Solution Chapter 12

Chapter 12 Problem I (a)Working Fund – Agency ……………………………… ……………………….. Cash …………………………………………………………………………. (b)Accounts Receivable …………………………………..................................... Sales-Agency ……………………………………………………………….

5,000 5,000 50,000 50,000

(c)Cash ………………………………………………………..................................... Accounts Receivable ……………………………………………………..

35,000 35,000

(d)Expenses-Agency ……………………………………………………………….. Cash ………………………………………………………………………….

4,500

(e)Expenses-Agency ……………………………………………………………….. Cash ………………………………………………………………………….

2,250

4,500 2,250

(f) Cost of Goods Sold-Agency …………………………………………………… 36,000 Merchandise Inventory - Agency ………………………………………. 36,000 2. Sales……………………………………………………………………………….P 50,000 Less: CGS………………………………………………………………………… 36,000 GP………………………………………………………………………………….P 14,000 Less: Expenses (P4,500 + P2,250)…………………………………………….. 6,750 Net income – agency………………………………………………………….P 7,250 Problem II (a) Branch Books: (a) Cash ………………………………………………………….. Home Office ……………………………………………

42,500

(b) Shipments from Home Office …………………………… Home Office …………………………………………...

50,200

(c) Accounts Receivable ……………………………………. Sales ……………………………………………………..

60,000

(d) Purchases …………………………………………………… Accounts Payable ……………………………………

22,500

(e) Home Office ……………………………………………….. Accounts Receivable …………………………..

53,400

(f) Accounts Payable ………………………………………... Cash ……………………………………………………..

12,250

(g) Furniture & Fixtures ………………………………………… Cash …………………………………………………….. (h) Expenses …………………………………………………….. Cash ……………………………………………………..

42,500 50,200 60,000 22,500 53,400 12,250

8,000 8,000 18,000

18,000

(b) Home Office Books: (a) Branch ………………………………………………………. Cash …………………………………………………….

42,500

(b) Branch ……………………………………………………… Shipments to Branch ………………………………..

50,200

(c) Accounts Receivable …………………………………... Sales ……………………………………………………

105,000

(d) Purchases …………………………………………………. Accounts Payable ………………………………….

122,500

(e) Cash ……………………………………………………….. Accounts Receivable ………………………………

113,600

(f) Accounts Payable ………………………………………. Cash ……………………………………………………

124,000

42,500 50,200 105,000 122,500 113,600 124,000

(g) Expenses …………………………………………………… Cash ……………………………………………………

26,600

(h) Cash ……………………………………………………….. Branch ………………………………………………...

53,400

(i) Retained Earnings ………………………………………. Cash …………………………………………………...

10,000

26,600 53,400 10,000

BARTON CO. Balance Sheet for Branch December 31, 20x4

Assets

Liabilities

Cash …………………………… 10,250 Accounts Receivable ……… 300 Merchandise Inv……………... 37,900 Prepaid Expenses …………… Furnitures & Fixtures …. P 8,000 Less accum. Depr …… 650 Total Assets …………………… ………………….P48,450

P 4,250

Accounts Payable ………… P

12,600

Accrued Expenses ……………

23,500

Home Office …………………..

750 7,350 P48,450

Total Liabilities

BARTON CO. Income Statement for Branch For Year Ended December 31, 19X6 Sales …………………………………………………………………………… P66,000

Cost of Goods Sold: Purchases …………………………………………………………… Shipments for home office ………………………………………. Merchandise available for sale ………………………………… Less merchandise inv, December 31 ………………………….. Cost of Goods Sold ……………………………………………….. Gross Profit ……………………………………………………………………. Expenses ……………………………………………………………………… Net loss ………………………………………………………………………... BARTON CO. Income Statement for Branch For Year Ended December 31, 20x4 Assets

