Questions 1 & 2 are based on the following information.

On February 14, 2012, Therese Company established a sales agency in Tagbilaran.

Upon establishment of the sales agency, the home office sent samples costing
P8,000 and a working fund of P3,000 to be maintained on the imprest basis. During
the six-month period, the sales agency reported to the home office sales orders.
These were billed at P70,000 of which of P40,000 was collected) the sales agency
paid expenses of P5,800 but was reimbursed by the home office.

On August 15, 2012, the sales agency samples were valued at P2,000. It was
estimated that the gross profit on goods shipped to fill sales order averaged 40% of
cost.

1. The cost of sales of the sales agency for the six-month period is
a. P42,000 c. P48,000
b. P44,000 d. P50,000

2. The net income of the sales agency for the six-month period is
a. P16,200 c. P10,200
b. P14,200 d. P8,200

3. A branchs ending inventory of merchandise shipped by the home office and

purchased from outside vendors amounts to P 50,000. The post-closing trial
balance in the Unrealized Gross Profit in Branch Inventory account is P 6,000
due to the home office practice of shipping merchandise at 20% above cost.
The merchandise purchased from outside vendors contained in the ending
inventory of the branch amounts to:
a. P 38,000 c. P 30,000

b. P 18,000 d. P 14,000

Questions 4 and 5 are based on the following information.

The income statement submitted by Loon Branch to the Home Office for the month
of December 31, 2013 follows:

Sales P600,000
Cost of Sales:
Inventory, December 31, 2013 P80,000
Shipments from Home office 350,000
Purchased locally by branch 30,000
Total P460,000
Inventory, December 31, 2013 (100,000) 360,000
Gross Margin P240,000
Operating Expenses (180,000)
Net Income for the month P 60,000
The Branch inventories consisted of:
12/1/2013 12/31/2013
Merchandise purchased from home P70,000 P84,000
Local purchases P10,000 P16,000
Total P80,000 P100,000

After effecting the necessary adjustments, the Home Office ascertained the true net
income of the Branch to be P156,000.

4. At what percentage of cost did the home office bill the branch for merchandise
shipped to it?
a. 100% c. 120%
b. 140% d. 150%

5. What is the balance of the Allowance for Overvaluation in the branch inventory
at December 31, 2013?
a. P10,000 c. P16,000
b. P24,000 d. P34,000

Questions 6 and 7 are based on the following information.

The following information is extracted from the books and records of Elaine
Company and its branch. The balances are at December 31, 2012 of the companys
operations.
Home Office Branch
Sales P260,000
Shipments to branch P 78,000
Shipments from home office 104,000
Purchases 39,000
Expenses 78,000
Inventory, January 1, 2012 26,000
Allowance for overvaluation of branch 31,200
inventory

However, no shipments in transit between home office and the branch were
made. Both shipments accounts are properly recorded. The ending inventory
includes merchandise acquired from the home office in the amount of P26,000
and P7,800 acquired from outsiders acquired from the home office in the
amount of P26,000 and P7,800 acquired from outsiders for a total of P33,800.

6. What is the realized profit in branch inventory?

a. P21,000 c. P22,533
b. P31,200 d. P24,700

7. What is the amount of branch merchandise beginning inventory that was

acquired from the home office?
a. P14,000 c. P15,600
 b. P19,000 d. P20,800

Questions 8 and 9 are based on the following information.

Auto Supply Company is engaged in merchandising both at its home office in Cebu
City and its branch in Toledo City. Selected accounts taken from the trial balances of
the home office and the branch as of December 31, 2012 follow:

Debits Cebu City Toledo

Branch
Inventory, January 1, 2012 P 23,000 P 11,550
Toledo Branch 58,300
Purchases 190,000 105,000
Freight in from home office 5,500
Sundry Expenses 52,000 28,000

Credits
Home Office P 53,300
Sales P155,000 140,000
Sales to branch 110,000
Allowance for Overvaluation of branch
inventory at January 1, 2012. 1,000

Additional information:
The Toledo City branch gets all of its merchandise from the home office.
The home office bills the goods at cost plus a 10% mark-up. At
December 31, 2012, a shipment with a billed value of P5,000 was still in
transit. Freight on this shipment was P250 and is to be treated as part of
the inventory.
Inventories on December 31, 2012, excluding the shipment in transit,
follow:
Home office, at cost... P30,000
Branch, at billed price (excluding freight of P520 10,000

8. What is the net income of the home office from own operations?
a. P30,470 c. P21,000
b. P20,000 d. P30,470

9. What is the net income of the branch in so far as the home office is concerned?
a. P870 c. P1,500
b. P10,470 d. P12,000

10. Durable Textile Company has a single branch in Bohol. On March 1, 2012,
the home office accounting records included an Allowance for Overvaluation of
Inventories Bohol Branch ledger account with a credit balance of P32,000.
During March, merchandise costing P36,000 was shipped to the Bohol Branch
and billed at a price representing a 40% markup on the billed price. On March
31, 2012, the branch prepared an income statement indicating a net loss of
P11,500 for March and ending inventories at billed prices of P25,000. What is
 the amount of adjustment for allowance 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

Questions 11 and 12 are based on the following information.

