Chapter 12

Chapter12
1:
d. This is recorded when the working fund is replenished.
2:
c.
Sales
P 700,000
Cost of goods sold:
Purchases
P800,000
Merchandise inventory, end
180,000
620,000
Gross profit
P 80,000
Expenses
198,000
Net income (loss)
P 118,000)
3:
b
Sales
P 70,000
Cost of goods sold (P70,000 / 140%)
50,000
Gross profit
P 20,000
Less: Samples (P8,000 P6,000)
P 2,000
Expenses
2,800
4,800
Net income
P 15,200
4:
a
Sales
P 100,000
Cost of goods sold
72,000
Gross profit
P 28,000
Expenses (P9,000 + P4,500)
13,500
Net income
P 14,500
5:
a
6:
a
7:
c
8.
a
Shipment of merchandise to home office
P 80,000
Equipment sent to home office
50,000
Expenses assigned to branch by the home office
8,000
Cash remittance to home office
(40,000)
Home office account balance
P 98,000
12-9: d
12-10: a
Home Office account balance before closing, Dec. 32, 1008
P 35,000
Net income (loss)
Sales
P147,000
Cost of cost goods sold
Shipment to branch
P135,000
Inventory, 12/31
18,500
116,500
Gross profit
P 30,500
Expenses
13,500
17,000
Home Office account balance (Investment in Branch account balance)P
52,000
Shipment to Branch account has no beginning balance, because this was closed
at the end of 2008.
11:
12-13:
a
Unadjusted balance Investment in Branch account, 12/31
Charge for advances by president
Erroneous entry for merchandise allowance
Share in advertising expense
Unadjusted balance Home Office account, 12/31
12-14:
(Branch Books) (Home Office Books)

Home Office
Investmentin Branch
P 97,350
P 84,000
6,150
25,000
900
( 6,400)
P103,500
P103,500

Home Office
Investment in Branch
Unadjusted balances
P25,550
P27,350
Error in recording shipment to Cavity branch (12,000)
Error in recording shipment to Tagaytay branch 15,000
Branch AR collected by home office
(3,000)
Merchandise returns in transit
( 1,200)
Error in recording branch profit
( 3,600)
Adjusted balances
P23,750
P23,750
12-16:
c
Unadjusted balance- Investment in Branch account
Remittance in transit
Shipment in transit
Expenses allocated
Error in recording remittance
Error in recording shipments
Unadjusted balance Home Office account
P 85,000
(10,000)
(20,000)
( 5,000)
3,000
( 9,000)
P 44,000
( Branch Books)
Home Office
P 44,000
(HomeOffice Books)
P 85,000
(10,000)
Unadjusted balances,
Shipment in transit
20,000
Expenses allocated
5,000
Unrecorded HO collection of AR
(3,000)
Error in recording shipments
9,000
Adjusted balances
P 75,000
12.17
2.
75,000
Investment
30,000
30,000
in
branch
Cash
30,000
30,000
Homeoffice
Shipment from home office
Shipment to branch
Home
75,000
75,000
3. No entry
Purchases
Accountspayable
4. No entry
Accounts receivable
Sales
5.
2,000
Shipment
to
branch
75,000
10,000
10,000
125,000
125,000
Home office
Investment in branch
office
2,000
2,000
2,000
6. No entry
Cash
105,000
Accountsreceivable 105,000
7. No entry
Accounts payable
Unadjusted balances
Branch AR collected by Home Office
Shipments in transit
Acquisition of furniture
Merchandise returns
Cash remittance in transit
Adjusted balances
Salaries
10,000
Rent
Utilities
Other operating expenses
P 75,000
P 440,000
( 8,000)
32,000
P 464,000
5,000
2,000
12,000
Cash
29,500
9.
7,500
Investment
in
branch
Accumulated depn
Depreciation
1,500
Rent
5,000
7,500
Insurance
Homeoffice
Cash
Home office
Cash
1,000
7,500
65,000
65,000
65,000
(Home Office Books)