P22,500 P72,700

50,200 23,500 49,200 P16,800 18,200 P 1,400

Liabilities & Stockholders’ Equity

Cash …………………………….. P 23,200 Liabilities Accounts Receivable ……….. 19,050 Accounts payable ………… P 21,300 Merchandise Inventory……… 48,500 Accrued Expenses …………. 1,350 P22,650 Prepaid Expenses ……………. 2,050 Stockholders Equity Furniture & Fixtures …. P 20,000 Capital stock, P20 par……… P50,000 Less accum. Depr….. 5,580 14,420 Retained Earnings …………. 72,740 122,470 Branch ………………………… 37,900 Total liabilities and stockholders’ Total Assets …………………... P145,120 equity ………………… P145,120 BARTON CO. Income Statement for Home Office For Year Ended December 31, 20x4 Sales ……………………………………………………………………………....... Cost of goods sold: Merchandise inventory, January 1 …………………………………. Purchases ………………………………………………………………... Merchandise available for sale ……………………………………… Less shipments to branch ……………………………………………... Merchandise available for own sale ……………………………….. Less merchandise inventory, December 31 ………………………. Cost of Goods Sold ……………………………………………………. Gross Profit ………………………………………………………………………… Expenses …………………………………………………………………………… Net income from own operations …………………………………………….. Deduct branch net loss …………………………………………………………. Total Income ……………………………………………………………………….

P105,000 P 40,120 122,500 P162,620 50,200 P112,420 48,500

63,920 P 41,080 27,630 P 13,450 1,400 P 12,050

BARTON CO. Income Statement for Home Office For Year Ended December 31, 20x4 Sales …………………………………………………………………………………. Cost of goods sold: Merchandise inventory, January 1 ………………………………….. Purchases ………………………………………………………………… Merchandise available for sale ………………………………………

P171,000 P 40,120 145,000 P185,120

Less merchandise inventory, December 31 ……………………….. Cost of goods sold ………………………………………………………. Gross profit ………………………………………………………………………….. Expenses …………………………………………………………………………….. Net Income ………………………………………………………………………….

72,000 113,120 P 57,880 45,830 P 12,050

(a) Branch Books: Expenses ………………………………………………………………. Accumulated Depreciation – F&F………………………. Sales …………………………………………………………………… Merchandise Inventory ……………………………………………. Income summary …………………………………………..

650

650 66,000 23,500 89,500

Income Summary …………………………………………………… Shipments from Home Office …………………………… 50,200 Purchases …………………………………………………… 22,500 Expenses ……………………………………………………..

90,900

18,200

Home Office ………………………………………………………… Income Summary …………………………………………

1,400 1,400

(b) Home Office Books Expenses ………………………………………………………………. Accumulated Depreciation – F&F……………………….

1,180 1,180

Sales …………………………………………………………………… Merchandise Inventory ……………………………………………. Shipments to Branch ……………………………………………….. Income summary …………………………………………..

105,000 48,500 50,200 203,700

Income Summary …………………………………………………… Merchandise Inventory …………………………………… Purchases ……………………………………………………. Expenses ……………………………………………………..

190,250

Branch Income ……………………………………………………… Branch ……………………………………………………….

1,400

40,120 122,500 27,630

Income Summary ………………………………………………….. Branch Income ……………………………………………

1,400

Income Summary ………………………………………………….. Retained Earnings ………………………………………..

12,050

1,400 1,400 12,050

Problem III Journal and Adjusting Entries – Home Office and Branch Home Office Books INTERCOMPANY 1/1 a

Branch Current . . . . . . . Cash . . . . . . . . . . . . . . .

1,500 1,500

/

Branch Books INTER-OFFICE Transactions

Cash . . . . . . . . . . . . . . . . . . . ... Home Office Current. . . . . .

1,500 1,500

b

c

d.

Shipment to branch, cost Branch Current . . . . . .

10,20 0

SFF - Branch Store Furniture & Fixt

3,000

Acc. Depreciation – SFF Acc. Deprec. SFF – Br. P3,000 x 10% x 2.5 yrs

750

SFF – Branch . . . . . . . . . . Branch Current . . . . . .

900

Branch Current . . . . . . . Accounts Receivable

10,20 0

Home Office Current . . . . . . . . Shipments from Home Office

3,000

No entry – eqpt accounts maintained in the HO books

750

No entry – eqpt accounts maintained in the HO books

900 2,600

10,200 10,20 0

Home Office Current . . . . . . . . Cash . . . . . . . . . . . . . . . . . .. Accounts Receivable - HO

2,600

900 900 2,600

Home Office Current. . . . .

