Home Office Agency and Branch Financials

HOME OFFICE, AGENCY AND BRANCH
1. On November 2, 2015, L Sison Company created an agency in Davao, and

transferred merchandise samples costing P15,000, equipment worth
P36,000 and a cash working fund of P10,000 to be maintained on an
imprest basis. The agency transmitted to the home office sales orders
which were billed at P90,000 of which P46,550 was collected net of a 2%
discount. The agency also paid for its operating expenses of P7,500
including supplies of P2,000. The agency received replenishment thereof
from the home office before the year ended. On December 31, the agency
samples were estimated to be useful over a period of 5 months while the
equipment is estimated to have a useful life of eight years. Unused
supplies on Dec 31 amounted to P1,000. Home office maintains a gross
profit rate of 25% of cost.
a. How much is agency profit at the end of December?
b. Give the agency real accounts that will be presented in the Dec. 31
balance sheet.
b. Give the cost of sales of Home Office if its Inventory on Nov 2 is
P1,250,000 while on hand at Dec 31 went down to 20% of total stock .
Net purchases was P2,750,000 including freight of P50,000.
2. Celestial Corporation shows the following balance sheet accounts as at Jan
1, 2015:
Cash
P 93,750
Accounts Receivable
7,250
Inventory
Payable
Furniture & Fixtures
2,500,000
Allowance for Bad Debts
263,250
P476,500
Accumulated Depreciation
1,050,000
Accrued Expenses
1,300,000
Accounts
743,750
750,000
Capital Stock
31,500
Retained
Earnings
On this date, management decided to establish a branch in Baguio

and reported the following transactions for the first quarter of 2015:
a) Transferred cash P150,000, merchandise P500,000 with freight prepaid
based on 2% of its shipment cost.
b) Home office approved on Feb 1, the purchase by the branch of its
furniture and fixtures costing P75,000 for its own use. Home office
policy was to maintain and control all fixed assets.
c) The branch was authorized to take over P60,000 home office accounts
from its Baguio customers and make the necessary collections. Home
Office issued a debit memo for this.
d) Summary of account sales and (collections) for the quarter : Home
Office- P1,865,000 and
(1,499,400 net of a 2% discount) and for the Branch- P655,000
(P565,000).
e) Summary of account purchases and (payments): Home OfficeP790,000 and (P745,000)
and for the Branch- P150,000 and (P88,755 net of a 3% discount).
f) Operating Expenses paid including accrued expenses, if anyHome Office, P230,000 and Branch, P 131,250.
g) Returns from the original shipment amounted to P75,000. Freight on
returns was paid
by the branch. Allocated freight and freight paid by branch were all
charged to home office as a loss account.
h) From the Baguio accounts turned over in c), collections were made
accordingly less a discount of 2% which the branch charged to the
home office.
i) P11,875 of the expenses paid by home office in f) were charged to the
branch.
j) Cash remittance was made by the branch in excess of original cash
transfer.
k) Depreciation was recorded at a rate of 12%.
l) Unpaid utility bills: P67,500 for home office and P18,500 for the branch.
m) Policy on doubtful accounts was to be maintained based on the previous

rate.
Required: 1) Entries to record transactions a) to m) in parallel column.
2) Closing Entries (one entry to close all the nominal accounts)
including set up of inventory per count: Home Office P785,500 and
Branch P130,750.
3) Present the Plant Asset section of the Statement of Financial
Position of the Home Office.
4) Present the Income statement of the Home Office and the
Branch using the
following format:
Income Statement
Combined
Home Office
Branch
Sales
Less Sales Discounts
(___________)
(___________)
(_________)
Net Sales
____________
___________
__________
Cost of Sales:
Inventory, Beginning
Net Purchases
Shipments from Home
Office
Freight In
____________
___________
__________
(___________)
____________
___________
____________
____________
___________
____________
Total
Shipments to branch
(
)
Inventory, Ending
Gross Profit
Less Operating Expenses:
Bad Debts
Depreciation
Utilities
Other operating expenses
____________
___________
__________
P__________
P_________
Net Profit from Operation

Branch Profit (Loss)
Loss on Branch Transfers
Net Profit
P___________
SOLUTION 3BAC
Home Office, Agency and Branch
1. a)
Income & Expense Summary
Samples Used
6,000 Sales
90,000
Supplies
1,000
Cost of Sales
72,000
Depreciation
750
Other expenses
5,500
Sales discount
950
Balance
2.
Home Office Books
Investment in branch
660,000
Cash
Shipments to Branch
Furn & Fix, Branch
Investment in Branch
75,000
Accts Receivable
60,000
Accts receivable
Sales
1,865,000
Cash
Sales Discount
Accts. Receivable
1,499,400
30,600
3,800
b. Real Accounts:
Agency Samples
Working Fund, Dvo Agency
Supplies, DvoAgency
Equipment, DvoAgency
Accum Depn
c. Home Office Cost of Sales
4.Inventory, Nov 2
Net Purchases
Freight In
Shipments
Inventory, Dec 31
Home Office Equity