Yul Trading Corp. operates a branch in Talisay City. At the close of business on
December 31, 2012, Talisay Branch account in the home office books showed a
debit balance of P225,770. The interoffice accounts were in agreement at the
beginning of the year. For purposes of reconciling the interoffice accounts, the
following facts were ascertained:
1. An office equipment costing the home office P3,5000 was picked up by the
branch as P350.
2. Insurance premium of P675 charged by the home office was taken up twice
by the branch.
3. Freight charges on merchandise made by the home office for P1,125 were
recorded in the branch book 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 take up a P700 debt memo from the home office
representing the share of the branch in the advertising.
6. The home office inadvertently recorded a remittance for P3,000 from the
Cebu branch as a remittance from its Talisay branch.

11. What is the balance of the Home Office account before adjustment as of
December 31, 2012?
a. P225,000 c. P228,485
b. 225,770 d. 226,485

12. What is the adjusted balance of the Home Office account as of December 31,
2012?
a. P225,000 c. P225,770
b. 226,485 d. 228,770

Questions 13 and 14 are based on the following information.

PTT Corporation retails merchandise through its home office store and through a
branch store in a distant city. Separate ledgers are maintained by the home office
and the branch. The branch store purchases merchandise from the home office (at
120% of home office cost), as well as from outside supplies. Selected information
from the December 31, 2012 trial balances of the home office and branch is as
follows:
Home Office Branch
Sales P120,000 P50,000
Shipments to branch 16,000 ----
Purchases 70,000 11,000
Inventory, January 1, 2012 40,000 30,000
Shipments from home office ----- 19,200
 Expenses 28,000 2,000
Unrealized profit in branch inventory 7,200 -----

Additional information:
The entire difference between the shipment accounts is due to the practice of
billing the branch at cost plus 20%.
The December 31, 2012 inventories are P40,000 and P20,000 for the home
office and the branch, respectively. (The branch purchased 16% of its ending
inventory from outside supplies.)
Branch beginning and ending inventories include merchandise acquired from
home office is inventoried at 120% of home office cost.

13. What is the realized profit in branch inventory?

a. P4,000 c. P2,800
b. 7,200 d. 4,400

14. What is the net income of the branch as far the home office is concern?
a. P50,200 c. P10,600
b. 15,000 d. 12,200

Questions 15 and 16 are based on the following information.

Kulas Corporation has one branch operation located 500 miles away from the home
office. The branch office sales merchandise which is shipped to it from the home
office. The merchandise is transferred at cost but the branch pays reasonable
freight charges. The branch office makes sales and incurs and pays operating
expenses. At the end of the current accounting period the true adjusted balance for
the home office account on the branchs books and the branch office account on the
home offices books is P500,000.

The following items may or may not be reconciling items. The current year is 2012.
1) The home office has shipped merchandise to the branch office which cost
P10,000 and which incurs P500 freight charges paid by the home office
but charged to the branch. This merchandise is received by the branch on
January 5, 2012.
2) The branch has transmitted P17,000 in cash back to the home office as a
partial payment on such purchased merchandise. This cash is received by
the home office on January 6, 2012.
3) The branch office returns some defective merchandise to the home office.
The cost of the returned merchandise is P750. The branch office pays P25
of freight costs which will be charged back to the home office.
4) On December 1, 2012, the home office sends a check for P25,000 to
replenish the branchs charged back to the home office.
5) The branch pays an advertising expense of P800 that should have been
paid by the home office since it applied to advertising fees incurred by the
home office of its own benefit.
6) The home office allocated P12,000 of general and administrative expenses
to the branch. The branch had not entered the allocation as of the end of
the year.
 7) The home office pays insurance premiums on the branch store. The
amount paid by the home office is P1,000 but the branch erroneously
records it as P776.00

15. What is the unadjusted balance of the Home Office account?

a. P481,425 c. P500,000
b. 452,276 d. 518,575

16. What is the unadjusted balance of the Branch account?

a. P433,701 c. P518,575
b. 500,000 d. 452,276

Questions 17 through 20 are based on the following information.

Selected information from the trial balances for the home office and the branch of
Lalay Company at December 31, 2012 is provided. The branch acquires
merchandise from the home office and outside suppliers.
Home Office Branch
Sales P60,000 P30,000
Shipments to branch 8,000
Allowance for overvaluation of branch inventory 3,600
Shipments from home office 10,000
Purchase (outsiders) 35,000 5,500
Merchandise inventory 12.01.12 20,000 15,000
Expenses 14,000 6,000
Additional information:
Merchandise inventory, December 31, 2012:
Home office P20,000
Branch (P7,500 from home office and P2,500 from outsiders) 10,000

17. The billing rate of home office to branch for merchandise shipments is
a. 120% of cost c. 130% of cost
b. 125% of cost d. 135% of cost

18. How much of the December 1 inventory of the branch represent purchases
from outsiders and goods shipped from home office?
a. Home office, P5,000 and Outsiders, P10,000
b. Home office, P8,000 and Outsiders, P7,000
c. Home office, P15,000 and Outsiders, P00,000
d. Home office, P12,000 and Outsiders, P3,000

19. The net income reported by the branch is

a. P4,500 c. P3,500
b. P5,600 d. P2,500

20. The combined net income for Home office and branch operations is
a. P22,500 c. P25,100
b. P24,600 d. P21,500
21. Clang-clang Corporations home office ships merchandise to its Toledo branch
at a billing price of 125% of cost. During 2012 the home office makes the
following entry:
Toledo Branch 75,000
Shipments to Toledo branch 75,000
At year-end 2012, P12,000 of this merchandise remains at Toledo branch
inventory.