2,600

.

1/1 – 1/31

Transaction with Outsiders

Accounts Receivable . . .

34,60 0 34,60 0

Sales.. . . . . . . . . . . . . . . Cash. . . . . . . . . . . . . . . ... Accounts Receivable

40,00 0

Purchases . . . . . . . . . . . . Accounts Payable . .

31,60 0

Accounts Payable . . . . .

36,20 0

Cash. . . . . . . . . . . . . .. Accrued expenses . . . . .

250

Expenses. . . . . . . . . . . . . . Cash. . . . . . . . . . . . . ..

8,950

1/1 – 1/31

Allowance for D/A. . . . .

Accounts Receivable . . .

6,200

Sales.. . . . . . . . . . . . . . .

6,200 2,600

40,00 0

Cash . . . . . . . . . . . . . . . . . . . ... Accounts Receivable . . . . .

3,000

31,60 0

Purchases. . . . . . . . . . . . . . . . .. Accounts Payable. . . . . . . . Accounts Payable . .. . . . . . . .

1,450

36.20 0

2,600

3,000

Cash. . . . . . . . . . . . . . . Expenses . .. . . . . . . . . . . . . . .. Cash. . . . . . . . . . . . . . .. . . ..

1,450 1,250 1,250

9,200

Intercompany / INTER-OFFICE Transactions

150

Branch Current . . . . . .

150

Shipment to branch ,cost Branch Current . . . . . .

1,250

Cash. . . . . . . . . . . . . . . . . Branch Current . . . . . .

1,000

1,250

1,000

Cash . . . . . . . . . . . . . . . . . . . ... Accts. Rec. – HO…………….

1,600

Home Office Current . . . . . . . . Accts. Rec. – HO…………….

150

Home Office Current . . . . . . . . Shipments from Home Office

1,250

Home Office Current . . . . . . . .

1,000

Cash. . . . . . . . . . . . . . . . . . .

1,600

150

1,250

1,000

Adjusting Entries a.

b.

Shipment to branch, cost Branch Current . . . . . .

600

Branch Current . . . . . . ..

475

600

475

Expenses. . . . . . . . . . . c.

600

Expenses. . . . . . . . . . . . . . . .... Home Office Current . . . . . .

475

600

475

Branch Current.. . . . . . 35 Expenses. . . . . . . . . . . . . . . 35 .. .... Acc. Deprec. SFF – 35 Home Office Current . . . . . 35 Br. . P3,000/10 years x 1/12 = P25 (depreciation for one month; Asset life, 10 years); P900 / 7.5 years, remaining life = P120 x 1/12= P10) Expenses. . . . . . . . . . . . 100 .. Acc. Deprec. – SFF [(P15,000 – P3,000)/10 x 1/12]

d. e.

Home Office Current . . . . . . . . Shipments from Home Office

Included in closing entries Expenses. . . . . . . . . . . . .. Accrued expenses. . .

100

750

Expenses. . . . . . . . . . . . . . 750

350

Accrued expenses. . .

350

Closing Entries Sales. . . . . . .. . . . . . . . ... Merch. inventory, ending Shipments to branch

34,60 0 44,50 0 12,05 0

Merch. Inv. , beg…….

6,200

Merch. inventory, ending (P9,800 + P600) 46,00 0 31,60 0

Purchases. . . . . . . . . . Expenses (9,200 – 250 - 475 + 100 + 750) ….. Income Summary……

Income Summary. . . . . . .

10,400 560

Merch. Inv. , beg…….

0

Purchases. . . . . . . . . .

Branch Income Summary Branch Current……….

560

Income Summary……….. Branch Income Sum

560

Income Summary……….. Retained Earnings…..

Sales. . . . . . .. . . . . . . . . . .

9,325

Shipments from HO

4,225

(P10,200 + P1,250 +P600) Expenses (1,250 + 475 + 35 + 350)…………….

560

Home Office Current . . . . . . . . Income Summary . . . . . . . .