Cash
75,000
Acct Receivable
Home Office Equity
60,000
60,000
Accts Payable
Cash
745,000
Operating Expenses
Accrued Expenses
222,750
7,250
790,000
745,000
660,000
75,000
60,000
Accts Receivable
Sales
655,000
Cash
565,000
655,000
Accts Receivable
Purchases
Accts Payable
35,250
P1,250,000
2,700,000
50,000
( 87,000)
(800,000)
P3,113,000
75,000
1,530,000
790,000
P 36,000
( 750)
Branch Books
Cash
150,000
160,000 Freight In
10,000
500,000 Shipments from H.O.
500,000
Home office Equity
1,865,000
Purchases
Accts Payable
P 9,000
10,000
1,000
565,000
150,000
150,000
Accts Payable
Cash
Purchase Discount
91,500
Operating Expenses
Cash
131,250
88,755
2,745
131,250
Cash
230,000
Shipments to Branch
Freight loss
75,000
3,000
Home office Equity

Cash
78,000
Freight In
Shipments from HO
78,000
Sales Discount
1,200
Home office Equity

1,200 Cash
Accts. Receivable
1,200
58,800
Investment In Branch
Operating Expenses
11,875
Cash
327,295
AccumDepn,Furn
&Fixtures,Branch
11,875
2,250
Depreciation Expense
Acc Depn,Furn & Fix
750,000 x 12%x 3/12
22,500
Utility Expense
Utility Payable
67,500
Bad Debts
1,325,000x.03=39,750-31,500
Inventory, End
Sales
Shipments to Branch
Inventory Beg
Purchases
Bad Debts
Depreciation
Sales Discount
Other Operating Expenses
Utility Expense
Income and Expense S
Home Office Equity
2,250
75,000 x 12% x 3/12
Utility Expense
67,500
Utility Payable
8,250
8,250
785,500
1,865,000
425,000
1,300,000
790,000
8,250
22,500
31,800
210,875
67,500
644,575
38,420
Branch Income & Expense

Inc & Exp Summary
Freight Loss
38,420
Req. 3 Furniture & Fixtures

Accum Depreciation
Home Office Equity

327,295
Cash
38,420
35,420
3,000
679,995
679,995
750,000
116,250
633,750
Furniture & Fixtures-Baguio 75,000

Accum Depreciation
2,250
72,750
Total
60,000
11,875
11,875
327,295
327,295
2,250
2,250
22,500
Branch Inc & Exp Sum=
Income & Expense S

Retained Earnings
Operating Expenses
Home Office Equity
1,500
1,500
75,000
P706,500
Bad Debts
Allow for Bad Debts
90,000 x .03
Inventory, End
Sales
Purchase Discount
Bad Debts
Shipments from H.O
Purchases
Freight In
Depreciation
Other Operating Exp
Utility Expense
Income & Expense S
Income & Expense S
Home Office Equity
18,500
18,500
2,700
2,700
130,750
655,000
2,745
2,700
425,000
150,000
8,500
2,250
143,125
18,500
38,420
38,420
38,420
Income Statement
Sales
Less Discounts,returns,allowances
Net Sales
Cost of Sales:
Net Purchases
Shipments to Branch
Freight In
Shipments from Home Office
Inventory, Ending
Gross Profit
Bad Debts
Depreciation
Utility
Branch Profit
Net Profit (Loss)
Home Office
1,865,000
( 31,800)
1,833,200
1,300,000
790,000
(425,000)
(785,500)
879,500
953,700
8,250
22,500
67,500
210,875
309,125
644,575
38,420
(3,000)
679,995
Branch
655,000
655,000
147,255
8,500
425,000
(130,750)
450,005
204,995
Combined
2,520,000
( 31,800)
2,488,200
1,300,000
937,255
8,500
(916,250)
1,329,505
1,158,695
2,700
2,250
18,500
143,125
166,575
38,420
10,950
24,750
86,000
354,000
475,700
682,995
______
38,420
(3,000)
679,995
HOME OFFICE, AGENCY AND BRANCH