The entry to adjust the branch income in the books of the home office will
include
a. Debit to Allowance for overvaluation of branch inventory, P12,600
b. Credit to Toledo branch account, P2,400
c. Debit to Shipments to Toledo branch, P12,600
d. Credit to Toledo branch inventory, P2,400

22. May Corporation operate two stores: The Head Office store and Rose branch.
On December 31, 2012, the Rose Branch account in the home office books has a
balance of P340,000. Both stores use a standard 120% markup on cost.
However, Mays home office ships merchandise to the branches at cost. Roses
ending inventory includes P20,000 of merchandise received from home office

Rose branch remitted P15,000 to home office on December 30, 2012. The Home
office will not receive the remittance until January 4, 2013. The Home office
allocated P5,000 general expenses to each of the branches but Rose branch
have not yet recorded the expenses at year-end)

Rose branch paid P2,000 for advertising after Christmas sales that were to be
allocated equally between the two stores. The Home office has not recorded its
share in the expenses.

The unadjusted balance of the Home office account in the books of Rose branch
is
a. P324,000 c. P323,000
b. P319,000 d. P318,000

Questions 23 & 24 are based on the following information.

On December 31, 2012, the home office account on the branch books shows a
balance of P9,735. The following reconciling data are determined in accounting for
the difference.
a. Merchandise billed at P615 shipped by the home office to the branch on
December 28 is still in transit.
b. The branch collected a home office accounts receivable of P2,500, but failed
to notify the home office of this collection.

c. The home office recorded the branch net income for November at P1,125.
This was in error, as the branch reported net income was P1,215.
d. The home office was charged P640 when the branch returned merchandise
to the home office on December 31. The merchandise is in transit.
23. The unadjusted balance of Branch account is
a. P9,735 c. P10,990
b. P10,350 d. P8,400

24. The adjusting entry to correct branch net income for November is
a. Debit, Branch profit and loss P90 and Credit, Branch account P90
b. Debit, Home office account P90 and Credit, Branch profit and loss P90
c. Debit, Branch account P90 and Credit, Branch profit and loss P90
d. Debit, Branch profit and loss P90 and Credit, Home office account P90

25. VERDI, Inc. has several branches. Goods costing P10,000 were transferred
by the head office to Cebu Branch with the latter paying P600 for freight cost.
Subsequently, the head office authorized Cebu Branch to transfer the goods to
Davao Branch for which the latter was billed for the P10,000 cost of the goods
and freight charge of P200 for the transfer. If the head office had shipped the
goods directly to Davao Branch, the freight charge would have been P700. The
P100 difference in freight cost would be disposed of as follows:
a. Considered as savings. c. Charged to Davao Branch.
b. Charged to Cebu Branch. d. Charged to the Head Office.

26. During the year 2012 goods billed at P840,000 were shipped to the branch
at 125% of cost. The account Allowance in Branch Inventory has a balance of
P242,000 before adjustment. The beginning inventory of the branch from home
office at cost is P370,000; the beginning inventory of the branch from outsider is
P35,000; purchases from outsider is P220,000. Determine the cost of goods
available for sale of the branch per branch record.
a. P1, 297, 000 c. P1, 465, 000
b. P1, 539, 000 d. P1, 757, 000

Use the following information for the next two items:

Trial balance for the home office and the branch of Terry Company show the
following accounts before adjustments on December 31, 2012. The home office
policy of billing the branch for merchandise is 20% above cost.
Home Office Branch
Allowance for overvaluation 60,000
Shipments to branch 240,000
Purchases (outsiders) 75,000
Shipments from home office 270,000
Merchandise Inventory, 12/01/12 100,000

The branch Merchandise Inventory on December 31, 2012 of P 50,000 includes

purchases from outsiders of P 20,000.

27. The working paper entry to eliminate profit in the beginning inventory
includes debit to
a. Allowance for overvaluation, P 48,000
b. Allowance for overvaluation, P 46,500
 c. Allowance for overvaluation, P 48,500
d. Allowance for overvaluation, P 12,000

28. The entry on the books of the home office to recognize mark-up includes
credit to
a. Branch income summary, P 52,000
b. Branch income summary, P 52,400
c. Branch income summary, P 52,500
d. Branch income summary, P 5,000

29. The Home office in Mandaluyong shipped merchandise costing P 80,000 to

Makati branch and paid for the freight charges of P 600. The home office bills
the branch at 125% of cost. Makati branch was subsequently instructed to
transfer one-half of the merchandise to Bulacan branch wherein Bulacan paid for
P 200 freight. If shipment was made directly from Mandaluyong to Bulacan, the
freight cost would have been P 400. By how much will the Makati branch charge
the Home Office account?
a. P50,300 c. P51,300
b. P0 d. P56,000

30. The Manila branch of the Great Company is billed for merchandise by the
home office at 20% above 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 by fire. No insurance was maintained. Branch accounts
show the following information:

Merchandise Inventory, January 1 (at billed price) P26,400

Shipments from home office ( Jan.1 Feb.16) 20,000
Sales 15,000
Sales Returns 2,000
Sales Allowances 1,000
What was the cost of the merchandise destroyed by fire?
a. P36,000 b. P30,667 c. P36,800 d. P30,000

31. Fischer Company opened its Tuguegarao Branch on January 1. Merchandise

shipments from home office during the month, billed at 120% of cost, is
P125,000. Branch returned damaged merchandise worth P15,620. On January
31, the branch reported a net loss of P2,270 and an inventory of P84,000. What
is the net income(loss) of the branch to be taken up in the books of the Home
Office?

a. (1690) b. 6,500 c. (2,270) d. 1,960

32. Barros Corporations 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, January 1, of P33,600; shipments received from home
office of P840,000; shipments returned of P48,000; and inventory, December
 21, of P36,000. What is the balance of the allowance for over valuation of
branch inventory on December 31 before adjustments?