560 3.665 3,665

EAGLE CO. Balance Sheet for Branch January 31, 20x4

3,000

12,050 2,110 560 560

Assets

Liabilities

Cash …………............................ Accounts Receivable ………….. Accts. Rec.-home office ………. Merchandise Inventory ………… Merchandise in Transit …………. Total assets ………………… P15,950

P 1,100 3,600 850 9,800 600 P15,950

Accounts Payable ………………. P 1,550 Accrued expenses ………………. 350 Home Office ……………………… 14,050 Total Liabilities …………………….

EAGLE CO. Income Statement for Branch For Month Ended January 31, 20x4 Sales …………………………………………………………………………………………. P 6,200 Cost of Goods Sold: Merchandise inventory, beginning………………………………..P 0 Add: Purchases ………………………………………………………. 3,000 Shipments from home office (P11,450 +P600, in-transit) 12,050 Merchandise Available for Sale ……………………….. P 15,050 Less: Merchandise inv. Dec 31, 19x4 (P9,800 + P600)…. 10,400 Cost of Goods Sold ……………………………………………………………. 4,650 Gross Profit ………………………………………………………………………………… P 1,550 Expenses …………………………………………………………………………………… 2,110 Net Loss, from own operations………………………………………………………… P 560 EAGLE CO. Balance Sheet for Home Office January 31, 20x4 Assets Cash …………………………………………………………………… Accounts Receivable ……………………………………………… P34,000 Less allowance for doubtful accounts ……………….. 1,050 Merchandise Inventory ……………………………………………. Store furniture and fixtures ………………………………………… P12,000 Less accumulated depreciation ………………………. 3,950 Store furniture and fixtures-branch ……………………………… P 3,900 Less accumulated depreciation ……………………… 785 Branch office ………………………………………………………... Total Assets ……………………………………………………………

P 9,100 32,950 44,500 8,050 3,315 14,050 P111,765

Liabilities Accounts Payable …………………………………………….. P29,150 Accrued Expenses …………………………………………….. 750 Total Liabilities ………………………………………………….. Stockholders’ Equity Capital Stock ……………………………………………………P50,000 Retained earnings …………………………………………….. 31,865 Total stockholder’s equity …………………………………… Total liabilities and stockholders’ equity ……………………

P29,900

81,865 P111,765

EAGLE CO. Income Statement for Home Office For Month Ended January 31, 20x4 Sales ……………………………………………………………………………… P 34,600 Cost of goods sold: Merchandise inventory, January 1 …………………….. P46,000 Purchases …………………………………………………… 31,600 Merchandise available for sale ………………………… 77,600 Less shipments to branch ………………………………… 12,050 Merchandise available for own sales …………………. P65,550 Less merchandise inventory, January 31 ……………… 44,500 Cost of goods sold …………………………………………………………… 21,050 Gross Profit ………………………………………………………………………… P 13,650 Expenses …………………………………………………………………………… 9,325 Net income from own operations ……………………………………………. P 4,225 Deduct branch net loss ………………………………………………………… 560 Total Income …………………………………………………………………… P 3,665 EAGLE CO. Income Statement for Home Office For Month Ended January 31, 20x4 Assets Liabilities’ and Stockholders’ Equity Liabilities Cash …………………………….. ………. P 10,200 Accounts Payable …… P30,700 Accounts receivable ……….. P38,450 Accrued Expenses …… 1,100 P 31,800 Less allow for doubtFul accounts ……….. 1,050 37,400 Merchandise Inventory ……………….. 54,900 Stockholders Equity Store furn. & fixtures ………… P15,900 Capital Stocks …………P50,000 Less accum depr 4,735 11,165 Retained earnings …… 31,865 81,865 Total assets ……………………………… P113,665 Total liab. And stockholders’ equity . P113,665 EAGLE CO. Combined Income Statement for Home Office and Branch For Month Ended January 31, 20x4 Sales ………………………………………………………………………………….. Cost of goods sold: Merchandise Inventory, January 1 ………………. P46,000 Purchases ……………………………………………... 34,600 Merchandise available for sale …………………... P80,600 Less merchandise inventory, Jan 31 ……………... 54,900 Cost of goods sold …………………………………............................... Gross profit …………………………………………………………………………... Expenses ……………………………………………………………………………… Net Income ………………………………………………………………………….. EAGLE CO. Combined Balance Sheet

