Home Office and Branch (Special Problems) - Ch9

CHAPTER 9 SUGGESTED ANSWERS EXERCISES Exercise 9 - 1 Books of Branch R Home Office Cash

15,000 15,000 Books of Branch S

Cash Home Office

15,000 15,000 Books of the Home Office

Branch S Branch R

15,000 15,000

Exercise 9 - 2 Books of Branch No. 1 Home Office Shipments from Home Office Freight-In

1,950 1,600 350 Books of Branch No. 5

Shipments from Home Office Freight-In Cash Home Office

1,600 400 350 1,650 Books of the Home Office

Branch No. 5 Excess Freight Branch No. 1 Exercise 9 – 3

1,650 300 1,950 Home Office Books

1.

no entry

2.

Branch Shipments to Branch Allowance for Markup in Branch Inventory 120,000/240,000 = 50%

3.

no entry

4.

Branch Advertising Expense Depreciation Expense Utility Expense

360,000 240,000 120,000

134,000 40,000 70,000 24,000

AA1- Chapter 9 (2008 edition) page 2

5.

no entry Cash Branch

6.

no entry

7.

Branch Branch Income

8.

9.

360,000 360,000

58,000 58,000

Allowance for Markup in Branch Inventory Branch Income P300,000 x 50/150 = P100,000

100,000

Branch Income Income Summary

158,000

100,000

158,000 Branch Books

1.

2.

3.

4.

5.

6.

7.

Purchases Accounts Payable

160,000

Shipments from Home Office Home Office

360,000

Accounts Receivable Sales

652,000

Advertising Expense Depreciation Expense Utility Expense Home Office

40,000 70,000 24,000

160,000

360,000

652,000

134,000

Cash Accounts Receivable

470,000

Home Office Cash

360,000

Merchandise Inventory Sales Purchases Shipments from Home Office Advertising Expense Depreciation Expense Utility Expense Income Summary

60,000 652,000

Income Summary Home Office

470,000

360,000

160,000 360,000 40,000 70,000 24,000 58,000 58,000 58,000

AA1- Chapter 9 (2008 edition) page 3

Exercise 9 - 4 a. Merchandise inventory, beg. Less Merchandise from home office at billed price Markup on merchandise shipped to branch Markup on current shipment (P96,000 – P80,000) Markup on beginning inventory

P150,000 P 36,000 16,000 P 20,000 x 120/20

Merchandise purchased from outsiders b.

Allowance for Intercompany Inventory Profit Branch Income Bal. of allowance before adjustment Adjusted balance of allowance acct (P84,000 x 20/120) Realized markup

120,000 P 30,000

22,000 22,000 P36,000 14,000 P22,000

Exercise 9 – 5 Home Office Books 1.

Branch Shipments to Branch Allowance for Markup in Branch Inventory 150,000/300,000 = 50%

2.

no entry

3.

Allowance for Markup in Branch Inventory Branch Income Realized markup on beginning inventory P600,000 x 55% = P330,000 x 25/125* Realized markup on current shipments P450,000 x 1/3 = P150,000 x 50/150 Total *(600,000 – 480,000) / 480,000 = 25%

450,000 300,000 150,000

116,000 116,000 P 66,000 50,000 P116,000

Branch Books 1.

2.

3.

Shipments from Home Office Home Office

450,000

Accounts Receivable Sales P590,000 + P280,000 = P870,000

870,000

450,000

870,000

no entry

Exercise 9 – 6 1. Branch Cash Shipments to Branch

820,000 80,000 240,000

AA1- Chapter 9 (2008 edition) page 4

Land Allowance for Markup in Branch Inventory Allowance on Transfer of Land 120,000/240,000 = 50% 2.

3.

4.

5.

6.