a. P5,600 c. P6,000

b. P137,000 d. P145,000

33. The Robert Corporation established its Bulacan branch in January 2016.
During its first year of operations, home office shipped to its Bulacan branch
merchandise worth P130,000 which included of 15% markup on cost. Sales on
account totaled P250,000 while cash sales amounted to P80,000. Bulacan
reported operating expenses of P38,000 and ending inventory of P15,000, at
billed price. In so far as the home office is concerned, the real net income of
Bulacan is

a. P82,000

b. P47,000

c. P177,000

d. P192,000

34. The Quezon City sales company established a branch in Dumaguete City
early last year. It shipped merchandise and billed the branch for P300,000 prior
to its opening. For the year, it made additional shipments at billed price of
P120,000. Within the year the branch shipped back P7500 inventory and got the
credit memo for said returns. On the last working day of the year, an inventory
count was made. Ending inventory of P185,000 was established, consisting of
purchases from third parties at P20,000, with the balance coming from the
home office shipments at billed price. The home office billed the branch 20%
above cost. The total purchases from outside suppliers amounted to P72,500.
The total cost of goods available for sale by the branch at cost (net of over
valuation and returns) amounted to

a. P416,250

b. P422,500

c. P435,200

d. P485,000

35. The home office of Glendale Company, which uses the perpetual inventory
system, bills shipment of merchandise to the Montrose Branch at a markup of
25% on the billed price. On August 21, 2016, the credit balance of the home
offices Allowance for Overvaluation of Inventories Montrose Branch ledger
 account was P60,000. On September 17, 2016, the home office shipped
merchandise to the branch at a billed price of P400,000. The branch reported an
ending inventory, at billed price, of P160,000 on September 30, 2016. Compute
the realized gross profit.

a. P20,000

b. P28,000

c. P120,000

d. P160,000

36. Tillman Textile Company has a single branch in Bulacan. On March 1, 2016,
the home office accounting records included an Allowance of Overvaluation of
Inventories Bulacan Branch ledger account with a credit balance of P32,000.
During March, merchandise costing P36,000 was shipped to the Bulacan branch
and billed at a price representing 40% markup on the billed price. On March 31,
2016, the branch prepared an income statement indicating a net loss of P11,500
for March and ending inventories at billed prices of P25,000. What is the amount
of adjustment for Allowance for Overvaluation of inventories to reflect the true
branch net income?

a. P39,257 debit

b. P46,000 credit

c. P39,333 debit

d. P46,000 debit

37. Charity Inc. established its first branch on May 1, 2016. During the first
month of operation, the home office shipped merchandise to the branch worth
P138,000 which included a markup of 15% on cost. Sales for cash were P80,000
while sales on account were P250,000. At months end, the branch reported an
operating expense of P38,000 and a closing inventory of P23,000 at billed price.
As far as the home office is concerned, the true branch net income for May 2016
is

a. P82,000

b. 147,000

c. P177,000

d. P192,000
38. The Gift Co. has a branch in Bacolod City. During 2016, the home office
shipped to the branch merchandise billed at P150,000 including a markup of
20% on cost. The branch reports opening and closing inventories of P90,000 and
P120,000 respectively, while the home office has a closing inventories of
P210,000 which includes merchandise which are held on consignment valued at
P10,000. Both location used the periodic inventory system. What closing
inventory would be reported in the combined statement of income for the year
2016?

a. P296,000

b. P3000,000

c. P320,000

d. P330,000

39. Hope Co. started operating a branch on May 1, 2016 with a shipment of
merchandise billed at P250,000. Additional shipments during the month were
billed at P125,000. The branch returned damaged merchandise worth P10,000.
Inter office shipments re billed uniformly at 120% of cost on May 31,2016, the
branch reported a net loss of P52,500 and an inventory of P150,000. What is the
branch net income(loss) reflected in the combined income statement for May
2016?

a. P(9,500)

b. P43,000

c. P(52,500)

d. P95,000

40. Lobster Trading bills its Iloilo City Branch for shipments of goods at 25%
above cost. At the close of business on October 21, 2016, a fire gutted the
branch warehouse and destroyed 60% of the merchandise stock stored therein.
Thereafter, the following data were gathered:

January 1 Inventory, at billed price - P50,000

Shipments from Home Office to Oct. 31 - P 130,000

Not sales to Oct.31 - P225,000

If undamaged merchandise recovered are marked to sell for P30,000, the

estimated cost of merchandise destroyed by the fire is
 a. P14,400

b. P21,600

c. P24,000

d. P27,500

41. The Bicol Corporation operates a branch in Naga City. The information from
the December 31, 2016 trial balance as follows:

Home Office Naga Branch

Sales P840,000 P420,000

Shipments to branch 280,000

Purchases 490,000

Shipments from Home Office 350,000

Inventory, Jan. 1, 2016 140,000 56,000

Inventory at December 31, Home Office P42,000; Branch P84,000

Compute the realized inventory profit of home office from sales made by the
branch (the overvaluation of cost of goods sold)?

a. P56,000

b. P120,000

c. P64,400

d. P80,000

42. Jaimee Marketing Co. opened a branch in San Fernando City at the
beginning of 2016. The Branch extends credit, makes collections, pays expenses
from cash receipts, and acquires goods exclusively from the home office. During
 2016, goods shipped by the home office to the branch, at a billing price of 125%
of cost, amounted to P104,000, of which P12,500 remained in the branchs year
end inventory. Other branch transactions in 2016 were as follows: sales, all on
credit, P117,430: expenses, of which P1,500 are unpaid at year end, P20,000;
collections on account, after deducting discounts of P1,480, P84,000; and, total
remittances to the home office, P62,500. As far as the home office is concerned,
the operations of the branch in 2016.

a. P4,450 net income

b. P9,550 net loss

c. P18,300 net income

d. P22,750 net income

43. Leila Co. s Clark branch submitted the following data for 2016, its first year
of operation:

Sales - P203,500 Cr.