P 40,800

25,700 P 15,100 11,435 P 3,665

January 31, 20x4 Assets Cash …………………………………………………………………… Accounts Receivable ……………………………………………… P38,450 Less: Allowance for doubtful accounts ………………………… 1,050 Merchandise Inventory ……………………………………………. Store furniture and fixtures ………………………………………… P15,900 Less: Accumulated depreciation ……………………………….. 4,735 Total Assets …………………………………………………………… Liabilities Accounts Payable …………………………………………….. P30,700 Accrued Expenses …………………………………………….. 1,100 Total Liabilities ………………………………………………….. Stockholders’ Equity Capital Stock …………………………………………………… Retained earnings …………………………………………….. Total stockholder’s equity …………………………………… Total liabilities and stockholders’ equity ……………………

P 10,200 37,400 54,900 _ 11,165 P113,665

P 31,800

P50,000 31,865 81,865 P113,665

Problem IV 1. Socrates Company Home Office and Plato Branch Reconciliation of Reciprocal Ledger Accounts June 30, 20x4 Investment in Plato Branch Ledger Account Account (Debit) Balances prior to adjustment P85,000 Add: Merchandise shipped to branch Less: Acquisition of office equipment by branch (carried in accounting records of home office)(14,500) Collection of branch trade accounts receivable Payment of cash by branch (22,000) Adjusted balances P48,500 2.

Home Office Ledger (Credit) P33,500 24,000 (9,000) _______ P48,500

(a) Accounting records of home office: Office Equipment: Plato Branch 14,500 Investment in Plato Branch To record acquisition of office equipment by branch. Cash in Transit Investment in Plato Branch To record cash in transit from branch. (b)

Accounting records of branch: Home Office

22,000

9,000

14,500

22,000

Trade Accounts Receivable To record collection by home office of branch accounts receivable. Inventories in Transit Home Office To record shipment of merchandise in transit from home office. Problem V ((a) Balances before Adjustments ……………………………………….. Adjustments: Additions: Merchandise in transit to branch …………………. Collection of Home office receivable by Branch Understatement of branch net income for Nov.. Deductions: Merchandise return to home office in transit ……………. Corrected Balances ……………………………………………… (b) Branch Books: Shipments from Home Office-in Transit ……………………. Home Office …………………………………………... Home Office Books: Branch …………………………………………………………… Accounts Receivable ……………………………….. Branch …………………………………………………………… Retained Earnings ……………………………………. Merchandise Returns from Branch – in Transit ……………. Branch …………………………………………………..

9,000

24,000 24,000

BRANCH ACCOUNT P 8,400

HOME OFFICE ACCOUNT… P 9,735 615

2,500 90 P10,990

P10,350

640 P10,350

P10,350

615 615 2,500 2,500 90

90

640 640

Problem VI

1. Branch Account Balances before adjustments Adjustments: Additions: Advertising charged to branch but not yet recorded on branch books Merchandise in transit to branch but not yet shown on branch books Collection of home office account by branch not yet recorded by home office Deductions:

P 77,150

Home office Account P 56,450

600 4,400 ____750 P77,900

_______ P61,450

Overstatement of branch profit for 20x0 on home office books Cash in transit to home office but not yet shown on home office books Overstatement of charge for merchandise from home office on branch books (home office shipped 200 units @ P37.85, or P7,570, and 200 units @ P44,95, or P8,990, a total of P16,560; branch erroneously recorded shipment at P16,650, an overstatement of P90 Corrected balances 2. Home office books: Jan. 31 Retained Earnings Wilshire Branch 31 31

Cash in Transit Wilshire Branch Wilshire Branch Accounts Receivable

Branch Books: Jan. 31 Advertising Expense Home Office 31 31

Shipments from Home Office – In Transit Home Office Home Office Shipments from Home Office

540 16,000

_______ P 61360

___90 P 61,360

540 540 16,000 16,000 750 750 600 600 4,400 4,400 90 90

Problem VII

1. Branch Account Balances before adjustments Adjustments: Additions: Corrected branch income for January (P1,440 – P215) Understatement of branch paid by home office for December Expenses of branch paid by home office Deductions: Collection by home office of branch receivable Correction of branch income for January Merchandise transferred to Brentwood branch but incorrectly charged by Beverly Hills branch Merchandise returns to home office in transit