300,000 120,000 80,000

Branch Shipments to Branch Allowance for Markup in Branch Inventory 160,000/400,000 = 40%

560,000

Branch Branch Income

130,000

Allowance for Markup in Branch Inventory Branch Income Realized markup on 1st inventory transfer Realized markup on 2nd inventory transfer (P640,000 – P360,000) x 40/140 Total

200,000

400,000 160,000

130,000

200,000 P120,000 80,000 P200,000

Allowance on Transfer of Land Branch Income

80,000 80,000

Branch Income Income Summary

410,000 410,000

Exercise 9 - 7 Required balance of allowance (markup on branch ending inventory) P9,600 x 20/120 Adjustment for realized markup Balance of allowance before adjustment Allowance on current shipment (P160,000 x 20%) Allowance on branch beginning inventory Markup rate Branch beginning inventory, at cost

P 1,600 36,400 P38,000 32,000 P 6,000 ÷ 20% P30,000

Exercise 9 - 8 a. Merchandise available for sale at billed price (P16,200 + P20,250) Merchandise available for sale at cost (P36,450/135%) Unrealized intercompany inventory profit balance before adjustment b.

Unrealized Intercompany Inventory Profit Branch Income Balance before adjustment Adjusted balance (P18,900 x 35/135) Realized markup

P36,450 27,000 P 9,450 4,550 4,550

P 9,450 4,900 P 4,550

AA1- Chapter 9 (2008 edition) page 5

c.

Home Office Books Shipments to Branch Unrealized Intercompany Inventory Profit Branch

400 140 540

Branch Books Home Office Shipments from Home Office

540 540

Exercise 9 – 9 1. P20,000 ÷ 25/125 = P100,000 2.

Allowance for Markup in Branch Inventory Branch Income P100,000 + P350,000 – P80,000 = P370,000 x 25/125 = P74,000

Exercise 9 - 10 Separate cost of goods sold of the home office: Inventory, beginning Purchases Shipments to branch Cost of goods available for sale Less Inventory, end Separate cost of goods sold of the branch: Inventory, beginning From outside purchases From home office (P36,000 / 120%) Total Purchases Shipments from home office (P720,000 / 120%) Cost of goods available for sale Less Inventory, end: From outside purchases From home office (P42,000 / 120%) Combined cost of goods sold Exercise 9– 11 1. Shipments from home office Shipments to branch Markup

74,000 74,000

P 252,000 2,800,000 ( 600,000) P2,452,000 240,000

P2,212,000

P

12,000 30,000 P 42,000 96,000 600,000 P 738,000 P10,000 35,000

Total P450,000 375,000 P 75,000

45,000

Resold P360,000 300,000* P 60,000

693,000 P2,905,000

On Hand P90,000 75,000** P15,000

* 75,000 / 375,000 = 20% ** 90,000 / 120% = P75,000 2.

Cost of Goods Sold Inventory P60,000 + P450,000 – P90,000 = P420,000

420,000 420,000

AA1- Chapter 9 (2008 edition) page 6

3.

Billed Price P 60,000 450,000 P510,000 90,000 P420,000

Inventory, beginning Shipments Total Inventory, end Cost of goods sold

Cost P 50,000 375,000 P425,000 75,000 P350,000

Exercise 9 - 12 a. Merchandise Inventory, January 1 Add Shipments from Home Office Cost of Goods Available for Sale Cost of Goods Sold Sales, net of Sales Returns (P15,000 - P2,000) Sales rate Merchandise destroyed by fire at billed price

Markup P 10,000 75,000 P 85,000 15,000 P 70,000

P26,400 20,000 P46,400 P13,000 125%

Merchandise destroyed by fire at cost b.

Home Office Books Branch Loss from Fire Allowance for Markup in Branch Inventory Branch Branch Books Home Office Merchandise Inventory

Exercise 9 – 13 1. Branch Income Cost of Goods Sold P230,000 x 15/115 Branch 2. 3.

10,400 P36,000 ÷ 120% P30,000

30,000 6,000 36,000 36,000 36,000

50,000 30,000 20,000

Home Office Branch

520,000 520,000

Allowance for Markup in Branch Inventory Inventory

9,000 9,000

PROBLEMS Problem 9 – 1 Billed Price Beginning inventory: Acquired from vendors Acquired from home office Purchases from vendors Shipments from Home Office P180,000 + P30,000 Total inventory available for sale Less Ending inventory: Acquired from vendors Acquired from home office P60,000 + P30,000 Cost of goods sold

Cost

Markup

P100,000 40,000 240,000 210,000 P590,000

P100,000 32,000 240,000 168,000 P540,000

P 8,000 42,000 P50,000

40,000 90,000 P460,000

40,000 72,000 P428,000

18,000 P32,000

AA1- Chapter 9 (2008 edition) page 7

Problem 9 – 2 Home Office Books a. b.

c.

d.

e.

f.

g.

h.

i.

j.

