PAMANTASAN NG CABUYAO

ADVANCED ACCOUNTING
HOME OFFICE AND BRANCH ACCOUNTING

1. Leila Co's Clark branch submitted the following data for 2011, 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, 2011 of the Branch Account current as
per home office books?
a. P46, 750. c. P65, 505
b. 48, 125. d. 71, 995

2. The following information pertains to shipments of merchandise from home office to branch
during 2011:
Home office's cost of merchandise. P160, 000
Intra company billing. 200, 000
Sales by branch 250, 000
Unsold merchandise of branch on Dec 31, 2011. 20, 000
In the combined income statement of home office and branch for the year ended December 31,
2011; what amount of the above transactions should be included in sales?
a. P250, 000 c. P200, 000
b. 230, 000 d. 80, 000

3. Barros Corporation's 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 31, 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. 137, 600. d. 145, 600

4. The clark branch of freeport corporation submitted the following trial balance as of June
2011:
Debit. Credit
Cash P28, 600
Accounts receivable 173, 800
Shipments from home office 462, 000
Home office current 324, 500
Sales 369, 600
Expenses 29, 700
Clark reported an ending inventory of P138, 600. Shipments are billed at a mark-up of 40% on
cost. What is the real net income of Clark branch?
a. P92, 400. c. P70, 600
b. 138, 600. d. 108, 900
5. Tillman textile company has a single branch in Bulacan on March 1, 2011, the home office
accounting records included an allowance for 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 billed at a price representing a 40% markup on the billed
price. On March 31, 2011, 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

6. The Gift co. has a branch in Dipolog City. During 2011, the home office shipped to the branch
merchandise billed at P150, 000 including a mark-up 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 use the periodic inventory system. What closing
inventory would be reported in the combined statement of income for the year 2011?
a. P296, 000. c. P320, 000
b. 300, 000. d. 330, 000

7. The Manila branch of the Great co. 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). P 26, 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. C. P36, 800
b. 30, 667. d. 30, 000

8. Trial balances for the home office and the branch of the Tony co. show the following accounts
before adjustment, on December 31, 2011. The home office policy of billing the branch for
merchandise is 20% above cost.
Home office Branch
Unrealized intercompany inventory profit P10, 800
Shipments to branch 24, 000
Purchase (outsiders) P7, 500
Shipments from home office 28, 800
Merchandise inventory, Dec. 1, 2011 45, 000
What part of the branch inventory as of Dec. 1, 2011 represent purchases from outsiders and
what part represents goods acquired from the home office?
Outsiders Home office
a. P12, 000. P33, 000
b. 16, 500. 28, 500
c. 15, 000. 30, 000
d. 9, 000. 36, 000
9. Swift corporation, operates a number of branches in Metro Manila. On June 30, 2011, it's San
Lorenzo branch showed a home office account balance of P27, 350 and the home office books
showed a San Lorenzo branch account balance of P25, 550. The following information may help
in reconciling both accounts:
1. A P12, 000 shipment, charged by Home office to San Lorenzo branch, was actually sent to and
retained by Sto. Tomas branch.
2. A P15, 000 shipment, intended and charged to San Jose branch was shipped to San Lorenzo
branch and retained by the latter.
3. A P2, 000 emergency cash transfer from Sto. Tomas branch was not taken up in the Home
office books.
4. Home office collects a San Lorenzo branch accounts receivable of P3, 600 and fails to notify
the branch.
5. Home office was charged for P1, 200 for merchandise returned by San Lorenzo branch on
June 28 the merchandise is in transit.
Home office erroneously recorded San Lorenzo's net income for May, 2011 at P16, 275. The
branch reported a net income of P12, 675.
What is the reconciled amount of the home office and San Lorenzo branch reciprocal accounts?
a. P21, 750
b. 23, 750
c. 27, 350
d. 20, 150

10. Lakers Trading Co. Operates a branch in Dagupan city, at close of business on December 31,
2011, Dagupan branch account in the home office books showed a debit balance of P225, 770.
The inter office accounts were in agreement at the beginning of the year. For purposes of
reconciling the inter office accounts, the following facts were ascertained:
1. An office equipment costing the home office P3, 500 was picked up by the branch as P350.
2. Insurance premium of P675 charged by th home office was taken up twice by the branch.
3. Freight charge on merchandise made by the home office for P1, 125 was recorded in the
branch books 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 debit memo from the home office representing the share
of the branch in advertising.
6. The home office inadvertently recorded a remittance for P3, 000 from its Cebu branch as a
remittance from its Dagupan branch.
Compute the balance as of December 31, 2011.

Unadjusted Balance Adjusted Balance

Of the home office account. Of the reciprocal account
a. P226, 485. P225, 770
b. 228, 485. 228, 770
c. 225, 770. 226, 485
d. 226, 485. 228, 770
11. On December 3, 2011, the home office of Kathy Office Supply Company recorded a
shipment of merchandise to its Davao branch as follows:

Davao branch. 30, 000

Shipments 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 during the rest of December 2011.
The books of the home office and Kathy office supply are closed on December 31 of each year.

On January 5, 2012, the Davao branch transfer half of the original shipment to the Baguio
branch, and e 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, 2011 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

12. Using the same information in No.11 at what amounts should the 60% of the merchandise
remaining unsold at December 31, 2011 be included in (1) the inventory of the Davao branch at
December 31, 2011, and (2) the published balance sheet of Kathy Office Supply Company at
December 31, 2011 shows inventory of:

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

b. (1) P17, 400; (2) P15, 000
c. (1) P18, 000; (2) P 15,600
d. (1) P18, 400; (2) P 16, 000
13. Using the same information in No. 11, what is the entry on the books of Baguio branch for
the January 5, 2012 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, 000
Freight-in. 600
Home office. 15, 600
d. Shipments 14, 500
Freight-in 1, 100
Home office. 15, 600

14. Using the same information in Nos. 11,12,13. What is the entry on the books of Davao
branch in respect to January 5, 2012 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

15. Using the same information in Nos. 11-13, what is the entry on the home office books in
respect to January 5, 2012 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