P 59,365

Home Office Account P 57,525

1,225 310 _______ P 60,900

____215 P 57,740 65 215

1,400 840

Uncollectible accounts of branch Corrected Balances

__1,200 P 57,460

_______ P 57,460

2. (a) Entries to bring branch books up to date: Correction in Income of Prior Periods Home Office

215

Home Office Income Summary

215

215 215

Home Office Accounts Receivable

65 65

(b) Entries to bring home office books up to date: Beverly Hills Branch Beverly Hills Branch Income Beverly Hills Branch Retained Earnings

1,225 1,225 310 310

Shipments to Beverly Hills Branch Beverly Hills Branch

1,400

Brentwood Branch Shipments to Brentwood Branch

1,400

1,400

Merchandise Returns from Branch – In Transit – Beverly Hills Branch Beverly Hills Branch Allowance for Doubtful Accounts – Beverly Hills Branch Beverly Hills Branch

1,400 840 840 1,200 1,200

Problem VIII 1. (b) Mdse. allowance by home office (f) Truck repairs charged by home office

Net credit Total

Home Office (a) Charge for office furniture 350.00 by home office (d) Charge for labor by home 293.00 office (e) Charge for freight by home office (h) Proceeds from sale of truck 643.00 1,556.5 0 1,229.5 0

780.00 866.00 78.50 475.00 2,199.5 0 _______ 2,199.5 0

(a) Purchase of office furniture for branch (c) Branch charge for interest (d) Branch charge for labor (e) Branch charge for freight

Branch (b) Mdse. allowance for 870.00 branch 325.00 (g) Proceeds from sale of truck 433.00 _785.0 0 2,413.0 0 _______ Net Debit Total 2,413.0 0

Balance in branch account per home office book, September 30, 20x2 Deduct net debit total per home office books for transactions that involve discrepancies Add net credit total per branch books for transaction that involve discrepancies Balance in home office account per branch books, September 30, 20x2

300.00 475.00 ______ 775.00 1,638,00 0 _2,413.0 0 P 131,690.00 1,638.00 P 130,052.00 __1,556.50 P 131,608.50

2. Balance in home office account per branch books, September 30, 20x2 Add:

P 131,608.50

(a) Failure by branch to take up full furniture charges (b) Recognition by branch of excess merchandise allowance (c) Failure by branch to recognize charge by home office for interest (e) Failure by branch to recognize full freight charges (f) Truck repairs charge to home office account in error

P 90.00

Deduct: (d) Recognition by branch of excess labor charges (h) Credit entry to home office made in error on sale of truck Corrected interoffice balance, September 30, 20x2

433.00

50.00 325 706.50 293.00

__475.00

___1,464.50 P 133,073.00

___908.00 P 132,265.00

3. Balance in branch account per home office books, September 30, 20x2

P

131,690.00 Add credit to branch account made in error for proceeds from sale of truck Corrected interoffice balance, September 30, 20x2

_____475.00 P 132,265.00

4. Office Furniture Merchandise allowances Home office interest charges payable Interest expense Freight In Repairs on truck Labor Trucks Home Office

90.00 50.00 250.00 75.00 706.50 293.00 433.00 475.00 556.50

Multiple Choice Problem 1.

d Branch A Assets: Inventory, January 1 Imprest branch fund Accounts receivable, January 1 Total Assets Less: Liabilities Home Office Current Account

2.

P 21,000 2,000 55,000 P 78,000 -0P 78,000

Branch B P 19,000 1,500 43,500 P 64,000 -0P 64,000

b Branch A Assets: Inventory, December 31 Imprest branch fund Accounts receivable, December 31 Total Assets Less: Liabilities Home Office Current Account

P 19,000 2,000 70,000 P 91,000 -0P 91,000

Branch B P 12,000 1,500 53,500 P 67,000 -0P 67,000

3. d – incidentally, the entry in the books of the branch would be as follows: Profit and loss summary ………………………………………………………… xxx Home Office Current……………………………………………………. Xxx 4. c January 1,20x4 Assets: Inventory Petty cash fund Accounts receivable Total Assets Less: Liabilities Home Office Current Account 5. a – refer to No. 4 for computations