Dagupan Branch Cash

10,000

Dagupan Branch Baguio Branch Shipments to Branch

25,000 40,000

Furniture and Fixtures Cash

17,500

10,000

65,000

17,500

Expenses Dagupan Branch

800 800

Baguio Branch Sales Discounts Accounts Receivable

29,400 600

Baguio Branch Dagupan Branch

15,000

Shipments to Branch Dagupan Branch

2,500

Dagupan Branch Baguio Branch

1,800

30,000

15,000

2,500

1,800

Dagupan Branch Shipments to Branch Cash

20,100

Baguio Branch Excess Freight Dagupan Branch

20,110 35

20,000 100

20,145 Dagupan Branch Books

a.

b.

Cash Home Office

10,000

Shipments from Home Office Home Office

25,000

c.

no entry

d.

Home Office Cash

e.

no entry

10,000

25,000

800 800

AA1- Chapter 9 (2008 edition) page 8

f.

g.

h.

i.

j.

Home Office Cash

15,000 15,000

Home Office Shipments from Home Office

2,500

Expenses Home Office

1,800

2,500

1,800

Shipments from Home Office Freight-In Home Office

20,000 100

Home Office Shipments from Home Office Freight-In Cash

20,145

20,100

20,000 100 45 Baguio Branch Books

a.

no entry

b.

Shipments from Home Office Home Office

40,000 40,000

c.

no entry

d.

no entry

e.

Cash Home Office

29,400

Cash Home Office

15,000

f.

g.

no entry

h.

Home Office Cash

i.

no entry

j.

Shipments from Home Office Freight-In Home Office

29,400

15,000

1,800 1,800

20,000 110 20,110

Problem 9 – 3 Requirement 1 Home Office Books 1.

Baguio Branch Cash

20,000 20,000

AA1- Chapter 9 (2008 edition) page 9

2.

3. 4.

Baguio Branch Shipments to Branch Allowance for Markup in Branch Inventory

259,000

Cash Baguio Branch

245,000

185,000 74,000 245,000

Baguio Branch Cash

7,000 7,000

5 – 7 - no entry Baguio Branch Books 1. 2. 3.

4. 5.

6. 7.

Cash Home Office

18,000 18,000

Shipments from Home Office Home Office

257,600

Home Office Cash

247,400

257,600 247,400

Accounts Receivable Home Office

2,400

Expenses Home Office

7,000

Cash Accounts Receivable Sales Expenses Cash Merchandise Inventory, end P30,100 + P1,400 Sales Income Summary Merchandise Inventory, beginning P257,600 + P1,400 Shipments from Home Office Expenses Income Summary Home Office

Requirement 2 Baguio Branch Branch Income Allowance for Markup in Branch Inventory Branch Income (P17,500 + P259,000 – P31,500) x 40/140

2,400 7,000 247,400 40,600 288,000 21,000 21,000 31,500 288,000 15,000 17,500 259,000 28,000 15,000 15,000

15,000 15,000 70,000 70,000

AA1- Chapter 9 (2008 edition) page 10

Branch Income Income Summary

85,000 85,000

Requirement 3 Shipments from Home Office Home Office

1,400

Cash Home Office

2,000

1,400 2,000

Problem 9 - 4 Requirement 1 Triple D Bookstore Statement of Recognized Income and Expenses - Quezon City Branch For the Year Ended December 31, 2008 Sales Cost of Goods Sold: Merchandise Inventory, beginning Shipments from Home Office Cost of Goods Available for Sale Less Merchandise Inventory, end Gross Profit Operating Expenses: Advertising and Promotion Depreciation Uncollectible Accounts Expense Others Net income

P192,690 P 31,500 128,000 P159,500 22,750

P 6,400 2,400 1,250 36,600

Requirement 2 Branch Branch Income

136,750 P 55,940

46,680 P 9,260

9,260 9,260

Allowance for Markup in Branch Inventory Branch Income P136,750 x 25/125

27,350

Branch Income Income Summary

36,610

27,350

36,610

Problem 9 - 5 Branch Books a.