Investmentin Branch
11.
3,000
Cash
12.
Investment
10,000
(12,000)
(15,000)
( 5,000)
P 464,000
10,000
3,000
Accounts receivable
3,000
in
branch
Branch income
Branch Books
Home office
3,000
P 496,000
1.
Home Office Books
8. No entry
(Branch Books)
Home Office
7,000
Cash
7,000
10.
65,000
Jan. 1, 2008
Jan. 1, 2009
Petty cash fund
P 6,000
P 6,000
Accounts receivable
86,000
98,000
Inventory
74,000
82,000
Home Office account balance P166,000 P186,000
12-12:
d
Home Office
Unadjusted balances, Dec. 31
P 21,320
P 38,600
(10,400)
Shipment in transit
7,280
Cash collections of home office
( 400)
Adjusted balances, Dec. 31
P 28,200
P 28,200
P430,000
(5,500)
( 600)
(9,000)
P414,900
Unadjusted balances, 12/31

Shipment in transit
Collection of HO A/R by branch
Error in recording of branch profit
Returns of merchandise in transit
Adjusted balances, 12/31
12-15:
Cash
Sales
Inventory,end
125,000
5,000
ShipmentfromHO
73,000
Purchases
10,000
Salaries
10,000
Rent
10,000
Utilities
2,000
Other operating expenses
12,500
Homeoffice
2.
a.
Books of the Branch

1.
Cash
Merchandise inventory
Home office
c.
200,000
350,000
550,000
2.
Accounts payable
3.
Accounts receivable
Sales
400,000
400,000
650,000
650,000
Cost of goods sold

425,000
Cash
Advertising expense
Sales commission
Other expense
Cash
Accounts receivable
157,500
Accounts receivable
Sales
99,000
n. Sales
d. Purchases
183,750
Purchases
33,750
Accounts payable
Accounts payable
170,400
80,100
Accounts receivable
Accounts receivable
80,100
150,000
41,445
490,000
P650,000
425,000
225,000
150,000
P 75,000
P 30,000
505,000
P535,000
80,100
g. Expenses
-Cash
39,900
Furniture & fixtures branch

Home office
Cash
h. Cash
63,750
75,300
Shipment to branch
73,300
Home office
75,300
80,100
27,000
Cash
27,000
i. Retained earnings
Cash
15,000
15.000
k. Investment in branch
Expenses
Acc. Depn Br. F & F
Home office
q. Income summary
Retained earnings
3.
80,100
j. Expenses
Acc. Depreciation
63,750
Home office
12,000
12,000
Expenses
p. Income summary
Branch loss
157,500
99,000
75,300
35,250
2,100
183,750
75,300
Expenses
Expenses
27,300
20,175
2,100
2,100
2,100
2,100
2,100
2,100
18,075
18,075
12,000
12,000
(2)
63,750
18,375
39,900
Branch Books
63,750
186,000
Branch Books
60,180
33,750
o. Branch loss
Home office
Income summary
80,100
f. Accounts payable
186,000
Accounts payable
18,375
Cash
Cash
3.
b. Investment in branch 75,300

Shipment from HO
170,400
Income summary
Home office
Cash
40,000
65,000
45,000
Cash
Merchandise inv. 1/1

Purchases
Purchases
Shipment from HO
600,000
Accounts payable
370,000
Home office
120,000
Cash
b.
Manila Sales Naga Branch
Income Statement
Year Ended December 31, 2008
Sales
Cost of goods sold
Gross profit
Expenses:
Advertising expense
P40,000
Sales commissions
65,000
Other expenses
45,000
Net income
c.
Manila Sales Naga Branch
Balance Sheet
December 31, 2008
Cash
P160,000 Accounts payable
Accounts receivable
50,000 Home office
Merchandise inventory 325,000
Total assets
P535,000 Total L and capital
a. Investment in branch
Cash
Sales
Shipments to branch
Merchandise inv., 12/31
Merchandise inv., 12/31
72,750
Income summary
183,750
33,750
e. Cash
425,000
150
450
Closing Entries
Home Office Books
157,500
99,000
Cash
5.
Home Office Books