P 37,000 3,000 43,000 P 83,000 _____-0P 83,000

January 1, 20x5 P 41,000 3,000 49,000 P 93,000 _____-0P 93,000

6. a Sales Less: Cost of goods sold: SFHO…………………………………………………………… Less: Inventory, ending……………………………………… Gross profit…………………………………………………………… Less: Expenses – Net Loss……………………………………………………………….. 7. a

P 74,000 P67,680 9,180

58,500 P 15,500 6,820 P 8,680

January 1, 20x6 Assets: Cash Inventory Accounts receivable Total Assets Less: Liabilities Home Office Current Account

P 4,200 9,180 12,800 P 26,180 _____-0P 26,180

8. a – nominal accounts have zero beginning balance. 9. d Branch Current

H. Office Current

Unadjusted balance, 6/30/20x4 P 225,770 P 226,485* Add (Deduct): Adjustments 1 Erroneous recording of branch equipment 3150 2. Insurance premium recorded twice ( 675) 3. Erroneous recording of freight ( 90) 4. Discount on merchandise ( 800) 5. Failure by the branch to record share in advertising 700 6. error by the home office to record remittance of 3,000 ________ Cebu Adjusted balance, 6/30/20x4 P 228,770 P 228,770 * The P226,485 is compute simply by working back with P228,770 adjusted balance as the starting point.

10. c

Unadjusted balance Add (deduct) adjustments: In transit Remittance Returns Cash in transit Expenses - HO Expenses – branch Error Adjusted balance 11. d

Home Office Books (Branch CurrentDr. balance) P518,575

Branch Books (Home Office Current – Cr. balance) P452,276 10,500

( 17,000) ( 775) (

800)

________ P 500,000 Home Office Books (Branch CurrentDr. balance)

25,000 12,000 _____224 P 500,000 Branch Books (Home Office Current – Cr. balance)

Unadjusted balance Add (deduct) adjustments: Excess freight Cash in transit Returns Expenses – branch Adjusted balance

P515,000

P495,750 (

750)

( 11,000) ( 4,000) ________

5,000

P 500,000

P 500,000

12. 13. 14. 15.

c – refer to No. 11 for computations a – refer to No. 11 for computations d – refer to No. 11 for computations d - No entry should be made in the books of the home office, since the freight should be chargeable to the branch and the payment of the freight was made by the branch. 16. a Home Office Books Branch Books (Branch Current(Home Office Current – Dr. balance) Cr. balance) Unadjusted balance P85,000 P33,500 Add (deduct) adjustments: Collection of branch receiv ( 9,000) Shipments in transit 24,000 Purchase by branch of office equipment ( 14,500) Remittance ( 22,000) _________ Adjusted balance P 48,500 P 48,500 17. b

Unadjusted balance Add (deduct) adjustments: Remittance Returns Error by the branch Expenses – branch Adjusted balance

Home Office Books (Branch CurrentDr. balance) P590,000

Branch Books (Home Office Current – Cr. balance) P506,700

(40,000) (15,000) ________

300 28,000

P 535,000

P 535,000

Home Office Books (Branch CurrentDr. balance) P150,000

Branch Books (Home Office Current – Cr. balance) P117,420

18. c

Unadjusted balance Add (deduct) adjustments: In transit HO A/R collected by br. Supplies returned Error in recording Br. NI Cash sent to branch to General Expense by HO Adjusted balance

37,500 10,500 ( 4,500) ( 1,080) 25,000 P 179,920

25,000 P 179,920

19. d – refer to No. 18 for computation. 20. a

Unadjusted balance Add (deduct) adjustments: In transit HO A/R collected by br. Cash in transit Error in recording Br. NI Adjusted balance

Home Office Books (Branch Current- Dr. balance) P40,000

Branch Books (Home Office Current – Cr. balance) P31,100 5,800

500 2,000 ( 3,600) P38,900

2,000 _______ P38,900

Home Office Books (Branch Current- Dr. balance) P49,600

Branch Books (Home Office Current – Cr. balance) P44,00

21. a – refer to No. 20 for computations 22. a

Unadjusted balance Add (deduct) adjustments: Collection of branch A/R In transit Purchase of furniture Return of excess merchandise Remittance Adjusted balance