Sales Merchandise Inventory, end Income Summary Merchandise Inventory, beginning Shipments from Home Office Selling Expenses Administrative Expenses

78,000 12,000 10,000 10,000 80,000 4,000 6,000

AA1- Chapter 9 (2008 edition) page 11

b.

a.

b.

c.

d.

e.

f.

g.

Home Office Income Summary

10,000 10,000

Home Office Books Sales Shipments to Branch Merchandise Inventory, end Merchandise Inventory, beginning Purchases Selling Expenses Administrative Expenses Income Summary

310,000 64,000 30,000 25,000 300,000 20,000 30,000 29,000

Branch Income Branch

10,000

Allowance for Overvaluation in Branch Inventory Branch Income P18,000 - (P12,000 x 25/125) = P15,600

15,600

10,000

15,600

Branch Income Income Summary

5,600 5,600

Income Tax Income Tax Payable

12,110

Income Summary Income Tax

12,110

Income Summary Retained Earnings

22,490

12,110

12,110

22,490

Problem 9 - 6 Requirement 1 Triple F Products Inc. - Branch Trial Balance December 31, 2008

Cash Accounts Receivable Merchandise Inventory Accounts Payable Home Office Sales Cost of Sales Operating Expenses

Debit 12,800 48,160 27,280

Credit

2,040 68,900 256,000 191,620 47,080 326,940

_______ 326,940

AA1- Chapter 9 (2008 edition) page 12

Requirement 2 Home Office Books a.

b.

c.

d.

e.

f.

g.

a.

b.

Sales Income Summary Cost of Sales Operating Expenses

640,600 41,360 452,840 146,400

Branch Branch Income

17,300

Allowance for Overvaluation of Branch Inventory Branch Income P191,620 x 10/110 P21,100 ÷ (P202,400 + P29,700 – P21,100) = 10%

17,420

Branch Income Income Summary

34,720

Income Tax Income Tax Payable

26,628

Income Summary Income Tax

26,628

Income Summary Retained Earnings

76,080

Branch Books Merchandise Inventory P202,400 – P189,200 Home Office Sales Income Summary Cost of Sales Operating Expenses

c.

Income Summary Home Office Requirement 3

17,300

17,420

34,720

26,628

26,628

76,080

13,200 13,200 256,000 17,300 191,620 47,080 17,300 17,300

Combined net income (P41,360 + P34,720 – P26,628) Combined Merchandise Inventory: Home Office Branch [ P27,280 + P13,200) ÷110%

P49,452

P156,640 36,800

P193,440

AA1- Chapter 9 (2008 edition) page 13

Problem 9 - 7 Triple G Company Combined Statement of Recognized Income and Expenses for Home Office and Branch For the Year Ended December 31, 2008 Sales Cost of goods sold: Merchandise inventory, beginning Purchases Cost of goods available for sale Less Merchandise inventory, end Gross profit Operating expenses Net income before Income Tax Income Tax Net Income

P325,000 P107,500 215,000 P322,500 81,300

241,200 P 83,800 50,000 P 33,800 11,830 P 21,970

Inventory: Beginning Ending Home Office P 80,000 Branch P7,500 + (P24,000/120%) 27,500 P5,500 + (P26,000/125%) Total P107,500 ** P37,500 – P30,000 = P7,500/ P30,000 = 25% Requirement 2 Davao Branch Books a. Sales 75,000 Merchandise Inventory, end 31,500 Income Summary Shipments from Home Office Purchases Expenses Merchandise Inventory, beginning b.

Income Summary Home Office Requirement 3

P55,000 26,300 P81,300

12,500 37,500 15,000 10,000 31,500

12,500 12,500 Home Office Books

a.

b.

Davao Branch Branch Income Allowance for Markup in Branch Inventory Branch Income Markup on branch beginning inventory (P24,000 x 20/120) Markup on shipments Allowance balance before adjustments Markup on branch ending inventory (P26,000 x 25/125) Realized markup

12,500 12,500 6,300 6,300 P 4,000 7,500 P11,500 5,200 P 6,300

AA1- Chapter 9 (2008 edition) page 14

c.

d.

e.

f.

g.