(1) Adjusting Entries
Accrued expenses
Accrued expenses
Sales
600,000
Accounts receivable
4.
10,000
Adjusting Entries
1,750
1,750
975
975
975
975
l. Prepaid expenses
Prepaid expenses
Expenses
Expenses
375
1,125
m. Expenses
Expenses
150
450
375
1,125
Individual Financial Statements

Cebu Company Home Office
Income Statement
Sales
Cost of sales
Merchandise inventory, 1/1
Purchases
Goods available for sale
Shipment to branch
Goods available for own sale
Gross profit
Expenses
Net operating income
Branch income (loss)
Net income
P157,500
P 60,180
183,750
P243,930
( 75,300)
P168,630
( 72,750)
95,880
P 61,620
41,445
P 20,175
( 2,100)
P 18,075
Cebu Company Branch

Income Statement
Sales
Cost of sales
Purchases
Shipments from home office
Gross profit
Expenses
Net income (loss)
P 99,000
P 33,750
75,300
P109,050
35,250
73,800
P 25,200
27,300
P( 2,100)
Prepaid expenses
Furniture and fixtures
Less: accumulated depreciation
Total assets
Cebu Company Home Office

Balance Sheet
December 31, 2008
Assets
Cash
Accounts receivable
Prepaid expenses
Furniture and fixtures
Less: Accumulated depreciation
Branch furniture and fixtures
Less: Accumulated depreciation
Total assets
Liabilities and Stockholders Equity
Liabilities
Accrued expenses
Accounts payable
Total liabilities
Stockholders Equity
Capital stock
Retained earnings
Total liabilities and stockholders equity
Liabilities and Stockholders Equity

Accrued expenses
Accounts payable
Capital stock
Retained earnings
Total liabilities and stockholders equity
P 34,800
28,575
72,750
3,075
P30,000
8,370
P12,000
975
2,025
31,950
P 33,975
183,705
P217,680
Branch Books
Sales
145,000
Inventory, 12/31
60,000
Inventory, 1/1
145,000
Shipments from HO
1/1
45,000
Expenses
540,000
Income summary
Expenses
18,000
Inventory
12/31 (BS)
Total
assets
P 2,475
47,325
Sales
560,000
Inventory, 12/31
90,000
Shipments to branch
145,000
Inventory,
20,000
Purchases
150,000
371,000
Credits
Accounts
payable
Home
Office
Capital
stock
Retained
earnings,
1/1
Sales
75,000
108,705
P233,505
Home Office Books

(a) and (b) Closing Entries
27,000
31,000
(2) 70,000
54,000
54,000
144,000
144,000
(705,000)
Shipments
to branch
Total
credits
23,000
4,000
70,000
560,000
145,000
(1)145,000
145,000
Inventory,
12/31 (IS)
90,000
930,000
219,000
90,000
60,000
(150,000)
215,000
Income summary
Assets
Cash
Accounts receivable
Prepaid expenses
Total assets
P 6,375
18,000
35,250
1,125
P61,650
Liabilities and Capital

Accounts payable
Home office
Total liabilities and capital
P 450
15,375
P61,650
Combined Financial Statements

Cebu Company
Combined Income Statement
Sales
Cost of sales
Purchases
Gross profit
Expenses
Combined net income
32,655
P233,505
4.
11,025
45,825
P217,680
Cebu Company Branch

Balance Sheet
December 31, 2008
4.
debits
21,630
P 75,000
108,705
4,200
P42,000
9,345
120,000
Income summary
22,000
Home office
22,000
Branch income
22,000
Income summary
22,000
22,000
Branchincome 22,000
142,000
142,000
Total
liabilities &
equity
1.
2.
Income summary
142,000
Retainedearnings 142,000
215,000
Net
income
CG Corporation
Combined Statement Working Paper
5.
(1)
371,000
To eliminate shipments to branch and shipments from HO