Shipments from Home Office - 186,120 Dr.

Operating Expenses - 18, 755 Dr.

Home Office current - 48,125 Cr.

Shipments to the branch are billed at cost. The December 31 inventory of the
branch was P25,245. What is the correct balance on December 31, 2016 of the
Branch Account current as per home office books?

a. P46,750

b. P48,125

c. P65,505

d. P71,995

44. The Aparri Branch of Cagayan Products, Inc. buys merchandise from third
parties and receives merchandise from the home office for which it is billed at 20%
above cot. Below are excerpts from the trial balances and data on the home office
and Aparri branch for the month just ended:
Home Office Books:
Cr. Allowance for overvaluation of branch
Merchandise P 740,000
Dr. Shipment to Branch . 1,700,000

Branch Books:
Dr. Beginning Inventory P2,880,000
Shipments from home office 2, 040,000
Purchases . 820,000

Month end additional data:

Ending inventory of branch P2,920,000
From home office at BP . 2,340,000
From outsiders, at cost .. 580,000

For the month just ended:

The total cost of goods sold The amount of allowance

of Aparri Branch at cost for overvaluation that was
(net of overvaluation) realized from branch sales
a. P2,820,000 P400,000
b. 2,470,000 350,000
c. 2,770,000 740,000
d. 2,470,000 390,000

45. The Clark branch of Freeport Corporation submitted the following trial balance
as of 30 June 2016:

Debit Credit
Cash . P 28,600
Accounts Receivable .. P173,800
Shipments from Home Office .. 462,000
Home office Current. 324,000
Sales . 369,600
Expenses .. 29,700
Total . P694,100 P694,100

Clark reported an ending inventory of P138,000. Shipments are billed at a

mark up of 40% on cost. What is the real net income of Clark branch?
a. P70,600
b. P92,400
c. P100,000
d. P108,900

46. The account balances shown below were taken from the trial balances
submitted to Bon Apetit Corporation by its Alabang branch:
 2015 2016
Petty cash fund P1,500 P1,500
Accounts Receivable 43,800 49,140
Inventory - 37,170
Sales 173,180 195,120
Shipments from home(140% of cost) 107,450 136,080
Expenses 51,260 57,930
Accounts written off 1,120 1,920

All branch collections are remitted to the home office. All branch expenses are paid
out of the petty cash fund. When the petty cash fund is replenished, the branch
debits appropriate expense accounts and credits Home Office Current. The petty
cash is counted every December 31, and its composition was as follows:

12/31/15 12/31/16
Currency and coins P580 P860
Expense vouchers 920 640

The branch inventory on December 31, 2016 was P41,370. The correct branch net
income for 2016 was:
a. P3,390
b. P3,670
c. P41,070
d. P41,350

47. The Manila branch of the Great Company is billed for merchandise by the home
office at 20% above cost. The branch in turn prices merchandise for sales purposes
at 25% above billed price. On February 16 all of the merchandise is destroyed by
fire. No insurance was maintained. Branch accounts show the following information:

Merchandise inventory, January 1 (at billed price) P26,400

Shipments from home office (Jan.1 Feb. 16) 20,000
Sales 15,000
Sales returns 2,000
Sales Allowances 1,000

What was the cost of the merchandise destroyed by fire?

a. P36,000
b. P30,667
c. P36,800
d. 30,000

48. The Best Co. bills merchandise shipments in its Cavite City branch at 125% of
cost. The branch, in turn, sells the merchandise it receives from the home office at
25% above the selling price. On August 1, 2016, all the branchs merchandise stock
was destroyed by fire. The branch records that were recovered showed the
following:
 Inventory, January 1, 2016 (at billed price) P165,000
Shipments received from home office,
January to July (at billed price) 110,000
Purchases, at cost, from outside sources,
all re-sold at a 20% mark up 7,500
Sales 169,000
Sales returns and allowances 3,750

The Best Co. will file an insurance claim. How much is the estimated cost of the
merchandise destroyed by fire?
a. P120,000
b. P130,000
c. P140,000
d. P150,000
49. The following information are extracted from the books and records of Rona
Company and its branch. The balances are at December 31, 2016 of the companys
operations.

Home Office Branch

Sales P260,000
Shipments to branch P78,000
Shipments from home office 104,000
Purchases 39,000
Expenses 78,000
Inventory, January 1,2016 26,000
Allowance for overvaluation of branch
Inventory 31,200

However, no shipments in transit between the home office and the branch were
made. Both shipments accounts are properly recorded. The ending inventory
includes merchandise acquired from the home office in the amount of P26,000 and
P7,800 acquired from outsiders for a total of P33,800.