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

250,000 30,000 55,000 15,000 200,000 40,000 80,000

Branch Income Income Summary

18,800

Income Tax Income Tax Payable

11,830

Income Summary Income Tax

11,830

Income Summary Retained Earnings

21,970

18,800

11,830

11,830

21,970

Problem 9 – 8 Requirement 2 a. Plant Assets Branch

4,000

b.

Home Office Accounts Receivable

2,000

Cash Branch

5,000

Expenses Home Office

1,000

Shipments from Home Office Home Office

3,000

Retained Earnings Inventory P15,000 x 20/120

2,500

c.

d.

e.

f.

g.

h.

4,000

2,000

5,000

1,000

3,000

2,500

Home Office Branch

11,000

Sales Shipments from Home Office

48,000

11,000

48,000

AA1- Chapter 9 (2008 edition) page 15

Problem 9 – 8 Triple J Wholesale Company Work Sheet for Combined Financial Statements For the Year Ended December 31, 2008 Adjustments and Eliminations

Trial Balance Home Office

Branch

Cash

36,000

8,000

Accounts Receivable

35,000

12,000

(b)

2,000

Inventory

70,000

15,000

(f)

2,500

Plant Assets, net

90,000

Branch

20,000

Debits

Debit

Credit

Income Statement Debit

Credit

(c ) 5,000

Balance Sheet Debit

Credit

49,000 45,000 82,500

74,500

(a) 4,000

74,500 94,000

(a)

4,000

(c ) 5,000 (g) 11,000 Purchases

290,000

Shipments from Home Office

24,000

314,000

45,000

(e)

3,000

44,000

16,000

(d)

1,000

61,000

(i) 36,400

36,400

585,000

120,000

Accounts Payable

36,000

13,500

49,500

Accrued Expenses

14,000

2,500

16,500

Expenses Income Tax

(h) 48,000

Credits

Income Tax Payable

(i) 36,400

Home Office

9,000

Ordinary Share Capital

50,000

Retained Earnings

45,000

Sales

(b)

2,000

(d)

1,000

(g) 11,000

(e)

3,000 50,000

(f)

2,500

440,000

95,000

(h) 48,000

585,000

120,000

112,900

42,500 487,000 112,900

Net income

Inventory, beg: Home Office Branch P2,000 + P21,000/120%

36,400

P55,000 19,500 P74,500

Invent ory, end: Home Office Branch

493,900

561,500

67,600 561,500

561,500

P70,000 12,500 P82,50

262,500

67,600 262,500

AA1- Chapter 9 (2008 edition) page 16

Problem 9 – 9 Triple M Company Work Sheet for Combined Financial Statements For the Year Ended December 31, 2008 Adjustments and Eliminations

Trial Balance Debits Cash Inventory Sundry Assets Investment in Branch Purchases Shipment from Office Freight-in from Office Sundry Expenses

HO 17,000

Branch 200

23,000 200,000

11,550 48,450

a.

Debit 1,700

b.

1,800 e.

60,000

Credit

Debit

Credit

1,000

33,550

44,770

Debit

Credit

Combined Balance Sheet Debit 20,700

105,000

c.

5,000

Home

5,500

d.

250

42,000

24,300

532,000

195,000

35,000

3,500

Income Tax

44,770 248,450

f. 110,000 5,750

h. 15,460

15,460 66,300 d. 250 h. 15,460

38,750 15,460 200,000

200,000

Retained Earnings Home Office Equity

31,000

Sales Shipments to Branch

155,000 110,000

31,000 51,500

g. 58,300

b. 1,800 c. 5,000

140,000

295,000 f. 110,000

1,000 532,000

e. 195,000

1,000 193,510

193,510

229,300

44,770

229,300

184,530 229,300

Cost of Goods Sold Net income

Merchandise inventory, end: Home office Branch [((P15,400 / 110%) + (P15,400 x 5%)] = P14,000 + P770 Total

Cred8t

190,000

Home

Allowance for Markup in BI

Income Statement

a. 1,700 g. 58,300

190,000

Credits Sundry Liabilities Income Tax Payable Ordinary Share Capital

Cost of Goods Sold

184,530 266,290

295,000

28,710 295,000

295,000

P30,000 14,770 P44,770

313,920

28,710 313,920

AA1- Chapter 9 (2008 edition) page 17

Problem 9 – 10 Triple N Commercial Working Paper for Combined Financial Statements for Home Office and Branch For the Year Ended December 31, 2008

Trial Balance Debits

HO

Cash

Adjustments

Branch

50,100

1,260

350,000

135,660

HO a.