To eliminate reciprocal accounts.
Oro Company
Working Paper for Combined Statements
Eliminations
Home
P256,500
Office
Cebu Company
Balance Sheet
December 31, 2008
Debits
Cash
Accounts
receivable
Inventory,
1/1
Investment
in branch
Equipment
(net)
Purchases
Assets
Cash
Accounts receivable
Shipments
from HO
Expenses
Total
P 60,180
217,500
P277,680
108,000
169,680
P 86,820
68,745
P 18,075
Branch
36,000
54,000
7,000
29,000
45,000
18,000
70,000
Debit
Credit
Income
Statemen
t
Dr (Cr)
43,000
83,000
63,000
(2) 70,000
95,000
95,000
540,000
540,000
P 41,175
47,475
108,000
(1)145,000
90,000
930,00
Income
Balanc
e
Sheet
145,000
20,000
219,00
110,000
Home
Statements
Debits
Cash
Notes
receivable
Accounts
receivable
(net)
Inventories
Furniture
& fixtures
(net)
Investment
in Branch
Cost
of
goods sold
Operating
Balance
Office
Branch
Eliminations
Debit
Credit
Dr (CR)
Sheet
63,000
10,500
21,900
84,900
10,500
120,600
55,950
176,550
143,700
72,150
36,300
(2)135,000
124,050
45,000
72,150
(1)124,050
300,750
128,700
104,250
32,850
(2)135,000
564,050
137,100
expenses
Totals
Credits
Accounts
payable
Common
stock
Retained
earnings
Home
Office
Sales
Totals
939,000
275,700
389,100
61,500
61,500
300,000
300,000
37,500
37,500
124,050
540,000
151,650
939,000
275,700
7.
a.
(1)124,050
(691,650)
289,050
b.
9,900
(9,900)
389,100
(1) To eliminate shipments

(2) To eliminate reciprocal accounts.
Closing Entries
2.
Branch Books
3. Home Office Books
Sales
151,650
Income Summary
9,900
Cost of goods sold
128,700
Operating expenses
32,850
Home Office
9,900
Branch loss
9,900
Income summary
Investment in Branch 9,900
6.
a.
9,900
Branch loss
Investment in Branch account (Home Office Books)

Unadjusted balance, Dec. 31
Cash remittance in transit
Merchandise returns in transit
Adjusted balance, Dec. 31
P166,400
(30,000)
(12,000)
P124,400
Home Office account (Branch Books)

Unadjusted balance, Dec. 31
Error in recording expense
Shipment in transit
Supplies charged to branch
Collection of branch receivable
Adjusted balance, Dec. 31
P103,200
7,200
24,000
8,000
( 18,000)
P124,400
289,050
Net
Income
Income summary
Cash (P20,000 + P19,200)
8.
(1)
9,900
(2)
9,900
Investment in Branch account (Home Office Books)

Unadjusted balance
Error in recording cash transfer, April 8
Cash transfer recorded in subsequent year, Dec. 31
Error in recording allocated depreciation, Dec. 31
Adjusted balance
P138,200
( 45,000)
( 15,000)
6,000
P 84,200
Adjusting Entries
Home Office Books
Cash
30,000
Shipment to branch
12,000
Reconciliation Statement
(Home Office Books)
P59,720
Advertising charged to branch
Home office AR collected by branch
Shipment in transit
Error in recording receipt of merchandise
Understatement of depreciation
Remittance in transit, 1/31
P47,088
Adjusting Entries
Home Office Books
Retained earnings
Advertising
480
Cash
Shipments from HO
3,520
Accounts receivable
600
Shipment from HO
180
12,632
Home office
3,820
Home Office account (Branch Books)