Compute the (1) realized inventory profit of home office from sales made by the
branch, and (2) the amount of branch merchandise beginning inventory that was
acquired from the home office.

a. (1) P24,700; (2) P15,600

b. (1) P31,200; (2) P20,800
c. (1) P22,533; (2) P15,600
d. (1) P24,700; (2) P20,800

51. The Dumaguete City branch of Silliman Enterprises, Negros, was billed for
merchandise shipments from home office at cost plus 25% in 2015 and cost plus
20% in 2016. Other pertinent data for 2012 show:

Dumaguete branch Home Office

 Sales P63,000 P212,000
Inventory, beginning
at cost 23,000
at billed price 8,900
Purchases 164,000
Inventory transfers
To Dumaguete,at cost 42,000
From Negros, at billed price 50,400
Inventory, end
at cost 28,500
at billed price 11,700
Expenses 20,300 76,400

Compute the (1)net income(loss) of Dumaguete City per branch books and (2) The
combined net income(loss) of Silliman Enterprises.
a. (1) P(4,900); (2) P18,740
b. (1) P(4,900); (2) P22,430
c. (1) P3,330; (2) P22,430
d. (1) P8,230; (2) P25,270

52. The Quezon City branch of Asser Enterprises, Manila, was billed for merchandise
shipments from home office at cost plus 25% in 2015 and cost plus 20% in 2016.
Other pertinent data for 2016 show:

Quezon City branch Home Office

Sales P63,000 P212,000
Inventory, beginning
at cost 23,000
at billed price 8,900
Purchases 164,000
Inventory transfers
To Dumaguete,at cost 42,000
From Negros, at billed price 50,400
Inventory, end
at cost 28,500
at billed price 11,700
Expenses 20,300 76,400

Compute the (1) realized inventory profit from branch sales (or overvaluation of
cost of goods sold, and (2) the ending inventory that should be presented in the
combined income statement.
a. (1) P8,230; (2) P40,200
b. (1) P8,230; (2) P38,250
c. (1) P7,993; (2) P38,250
d. (1) P9,520; (2) P37,860
53. Selected accounts from the December 31, 2016 trial balances of Betty Star Co.
and its branch follow:
 5-star Branch
Inventory, Jan. 1 P46,000 P23,100
Branch Current 116,000 -
Purchases 380,000 -
Shipments from Home Office - 209,000
Freight In - 10,450
Expenses 104,000 58,100
Home Office Current - (106,000)
Sales (310,000) (280,000)
Shipments to branch (200,000) -
Branch merchandise markup (22,000) -

As of December 31, 2016, a shipment with a billing price of P11,000 was in transit
to the branch. Freight cost, typically 5% of the billing price, is inventoriable.
Merchandise on hand at year end were: at home office, P64,000 at cost; at
branch, P33,000 at billing price.

Compute the (1) branch net income in so far as home office is concerned, and (2)
the combined net income for 2016:
a. (1) P40,900; (2) P84,900
b. (1) P32,100; (2) P76,100
c. (1) P32,000; (2) P76,000
d. (1) P33,000; (2) P77,000

54. Swift Corporation, operates a number of branches in Metro Manila. On June 30,
2016, its Sn. Lorenzo branch showed a Home Office Account balance of P27,350
and the home Office books showed a Sn. Lorenzo branch account balance of
P25,550. The following information may help in reconciling both accounts:
A P12,000 shipment, charged by Home Office to Sn. Lorenzo branch, was
actually sent to and retained by Sto. Tomas branch.
A P15,000 shipment, intended and charged to San Jose branch was
shipped to Sn. Lorenzo branch and retained by the latter.
A P2,000 emergency cash transfer from Sto. Tomas branch was not taken
up in the Home Office books
Home office collects a Sn. Lorenzo branch accounts receivable of P3,600
and fails to notify the branch.
Home office was charged for P1,200 for merchandise returned by Sn.
Lorenzo branch on June 28. The merchandise is in transit.

Home office erroneously recorded Sn. Lorenzos net income for May, 2016 at
P16,275. The branch reported a net income of P12,675.
55. What is the reconciled amount of the Home Office and Sn. Lorenzo branch
reciprocal amounts?
a. P21,750
b. P23,750
c. P27,350
d. P20,150
56. On December 31, 2016, the investment in Branch account on the home offices
books has a balance of P102,000. In analyzing the activity in each of these
accounts for De cember you find the following differences:
A P12,000 branch remittance to the home office initiated on December
27,2016, was recorded on the home office books on January 3,2017.
A home office inventory shipment to the branch on December 28, 2016, was
recorded by the branch on January 4, 2012; the billing of P24,000 was at
cost.
The home office incurred P14,400 of advertising expenses and allocated
P6,000 of this amount to the branch on December 15, 2016. The branch has
not recorded this transaction.
A branch customer erroneously remitted P3,600 to the home office. The home
office recorded this cash collection on December 23,2016. Meanwhile, back
at the branch, no entry has been made yet.
Inventory costing P51,600 was sent to the branch by the home office on
December 10, 2016. The billing was at cost, but the branch recorded the
transaction at P40,800.

Compute the (1) Unadjusted Balance of the Home Office Account and (2) Adjusted
Balance of the Reciprocal Account as of December 31, 2016:
a. (1) P76,800; (2) P114,000
b. (1) P52,800; (2) P93,600
c. (1) P151,200; (2) P139,200
d. (1) P52,800; (2) P90,000

57. Aca. Inc. has several branches. Goods costing P10,000 were transferred by the
head office to Cebu Branch with the latter paying P600 for freight cost.
Subsequently, the head office authorized Cebu Branch to transfer the goods to
Davao Branch for which the latter was billed for the P10,000 cost of the goods and
freight charge of P200 for the transfer. If the head office had shipped the goods
directly to Davao Branch, the freight charge would have been P700. The P100
difference in freight cost would be disposed of as follows:
a. Considered as savings
b. Charged to Cebu Branch
c. Charged to Davao Branch
d. Charged to the Head Office

58. On December 3, 2016, the home office of Kathy Office Supply Company
recorded a shipment of merchandise to its Davao Branch as follows:

Davao Branch ----------------------------------- 30,000

Shipment to Branch ----------------------- 25,000
Unrealized Profit in Branch inventory ---- 4,000
 Cash ( for freight charges) --------------- 1,000

The Davao branch sells 40% of the merchandise to outside entities during the rest
of December 2016. The books of the home office and Kathy Office Supply are
closed on December 31 of each year.