5,320

b.

Adjusted Trial Balance

Eliminations

Branch

HO

2,100

55,420

Branch 3,360

350,000

133,160

Debit

Credit

Branch Income Statement

Home Office Income Statement

Debit

Debit

Credit

Credit

Combined Balance Sheet Debit

Credit

58,780 Accounts Receivable (net)

c. ( 2,500)

483,160 Inventory – Home office

64,400

64,400

64,400 70,000

Branch

32,340

Fixed Assets (net)

210,000

Branch Current

163,120

32,340

a. 2,940

29,400

32,200

102,200

210,000 210,000

Purchases

a. (5,320)

157,800

532,000

Shipments from Office Sundry Expenses

Home

532,000 294,000

119,980

c. 157,800

d. 14,000

83,440

Income Tax 1,489,600

546,700

Accounts Payable

30,500

10,500

Mortgage Payable

67,500

532,000 308,000

119,980

b. 28,000

280,000

83,440

f. 23,667

e. 10,976

23,667

10,976

23,667

24,576

1,513,267

571,276

30,500

10,500

119,980 83,440 10,976

23,667

Credits 41,000 67,500 67,500 Income Tax Payable

f. 23,667

e. 10,976

23,667

10,976 34,643

Home Office Current

144,200

b.

2,100

c. ( 2,500) d. 14,000 392,000

157,800 434,000

c. 157,800

Sales

434,000

392,000

Shipments to Branch

308,000

308,000

b.

28,000

2,940

2,940

a.

2,940

600,000

600,000

46,660

46,660

392,000

434,000 280,000

Allowance for Overvaluation Ordinary Share Capital

600,000 Retained Earnings

46,660 1,489,600

546,700

23,667

24,576

1,513,267

571,276

188,740

740,047 188,740

403,816

424,200

784,000

854,140

789,803

Branch net income 20,384

20,384

Home Office net income

43,953 43,953 424,200

Inventory, end: Home Office Branch [(P21,420 + P14,000) / 110%] Total

P 70,000 32,200 P102,200

424,200

784,000

784,000

854,140

854,140

AA1- Chapter 9 (2008 edition) page 18

MULTIPLE CHOICE 1. 2.

B B

9

A

3. C 4. D

5. D 6. B

10 11 12 13

C C D C

P13,200 + P350 = P13,550 P11,000 + P350 = P11,350

14

A

P12,000 x 20/120 = P2,000

15

D

Inventory, beginning (P165,000 / 125%) Shipments (P110,000 / 125%) Merchandise available for sale from home office at cost Cost of merchandise sold from home at cost Sales, net of returns and allowances Less Sales from merchandise purchased from outsiders (P7,500 x 120%) Sales from merchandise from home office Cost of sales at billed price Billed price rate Inventory destroyed by fire

7. D 8. D

P132,000 88,000 P220,000 P165,250 9,000 P156,250 ÷ 125% P125,000 ÷ 125%

100,000 P120,000

16

D

Balance of allowance before adjustment Required balance of allowance (P1,170,000 x 20/120) Realized markup

P370,000 195,000 P175,000

17

C

Sales Cost of goods sold (P120,000 x 3/4 x 125%) Gross profit Operating expenses Net income reported by the branch

P141,000 112.500 P 28,500 27,000 P 1,500

18

A

P50,400/120%

P42,000

19

B

P90,000 + P36,000 – P2,520 – P50,400/120% = P60,900

20

B

Net income (loss) reported by branch Realized markup (P90,000 + P36,000 – P2,520 - P50,400 = P73,080) x 20/120 True net income of the branch

(P 7,800)

Net income reported by branch Realized markup [(P3,960 + P17,600 – P4,840) x 10/110]

P 4,800 1,520

21

B

12,180 P 4,380

AA1- Chapter 9 (2008 edition) page 19

Actual branch income

P 6,320

22

B

Branch ending inventory, at cost (P4,840 / 110%) Home office ending inventory Ending inventory to be reported in the combined balance sheet