Unadjusted balance
P(93,000)
Error in recording salary allocation, April 5
( 200)
Error in recording inventory transfer, July 6
12,000
Unrecorded allocated depreciation, Dec. 31
( 3,000)
Adjusted balance
P(84,200)
b.
Adjusting Entries
Home Office Books
Branch Books
Other income
45,000
Salary expense
200
Home office
200
Rizal
45,000
9.
(1)
Cash
Income summary
Investment in branchRizal
Accumulated depn
15,000
Home office
12,000
Shipments from HO 12,000
15,000
6,000
Depreciation expense
3,000
6,000
Home office
3,000
(2)
Branch Books
Shipment from HO
24,000
Supplies
8,000
42,000
Expenses
7,200
Accounts receivable 18,000
Home office
21,200
(Branch Books)
Home Office
P 43,268
480
600
( 180)
( 432)
(12,800)
P 47,088
Branch Books
432
12,800
Branch Books
Adjusting Entries
57,600
Operating expenses (P4,200 + P3,900)
8,100
Home office
Closing Entries
Sales
778,200
Inventory, 12/31 (P64,580 + P57,600)
122,180
Inventory, 1/1
Shipment from HO (P623,200 + P57,60)
Operating expenses
Income summary
47,800
680,800
54,790
116,990
116,990
Home office
Home Office Books
Accounts receivable
65,700
116,900
470
330
800
116,990
Branch income
116,900
(3)
Reconciliation Statement
Home Office Books
Branch Books
(Investment in Branch)
(Home Office)
P 206,344
P 140,974
Error in recording remittance to branch
20,000
Shipment in transit
57,600
Expenses charged to branch
8,100
Branch net income
116,990
116,990
Freight erroneously charged to branch
(
470)
Cash remittance in transit to HO
( 19,200)
Adjusted balances, 12/31
P 323,664
P 323,664
11.a.
P 2,000
Sales (P 27,000 + P 33,000 + P 26,000)
P 86,000
Cost of Goods Sold (P 36,000 + P 18,000) (54,000)
Gross Profit
P 32,000
Rent Expense P 4,000
Property Tax Expense 5,000
Depreciation Expense 4,000
Miscellaneous Expense 11,000
General Corporate Expense 6,000 (30,000)
Net Income P 2,000
b.
P 180,000
Initial Transfers .P 188,000
June Inventory Shipment .. 18,000
Property Tax Payment ..
5,000
September Inventory Shipment 26,000
Expense Allocation ..
6,000
Cash Transfer ... (63,000)
Balance in Home Office/Branch Accounts (correct) ..P 180,000
c
1/10/08
Journal Entries Tarlac Branch

Cash 30,000
Inventory 36,000
Equipment 122,000
Home Office
188,000
1/20/08 Rent Expense
4,000
Cash 4,000
2/1/08
Cash .. 27,000
Sales 27,000
Cost of Goods Sold .. 18,000
Inventory 18,000
4/1/08
Cash 33,000
Sales ...
33,000
Cost of Goods Sold . 18,000
Inventory 18,000
5/1/08
Miscellaneous Expenses
7,000
Cash ...
7,000
6/5/08
Inventory . 18,000
Home office ...
18,000
7/6/08
Property Tax Expense . 5,000
Home Office ..
5,000
9/9/08
Inventory 26,000
Home Office .
26,000
10/1/08 Cash 26,000
Sales .
26,000
Cost of Goods Sold ..
18,000
Inventory .
18,000
11/1/08
Miscellaneous Expenses 4,000
Cash
4,000
12/22/08
12/31/08
12/31/08
Home Office 63,000

Cash .
Depreciation Expense . 4,000
Accumulated depreciation ..
General Corporate Expenses 6,000
Home Office .
Total Assets
Home Office*
63,000
4,000
6,000
P 182,000
P 182,000
Assets
Cash .
P 38,000
Inventory .
26,000
Equipment ...
122,000
(4,000)
Accumulated Depreciation .
118,000
Total Assets
P 182,000
Equity
Home Office* ..
P 182,000
*Home office balance is P 180,000 as computed in Part b plus
the P 2,000 net income for the period.

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Chapter 12

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Chapter12

(Branch Books) (Home Office Books)

(Branch Books) (Home Office Books)

Shipment from home office

(Home Office Books)

Unadjusted balances, 12/31

Books of the Branch

Cost of goods sold

Furniture & fixtures branch

b. Investment in branch 75,300

Merchandise inv. 1/1

Home Office Books

Individual Financial Statements

Cebu Company Branch

Cebu Company Home Office

Liabilities and Stockholders Equity

Home Office Books

Liabilities and Capital

Combined Financial Statements

Cebu Company Branch

To eliminate shipments to branch and shipments from HO

(1) To eliminate shipments

Investment in Branch account (Home Office Books)

Home Office account (Branch Books)

Investment in Branch account (Home Office Books)

Home Office account (Branch Books)

Journal Entries Tarlac Branch

Home Office 63,000

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