On January 5, 2017, the Davao branch transfer half of the original shipment to the
Baguio Branch, and the Davao Branch pays P500 as the shipment.

The entry on the books of the Davao Branch to record receipt of the shipment from
the home office on December 3, 2016 would be:

a. Shipments from Home Office -------------- 29,000

Freight-out ---------------------------------- 1,000
Home Office --------------------------- 30,000

b. Shipments from Home Office -------------- 25,000

Accounts Receivable ------------------------ 4,000
Freight-in ---------------------------------- 1,000
Home Office --------------------------- 30,000

c. Shipments from Home Office -------------- 30,000

Home Office --------------------------- 30,000

d. Shipments from Home Office -------------- 29,000

Freight-in ---------------------------------- 1,000
Home Office --------------------------- 30,000

59. Using the same information in No. 58, at what amounts should the 60% of the
merchandise remaining unsold at December 31, 2016 be included in (1) the
inventory of the Davao Branch at December 31, 2016, and (2) the published
balance sheet of Kathy Office Supply Company at December 31, 2016 shows
inventory at:

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

b. (1) P17,400 ; (2) P15,000 d. (1) P18,400 ; (2) p16,000

60. Using the same information in No. 58, what is the entry on the books of Baguio
Branch for the January 5, 2017 transfer, assuming that the freight cost of the
merchandise from the home office to Baguio Branch would have been P600:

a. Shipments ------------------------------------ 15,100

Home Office ----------------------------- 15,100
 b. Shipments ------------------------------------ 14,500
Freight-in ------------------------------------- 600
Home Office ----------------------------- 15,100

c. Shipments ------------------------------------ 15,100

Freight-in ------------------------------------- 600
Home Office ----------------------------- 15,600

d. Shipments ------------------------------------ 14,500

Freight-in ------------------------------------- 1,100
Home Office ----------------------------- 15,600

61. Using the same information on 58, 59, and 60, what is the entry on the books
of Davao Branch in respect to January 5, 2017 transfer:

a. Home Office ----------------------------------- 15,500

Inventory ------------------------------- 15,500

b. Home Office ----------------------------------- 15,100

Shipments inventory ------------------- 15,000
Cash (for freight charges) ------------- 100

c. Home Office ----------------------------------- 15,500

Cash (for freight charges) -------------- 500
Inventory -------------------------------- 15,000

d. Home Office ----------------------------------- 15,600

Cash (for freight charges) ------------- 500
Freight-in -------------------------------- 600
Inventory -------------------------------- 14,500

62. Using the same information in Nos. 58, 59 and 60, what is the entry on the
home office books in respect to January 5, 2017 transfer:

a. Home Office ----------------------------------- 15,500

Cash --------------------------------------- 500
Inventory ---------------------------------- 15,000
 b. Shipments ------------------------------------- 14,500
Freight-in ------------------------------------- 600
Home Office Current --------------------- 15,100

c. Branch Current Baguio --------------------- 15,100

Excess Freight -------------------------------- 400
Branch Current Davao ----------------- 15,500

d. Branch Current Baguio --------------------- 15,100

Excess Freight -------------------------------- 600
Branch Current Davao ----------------- 15,700

63. Lipton Company had an agency in Antipolo. For the period just ended, the
agency transactions showed the following:

Receipts from sales ---------------------------------------------- P350,000

Disbursements:
Purchases --------------------------------------------------- 400,000
Salaries and commissions ---------------------------------- 70,000
Rent ---------------------------------------------------------- 20,000
Advertising supplies ---------------------------------------- 10,000
Other expenses --------------------------------------------- 5,000

The agency had P100,000 receivables and P50,000 payables as of the end of the
period. Also, they were inventories on hand of P90,000 and unused advertising
supplies of P6,000. The agency was set up as an experiment for one period and
would be closed if losses were incurred. The agency should:

a. Review again because it was a break even operation.

b. Close with the periods operational loss of P155,000.
c. Close with the periods operational loss of P9,000.
d. Continue with the periods profit of P25,000.

64. The JJ Company, Inc. opened an agency in Makati in 2016. The following is a
summary of the transactions of the agency:

Sales orders sent to home office ------------------------------- P66,000

Sales orders filled by home office in 2016 --------------------- 55,800
Freight on shipment to agency --------------------------------- 1,320
Collections, net if 2% discount --------------------------------- 47,628
Selling expenses paid from the agency working fund--------- 3,384
 Administrative expenses charged to agency ------------------ 5% of gross sales
Samples shipped to agency:
Cost -------------------------------------------------------- P3,600
Inventory, December 31, 2016 --------------------------- 1,320

The company maintains its gross margin on agency gross sales at 30%
excluding the freight cost on shipments to agency.