1. On November 2, 2015, L Sison Company created an agency in Davao, and
transferred merchandise samples costing P15,000, equipment worth
P36,000 and a cash working fund of P10,000 to be maintained on an
imprest basis. The agency transmitted to the home office sales orders
which were billed at P90,000 of which P46,550 was collected net of a 2%
discount. The agency also paid for its operating expenses of P7,500
including supplies of P2,000. The agency received replenishment thereof
from the home office before the year ended. On December 31, the agency
samples were estimated to be useful over a period of 5 months while the
equipment is estimated to have a useful life of eight years. Unused
supplies on Dec 31 amounted to P1,000. Home office maintains a gross
profit rate of 20% of cost.
a. How much is agency profit at the end of December?
b. Give the agency real accounts that will be presented in the Dec. 31
balance sheet.
b. Give the cost of sales of Home Office if its Inventory on Nov 2 is
P1,250,000 while on hand at Dec 31 went down to 20% of total stock .
Net purchases was P2,750,000 including freight of P50,000.
2. Celestial Corporation shows the following balance sheet accounts as at Jan
1, 2015:
Cash
P 93,750
Accounts Receivable
7,250
Inventory
Payable
Furniture & Fixtures
2,500,000
263,250
P476,500
Accumulated Depreciation
1,050,000
Accrued Expenses
1,300,000
Accounts
743,750
750,000
Capital Stock
31,500
Retained
Earnings
On this date, management decided to establish a branch in Baguio

and reported the following transactions for the first half of 2015:
a) Transferred cash P150,000, merchandise P500,000 with freight prepaid
based on 2% of its shipment cost.
b) Home office approved on Feb 1, the purchase by the branch of its
furniture and fixtures costing P75,000 for its own use. Home office
policy was to maintain and control all fixed assets.
c) The branch was authorized to take over P60,000 home office accounts
from its Baguio customers and make the necessary collections. Home
Office issued a debit memo for this.
d)
Summary of account sales and (collections) for the quarter : Home

Office- P1,865,000 and
(1,499,400 net of a 4% discount) and for the Branch- P655,000
(P565,000).
e) Summary of account purchases and (payments): Home OfficeP790,000 and (P745,000)
and for the Branch- P150,000 and (P88,755 net of a 3% discount).
f) Operating Expenses paid including accrued expenses, if anyHome Office, P230,000 and Branch, P 131,250.
g) Returns from the original shipment amounted to P75,000. Freight on
returns was paid
by the branch. Allocated freight and freight paid by branch were all
charged to home office as a loss account.
n) From the Baguio accounts turned over in c), collections were made
accordingly less a discount of 2% which the branch charged to the
home office.
o)P11,875 of the expenses paid by home office in f) were charged to the
branch.
p) Cash remittance was made by the branch in excess of original cash
transfer.
q) Depreciation was recorded at a rate of 12%.
r) Unpaid utility bills: P67,500 for home office and P18,500 for the branch.
s) Policy on doubtful accounts was to be maintained based on the previous
rate.
Required: 1) Entries to record transactions a) to m) in parallel column.
2) Closing Entries (one entry to close all the nominal accounts)
including set up of inventory per count: Home Office P785,500 and
Branch P130,750.
3) Present the Asset section of the Statement of Financial Position
of the Home Office, Branch and Combined.
4) Present the Income statement of the Home Office and the
Branch using the
following format:
Statement of Financial Position

Assets
Cash
Accounts Receivable
Inventories
Furniture and Fixtures
Accumulated Deprreciation
Furnitures & Fixtures,Branch
Accum Dep- Furn & Fix, Branch
Total Assets
Liabilities and Equity
Accounts Payable
Accrued Expenses
Capital Stock
Retained Earnings
Home Office Equity
Total Liabilities & Equity
Home Office
Branch
Combined
SOLUTION 3AAc Home Office, Agency and Branch

1. a)
Income & Expense Summary
Samples Used
6,000 Sales
90,000
Supplies
1,000
Cost of Sales
75,000
Depreciation
750
Other expenses
5,500
Sales discount
950
Balance
2.
Home Office Books
Investment in branch
660,000
Cash
Shipments to Branch
Furn & Fix, Branch
75,000
Accts Receivable
60,000
800
b. Real Accounts:
Agency Samples
Working Fund, Dvo Agency
Supplies, DvoAgency
Equipment, DvoAgency
Accum Depn
c. Home Office Cost of Sales
4.Inventory, Nov 2
Net Purchases
Freight In
Shipments
Inventory, Dec 31
P 9,000
10,000
1,000
P 36,000
( 750)
P1,250,000
2,700,000
50,000
( 90,000)
(800,000)
P3,110,000
Branch Books
Cash
150,000
160,000 Freight In
10,000
500,000 Shipments from H.O.
500,000
Home office Equity
75,000
Home Office Equity