P 4,400 11,200 P15,600

23

D

Net income reported by the branch Realized markup[P280,000 - (P50,000 – P6,600)] x 40/140 True net income of the branch

P 5,000 67,600 P 72,600

24

B

Branch inventory from home office (P43,400 /140%) Branch inventory from outside purchases Total cost of branch inventory, end

P31,000 6,600 P37,600

25

D

P60,000 - P7,500

P52,500

26

A

P60,000 - (P7,500 x 120/20)

P15,000

27

B

Sales Cost of goods sold (P180,000 + P45,000 - P60,000) Operating expenses Realized markup [(P180,000 x 20/120) - P7,500 True net income of the branch

P 292,500 (165,000) ( 72,000) 22,500 P 78,000

28

A

Unadjusted balance of allowance account Markup on 2008shipments from home office (P390,000 – P300,000) Markup on beginning inventory Total merchandise inventory beg Merchandise from outside purchases

29

D

Sales Cost of goods sold (P54,600 + P390,000 + P144,600 - P48,750) Operating expenses Realized markup [P99,900 - (P39,000 x 30/130)] True net income of the branch

P99,900 90,000 P 9,900 x 130/30

P 42,900 54,600 P 11,700 P540,000 (540,450) ( 51,000) 90,900 P 39,450

30

C

P39,000 x 30/130 = P9,000

31

D

Sales (net of discount of P1,480) Cost of goods sold (P104,000 - P12,500) Operating expenses Net income reported by branch

P115,520 ( 91,500) ( 20,000) P 4,020

32

C

Net income reported by branch Realized markup (P91,500 x 25/125) True net income of the branch

P 4,020 18,300 P 22,320

AA1- Chapter 9 (2008 edition) page 20

33

C

34

D

35

36

C

A

Sales Cost of goods sold (P5,000 + P2,000 + P26,400 – P4,500) Operating expenses Realized markup [P2,800 – (P3,960 x 10/110)] True profit of Cebu branch

P 37,400 ( 28,900) ( 3,000) 2,440 P 7,940

Sales Cost of goods sold (P16,000 + P80,000 – P24,000 – P20,000) Operating expenses Net income of the home office Net income of the branch Combined net income of the home office and branch

P110,000

Sales Cost of sales: Inventory, beginning Purchases Goods available for sale Shipments to branch (P110,000/110%) Goods available for own sale Less Inventory, end Gross profit Expenses Net income

P155,000

Sales Cost of sales: Inventory, beginning (P11,550 – P1,000) Shipments from HO, including freight-in Goods available for sale Less Inventory, end [(P10,400 + P5,000)/110%] + P520 + P250 Gross profit Expenses True branch net income

( 52,000) ( 10,000) P 48,000 7,940 P 55,940

P 23,000 190,000 P213,000 100,000 P113,000 30,000

83,000 P 72,000 52,000 P 20,000 P140,000

P 10,550 105,750 P116,300 14,770

101,530 P 38,470 28,400 P 10,470

37

D

(P10,400 + P5,000) x 10/110

P1,400

38

B

Unadjusted balance of allowance account Markup on 2008 shipments (P200,000 x 25%) Markup on beginning inventory

P 57,500 50,000 P 7,500 x 125/25 P 37,500

Branch beginning inventory at billed price

AA1- Chapter 9 (2008 edition) page 21

39

C

Sales Cost of goods sold (P37,500 + P250,000 - P40,000) Operating expenses Net income reported by branch

P400,000 (247,500) (100,000) P 52,500

40

C

Net income reported by branch Realized markup (P247,500 x 25/125) True net income of the branch

P 52,500 49,500 P102,000

41

B

Beginning inventory Purchases Shipments from home office Ending inventory Cost of goods sold reported by branch Realized markup [P19,750 - (P6,000 x 25/125)* Cost of goods sold at cost

P 8,000 30,000 93,750 ( 10,350) P 121,400 ( 18,550) P 102,850

*P93,750 – P75,000 = P18,750/P75,000 = 25% 42

C

The amount of the realized markup of P18,550

43

C

Adjusted net income Reported net income Realized markup Cost of sales at cost (P70,000 + P350,000 – P84,000) – P96,000