The agencys cost of sales including freight and agencys net income would
amount to:

Cost of Sales Net Income

a. P39,000 P5,994
b. 47,520 7,668
c. 40,380 5,994
d. 40,380 7,320

65. Happy Inc. opens a sales agency in Davao City, and a working fund for P20,000
is established on the imprest basis. The first payment from the fund is P3,000 for
rent. This transaction should be recorded by the home office as follows:

a. No Entry
b. Rent ---------------------------- 3,000
Cash -------------------------- 3,000
c. Davao Agency ----------------- 3,000
Cash -------------------------- 3,000
d. Davao Agency ----------------- 3,000
Working Fund --------------- 3,000

66. Sad Co. has a sales agency in Cebu. Agency revenues and expenses are
recorded in separate agency accounts, with the operating results of both the agency
and the home office generated at each month-end. For the month of October 2016,
the home office paid P10,000 for advertising costs on behalf of the agency and
recorded this as follows:
a. Cebu agency 10,000
Cash 10,000
b. Advertising Expense 10,000
Cash 10,000
c. Accounts Receivable Cebu Agency 10,000
Cash 10,000
d. Advertising expense Cebu Agency 10,000
Cash 10,000

67. The home office ships merchandise to the branch at 25% percent above cost. If
the balance before closing in the Intracompany Inventory Profit account is P66,000
and Shipments from Home Office amounted to P300,000, what was the cost of the
branchs beginning inventory?
a. P30,000
 b. P24,000
c. P80,000
d. P96,000

68. The home office ships merchandise to the branch at 50% above cost. On its
books the branch shows a beginning inventory of home office merchandise
amounting to P15,000 and shipments from home office of P110,000. Its ending
inventory of home office merchandise is P5,000. What amount should the home
office adjust the allowance for overvaluation of branch inventory account?
a. P40,000
b. P55,000
c. P60,000
d. P62,500

69. Power Corporation shipped inventory to its Bacolod branch, costing P375,000
plus freight. Power bills inventory to its branches at 120% of original cost, plus the
actual amount of shipping charges. At the end of the year, the Bacolod branch had
resold 50% of the inventory from the home office. Shipping cost paid by Power
were P2,000.

What amount should the inventory be reported in the branchs statement of

financial position?

a. P187,500
b. P188,500
c. P226,000
d. P377,000

70. Using the question in No. 69, at what amount should the branchs inventory
from the home office be reported in the statement of financial position of Power
Corporation as a whole?
a. P157,520
b. P188,500
c. P189,500
d. P377,000

71. Oro Corporation has a branch in Cebu. The branch reported income of P130,000
for 2013. The branch has a balance in its Home Office account at the end of the
year, after closing, P765,000. Branch income has not been recorded by Oros home
office. During the year, Oro shipped inventory to the branch at a price of P160,000;
oros original cost was P90,000. All but 45% of the inventory has been resold to
unrelated parties by year end.

What is the balance in Oros Investment in Branch account?

a. P594,500
b. P603,500
c. P635,000
d. P765,000
72. A branchs ending inventory of merchandise shipped by the home office and
purchased from outside vendors amounts to P50,000. The post closing balance in
the Unrealized Gross Profit in Branch Inventory account is P6,000 due to the home
office practice of shipping merchandise at 20% above cost. The merchandise
purchased from outside vendors contained in the ending inventory of the branch
amounts to:
a. P38,000
b. P30,000
c. P18,000
d. P14,000

73. Merchandise shipped to a branch for P30,000, which includes a 20% markup on
cost, was returned by the branch. To record the receipt of the returned
merchandise, the home office should make the following entry:
a. Shipments to Branch 30,000
Investment in Branch 25,000
Allowance for overvaluation of Br. Inv. 5,000
b. Investment in Branch 30,000
Shipment in Branch 30,000
c. Shipments to Branch 25,000
Allow. for Overvaluation of Br. Inv. 5,000
Investment in Branch 30,000
d. Shipment to branch 24,000
Unrealized Profit in Br. Inv 6,000
Investment in Branch 30,000

74. During 2016, Jose Corporation transferred inventory from its home office to its
Laguna Branch at a billed price of P110,000. The inventory originally cost the
company P90,000. The home office reported sales and cost of goods sold of
P1,400,000 and P590,000, respectively. The Laguna branch reported sales and cost
of goods sold of P675,000 and P300,000, respectively. All of the inventory had been
sold by year end. What is the cost of goods sold to be reported in the 2016
combined statement of comprehensive income?
a. P890,000
b. P870,000
c. P800,000
d. P780,000

75. The Simon Company always ships merchandise to a branch outlet at a 30%
mark up above cost. During 2016, this branch received P182,000 in such
shipments while also acquiring goods from outside vendors at cost of P96,000. Half
of the branchs December 31, 2016, inventory of P57,200 came from home office
acquisitions. At the beginning of 2013, the branch held merchandise with transfer
price of P49,400. All of this inventory had been purchased directly from the home
office. At the end of 2016, what is the adjusted balance in Simons Allowance for
Overvaluation in Branch Inventory account?
a. P4,250
 b. P5,340
c. P6,000
d. P6,600

76. Lakas, Inc., starts a branch operation to sell more of its merchandise. Inventory
costing P60,000 is shipped to this branch at a billed price of P90,000. During the
initial year, the home office pays P17,000 in expenses for the branch. The branch
sells 80% of the inventory that it received for P110,000 and remits P70,000 in cash
to the home office. What is the correct Home Office account balance on the records
of the branch? Closing entries have not been made.
a. P7,000
b. P37,000
c. P75,000
d. P147,000

77. Lamp starts a branch operation on January 1, 2016.