.

15, 100 15, 100 14, 500 600 15, 100 15, 000 600 15, 600 14, 500 1, 100 15, 600

14. Using the same information in Nos. 11,12,13. What is the entry on the books of Davao branch in respect to January 5, 2012 transfer: a. Home office 15, 500 Inventory b. Home office. Shipments inventory Cash (for freight charges). c. Home office Cash (for freight charges). Inventory d. Home office. Cash (for freight charges). Freight-in. Inventory. Inventory.

15, 500 15, 100 15, 000 100 15, 500 500 15, 000 15, 600 500 600 14, 500

15. Using the same information in Nos. 11-13, what is the entry on the home office books in respect to January 5, 2012 transfer: a. Home office. 15, 500. Cash. 500 Inventory. Inventory. b. Shipments. Freight-in. Home office current c. Branch current- Baguio. Baguio. Excess freight. Branch current -Davao. -Davao. d. Branch current-Baguio. Excess freight. Branch current-Davao. current-Davao.

15, 000 14, 500 600 15, 100 15, 100 400 15, 500 15, 100 600 15, 700