P156,000 60,000 P 96,000 ÷ P240,000 140%

44

C

P84,000 x 40/140

P24,000

45

A

72,500 ÷ (75,000 + 444,000 -84,000 – 72,500)

20%

46

D

P444,000 / 120%

P370,000

47

D

Sales Cost of goods sold (P75,000 + P444,000 - P84,000) Operating expenses Realized markup [P72,500 - (P84,000 x 20/120)] Adjusted profit of the branch

P 600,000 (435,000) (200,000) 58,500 P 23,500

48

C

P84,000 x 20/120 = P14,000

49

A

P84,000 – P14,000 = P70,000

50

B

Home office inventory (P160,500 - P10,500) Branch inventory (P108,000/120%) Inventories reported in the combined balance sheet

P 150,000 90,000 P 240,000

AA1- Chapter 9 (2008 edition) page 22

Problem 9 – 8 Triple J Wholesale Company Work Sheet for Combined Financial Statements Adjustments and Eliminations

Trial Balance Home Office

Branch

Cash

36,000

8,000

Accounts Receivable

35,000

12,000

(b)

2,000

Inventory

70,000

15,000

(f)

2,500

Plant Assets, net

90,000

Branch

20,000

Debits

Debit

Credit

Income Statement Debit

Credit

(c ) 5,000

Balance Sheet Debit

Credit

49,000 45,000 82,500

74,500

(a) 4,000

74,500 94,000

(a)

4,000

(c ) 5,000 (g) 11,000 Purchases

290,000

Shipments from Home Office

24,000

314,000

45,000

(e)

3,000

44,000

16,000

(d)

1,000

61,000

(i) 36,400

36,400

585,000

120,000

Accounts Payable

36,000

13,500

49,500

Accrued Expenses

14,000

2,500

16,500

Expenses Income Tax

(h) 48,000

Credits

Income Tax Payable

(i) 36,400

Home Office

9,000

Ordinary Share Capital

50,000

Retained Earnings

45,000

Sales

(b)

2,000

(d)

1,000

(g) 11,000

(e)

3,000

36,400

50,000 (f)

2,500

440,000

95,000

(h) 48,000

585,000

120,000

112,900

42,500 487,000 112,900

Net income

For the Year Ended December 31, 2008

493,900

561,500

67,600 561,500

561,500

262,500

67,600 262,500

AA1- Chapter 9 (2008 edition) page 23

Problem 9 – 9 Triple M Company Work Sheet for Combined Financial Statements For the Year Ended December 31, 2008

Adjustments and Eliminations

Trial Balance Debits Cash Inventory Sundry Assets Investment in Branch Purchases Shipment from Office Freight-in from Office Sundry Expenses

HO 17,000

Branch 200

23,000 200,000

11,550 48,450

a.

Debit 1,700

b.

1,800 e.

60,000

Credit

Debit

Credit

1,000

33,550

44,770

190,000

Debit

Credit

Combined Balance Sheet Debit 20,700

c.

5,000

Home

5,500

d.

250

42,000

24,300

532,000

195,000

35,000

3,500

Income Tax

44,770 248,450

f. 110,000 5,750

h. 15,460

15,460 66,300 d. 250 h. 15,460

38,750 15,460 200,000

200,000

Retained Earnings Home Office Equity

31,000

Sales Shipments to Branch

155,000 110,000

31,000 51,500

g. 58,300

b. 1,800 c. 5,000

140,000

295,000 f. 110,000

1,000 532,000

e. 195,000

1,000 193,510

193,510

229,300

44,770

229,300

184,530 229,300

Cost of Goods Sold Net income

Merchandise inventory, end: Home office Branch [((P15,400 / 110%) + (P15,400 x 5%)] = P14,000 + P770 Total

Cred8t

190,000 105,000

Allowance for Markup in BI

Income Statement

a. 1,700 g. 58,300

Home

Credits Sundry Liabilities Income Tax Payable Ordinary Share Capital

Cost of Goods Sold

184,530 266,290

295,000

28,710 295,000

295,000

P30,000 14,770 P44,770

313,920

28,710 313,920

AA1- Chapter 9 (2008 edition) page 24