Cash
Acct Receivable
60,000
Home Office Equity
35,250
660,000
75,000
75,000
60,000
60,000
Accts receivable
Sales
1,865,000
Cash
Sales Discount
Accts. Receivable
1,499,400
62,475
1,865,000
1,561,875
Purchases
Accts Payable
790,000
Accts Payable
Cash
745,000
Operating Expenses
Accrued Expenses
Cash
222,750
7,250
Accts Receivable
Sales
655,000
Cash
565,000
Accts Receivable
Purchases
790,000
Accts Payable
745,000
655,000
565,000
150,000
150,000
Accts Payable
Cash
Purchase Discount
91,500
Operating Expenses
Cash
131,250
88,755
2,745
131,250
230,000
Shipments to Branch
Freight loss
75,000
3,000
Home office Equity

Cash
78,000
Freight In
Shipments from HO
78,000
Sales Discount
1,200
Home office Equity

1,200 Cash
Accts. Receivable
1,200
58,800
Investment In Branch
Operating Expenses
11,875
Cash
327,295
11,875
327,295
AccumDepn,Furn
&Fixtures,Branch
3,750
Acc Depn,Furn & Fix
750,000 x 6%
45,000
Utility Expense
Utility Payable
67,500
Home Office Equity

Cash
Home Office Equity
3,750
75,000 x 12% x 5/12
60,000
11,875
11,875
327,295
327,295
3,750
3,750
45,000
67,500
Bad Debts
1,293,125 x.03=38,793.75-31,500
Inventory, End
Sales
Shipments to Branch
Inventory Beg
Purchases
Bad Debts
Depreciation
Sales Discount
Other Operating Expenses
Utility Expense
Income and Expense S
Operating Expenses
Home Office Equity
1,500
1,500
75,000
7,293
7,293.75
785,500
1,865,000
425,000
1,300,000
790,000
7,293.75
45,000
63,675
210,875
67,500
591,156.25
Branch Inc & Exp Sum=
36,920
Branch Income & Expense

Inc & Exp Summary
36,920
36,920
33,920
Utility Expense
Utility Payable
Bad Debts
Allow for Bad Debts
90,000 x .03
Inventory, End
Sales
Purchase Discount
Bad Debts
Shipments from H.O
Purchases
Freight In
Depreciation
Other Operating Exp
Utility Expense
Income & Expense S
Income & Expense S
Home Office Equity
18,500
18,500
2,700
2,700
130,750
655,000
2,745
2,700
425,000
150,000
8,500
3,750
143,125
18,500
36,920
36,920
36,920
Freight Loss
Income & Expense S
Retained Earnings
3,000
625,076.25
625,076.25
Requirement 3
Balance Sheet
Home Office
Branch
Combined
Assets
Cash
Accounts Receivable
Allow for Bad Debts
Inventory
Furniture and Fixtures
Accumulated Depn
1,168,825.0
1,293,125.0
(38,793.75)
750,000.00
138,750.00
Fur & Fixtures-Branch

Accum Dep Fur & Fix Br
Total Assets
Income Statement
Sales
Less Discounts,returns,allowances
Net Sales
Cost of Sales:
Net Purchases
Shipments to Branch
Freight In
Shipments from Home Office
Inventory, Ending
Gross Profit
Bad Debts
Depreciation
Utility
Branch Profit
Net Profit (Loss)
75,000.0
0
3,750.00
1,254,331.2
5
785,500.0
369,050.0
150,000
112,500
(5,625)
1,318,825
1,405,625
106,875 (44,418.75) 1,361,206.25
130,750
916,250
750,000.00
(138,750)
611,250.0
611,250.00
75,000.00
71,250.0
4,260,206.2
5
Home Office
1,865,000
( 63,675)
1,801,325
1,300,000
790,000
(425,000)
(785,500)
879,500
921,825
7,293.75
45,000
67,500
210,875
330,668.75
591,156.25
36,920
(3,000)
625,076.25
_______
387,625
Branch
655,000
655,000
147,255
8,500
425,000
(130,750)
450,005
204,995
Combined
2,520,000
( 63,675)
2,456,325
1,300,000
937,255
8,500
(916,250)
1,329,505
1,126,820
2,700
3,750
18,500
143,125
168,075
36,920
9,993.75
48,750
86,000
354,000
498,743.75
628,076.25
______
36,920
(3,000)
625,076.25
3,750.00
71,250.00
4,278,781.25

Home Office Agency and Branch Financials

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HOME OFFICE, AGENCY AND BRANCH

1. On November 2, 2015, L Sison Company created an agency in Davao, and

On this date, management decided to establish a branch in Baguio

m) Policy on doubtful accounts was to be maintained based on the previous

Other operating expenses

Net Profit from Operation

Home Office Equity

Home office Equity

Home office Equity

Branch Income & Expense

Req. 3 Furniture & Fixtures

Home Office Equity

Furniture & Fixtures-Baguio 75,000

Income & Expense S