PRACTICAL ACCOUNTING 2 (SY 2017 – 2018) – HOME OFFICE AND BRANCH ACCOUNTING NAME:___________________________________________________ DATE:___________________ Questions 1 to 5 are based on the following: Comparative trial balance of the home office and the two branches of Norway Corporation at December 31, 2014 were as follows: Home office
Cash Accounts receivable (net) Inventories Branch No. 1 Branch No. 2 Plant assets (net) Purchases Shipments from home office Expenses Total
P 5,000 80,000 150,000 170,000 165,000 730,000 900,000 300,000 P2,500,000
Accounts payable Other liabilities Loading in branch inventories Capital stock, P10 par Retained earnings Home office Sales Shipments to branches Total
P100,000 80,000 108,000 500,000 262,000 1,000,000 450,000 P2,500,000
Branch 1
Branch 2
P15,000 30,000 60,000
P22,000 40,000 48,000
250,000
200,000
300,000 75,000 P730,000
240,000 50,000 P600,000
P45,000 15,000
P30,000 5,000
170,000 500,000 0 P730,000
165,000 400,000 0 P600,000
Additional information: Home office and Branch inventory at December 31, 2014 were: Home office (at cost) P120,000 Branch No. 1 (at billed price) 72,000 Branch No. 2 (at billed price) 96,000 1. What is the mark-up rate on merchandise transfers to branch? a. 20 percent of billed price c. 16-2/3 percent of billed price b. 25 percent of cost d. 25 percent of billed price 2. How much is the beginning inventory of Norway Corporation? a. P150,000 b. P258,000 c. P240,000 d. P90,000 3. How much is the ending inventory of Branch No. 1 at cost? a. P72,000 b. P57,600 c. P60,000 d. P54,000 4. How much is the correct net income of Branch No. 2 as far as home office is concerned? a. P190,000 b. P158,000 c. P185,000 d. P94,000 5. How much net income will the home office report in its separate income statement? a. P220,000 b. P595,000 c. P494,000 d. P100,000 Questions 6 to 7 using the following information: The Dagupan City branch of Andy Enterprise, Manila was billed for merchandise shipments from home office at cost plus 25% in 2013 and cost plus 20% in 2014. Other pertinent data for 2014: Dagupan branch
Sales Inventory beginning Purchases Inventory transfers Inventory, end Expenses
P63,000 8,900 (at billed price) 50,400 (at billed price) 11,700 (at billed price) 20,300
Home office
P212,000 23,000 (at cost) 164,000 42,000 (at cost) 28,500 (at cost) 76,400
6. What will be the combined cost of sales of Dagupan branch and Andy’s home office that must be shown in the combined income statement?
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PRACTICAL ACCOUNTING 2 (SY 2017 – 2018) – HOME OFFICE AND BRANCH ACCOUNTING a. P22,430
b. P155,815
c. P155,870
d. P22,040
7. What will be the combined net income of Dagupan branch and Andy’s home office? a. P22,430 b. P22,600 c. P22,133 d. P22,040 Questions 8 to 10 using the following information: At the end of 2008, the branch reported an inventory of P15,625. The home office bills this branch at 125% of cost. During 2009, goods costing P300,000 were shipped to the branch. The account “allowance for overvaluation of branch inventory” after adjustment,
shows a balance of P16,250 at the end of the year. 8. What was the amount of inventory at January 1, 2009 at cost? a. P12,500 b. P15,625 c. P19,531 d. P28,125 9. What was the amount of ending inventory at billed price? a. P309,37 b. P247,500 c. P81,250 d. P65,000 10. What was the amount of allowance for overvaluation before adjustment? a. P61,875 b. P78,125 c. P20,312 d. P20,000 11. The following data pertains to the shipments of merchandise from Home Office to Branch during 2013: Home office’s cost of merchandise
Inter-office billings Sales by branch to outsiders Merchandise inventory on December 31, 2013
P350,000 420,000 520,000 50,000
In the combined statement of comprehensive income of the Home Office and the Branch for the year ended December 31, 2013, what amount of the above transactions should be included as sales? a. P570,000 b. P520,000 c. P470,000 d. P350,000 12. The Bicol Corporation operates a branch in Naga City. The information from the December 31, 2011 trial balance are as follows: Home office
Sales Shipments to branch Purchases Shipments from home office Inventory, January 1, 2011
P840,000 280,000 490,000 140,000
Naga branch
P420,000
350,000 56,000
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. P120,400 c. P64,400 d. P80,000 Questions 13 to 14 using the following information: Mariano operates a branch in Laoag City. At close of the business on December 31, 2016, Laoag Branch account in the home office books showed a debit balance of P234,900. The interoffice accounts were in agreement at the beginning of the year. For purposes of reconciling the interoffice accounts, the following facts were ascertained: a. Computer equipment costing the home office P27,000 was sent to Laoag branch. The home office will maintain the records of the asset used by the branch. Meanwhile, back at the branch no entry was made. b. The branch acquired a machinery costing P18,000. The home office will maintain the records of the asset used by the branch. The home office was not yet notified. c. The home office charged the branch for freight amounting to P2,220. It should have been charged to its customer. d. The home office inadvertently recorded a Laoag branch remittance of P4,200, as collection from its customers on account. e. On December 24, 2016, the branch sent a check for P9,600 to its suppliers on account. The branch erroneously recorded the transaction as a remittance to the
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PRACTICAL ACCOUNTING 2 (SY 2017 – 2018) – HOME OFFICE AND BRANCH ACCOUNTING
f.
g.
h.
i.
home office and sent a copy of the debit memo to the home office. The home office recorded this upon receiving the debit memo on December 29,2016. On December 26, 2016 the branch returned P6,600 of excess merchandise to the home office. The merchandise was received by the home office on December 30, 2016 and credited Lanao Branch Current. The home office allocated advertising and rent expense totaling P5,400 to Laoag branch. The home office charged the said expense to Laguna branch by mistake; Laoag branch had not entered the allocation at year-end. A home office customer remitted P3,600 to the branch. The branch inadvertently recorded this transaction on December 28, 2016 as a transfer of cash from the home office. The home office made no entry during the year. Inventory costing P36,000 was sent to the branch by the home office on December 14, 2016. The branch recorded the transaction as a purchase of merchandise on account from outsiders by mistake.
_____13. What is the unadjusted balance of the home office current account as of December 31, 2016? a. P222,480 b. P171,480 c. P188,880 d. P178,320 _____14. What is the adjusted balance of the reciprocal accounts as of December 31, 2016? a. P200,280 b. P247,320 c. P222,480 d. P262,320 _____15. The home office ships merchandise to its branch above cost. What journal entry should the branch make to record receipt of the shipment? a. Home Office Shipment from Home Office b. Home office Shipment from Home Office Allowance for Overvaluation of Home Office Inventory c. Shipment from Home Office Allowance for Overvaluation of Home Office Inventory d. Shipment from Home Office Home Office
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