( ( 1,200) ( 1,500) ( 500) P46,400

800) 3,200

_______ P46,400

23. b – refer to No. 22 for computations 24. (C) Sales (P350,000 + P100,000)………………………………………………………….P 450,000 Less: Cost of goods sold: Purchases (P400,000 + P50,000)……………………………. P 450,000 Less: Inventory, ending……………………………………… 90,000 360,000 Gross profit…………………………………………………………… P 90,000 Less: Expenses – Salaries and commission…………………………………….. P 70,000 Rent……………………………………………………………… 20,000 Advertising supplies (P10,000 – P6,000)…………………… 4,000 Other expenses………………………………………………. 5,000 99,000 Net Loss……………………………………………………………….. P ( 9,000) 25. a In adopting the imprest system for the agency working fund, the home office writes a check to the agency for the amount of the fund. Establishment of the fund is recorded on the home office books by a debit to the Agency working fund and credit cash. The agency will request fund replenishment whenever the fund runs low and at the end of each fiscal period. Such a request is normally accomplished by an itemized and authenticated statement of disbursements and the paid vouchers. Upon sending the agency a check in replenishment of the fund, the home office debits expense or other accounts for which disbursements from the fund were reported and credits cash. 26. d

Normally, transactions of the agency are recorded in the books of the home office separately identified with the appropriate agency.

Quiz- XII 1. P78,000

Branch A

Assets: Inventory, January 1 Imprest branch fund Accounts receivable, January 1 Total Assets Less: Liabilities Home Office Current Account

P 21,000 2,000 55,000 P 78,000 _____-0P 78,000

2. P64,000 – refer to No. 1 3. P10,416 Sales ……….………………………………………………………… Less: Cost of goods sold: Purchases……………………………..………………………. Shipments from home office……………………………… Less: Inventory, ending (P3,391 + P7,625)…….………… Gross profit…………………………………………………………… Add (deduct): Expenses……………………………………………………….. Interest expense………………………………………………. Gain on sale…………………………………………………... Net Income……………………………………………………………….. 4. P31,416 = P21,000 + P10,416 5. Zero, since it is a nominal account 6. P117,420

Unadjusted balance Add (deduct) adjustments: In transit HO A/R collected by br. Supplies returned Error in recording Br. NI Cash sent to branch to General Expense by HO Adjusted balance

Home Office Books (Branch CurrentDr. balance) P150,000

7. P179,920 - refer to No. 6 for computation. 8. c 9. a 10. P7,100 Sales Less: Cost of goods sold Gross profit Less: Expenses

10,500 ( 4,500) ( 1,080) 25,000 P 179,920

Branch B P 19,000 1,500 43,500 P 64,000 _____-0P 64,000

P 80,000 P 25,000 56,216 11,016 70,200 P 9,800 ( 7,500) ( 684) 8,800 P 10,416

Branch Books (Home Office Current – Cr. balance) P117,420 37,500

25,000 P 179,920

P17,600 10,500 P 7,100

Salaries and commission [P1,750 + (5% x (P17,600 – P10,000) Rent expense Advertising expense Samples expense [(P5,000 – P2,000) x 1/6] Advertising materials expense (3/5 x P1,250) Depreciati0n expense [(P2,400 / 5 years) x 1/12] Miscellaneous expense Net income

P 2,130 800 325 500 750 40 ___600

__5,145 P 1,955

11. P5,145 – refer to No. 10 12. P1,955 – refer to No. 10

Theories 1.

decentralized

2.

Home Office Current

3.

Branch Income

4.

Home Office

5.

intracompany

6.

True

7.

True

8.

False

9.

False

10 ,

True

11 . 12 . 13 . 14 . 15 . 16 . 17 . 18 . 19 . 20 .

False

21.

False

31.

E

False

22.

True

32.

B

False

23.

True

33.

c

True

24.

True

34.

d

True

25.

False

35.

A

False

26.

C

36.

C

True

27.

A

37.

A

False

28.

A

38.

B

True

29.

D

39.

B

True

30.

A

40.

B

41 . 42 . 43 . 44 . 45 . 46 . 47 . 48 . 49 . 50 . 51 . 52 .

A C B D D C B B C C C D