HOME OFFICE, BRANCH AND SALES AGENCY ACCOUNTING

DEPARTMENTAL QUIZ NUMBER 3

PROBLEM SOLVING 3PTS 24

EACH
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4 28

5 29

6 30

7 31

8 32

9 33

10 34

11 35

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PROBLEM A
Partial list of accounts from the trial balances of the BERGER CO., BRANCH A,
BRANCH B at December 31, 2019 are as follows:
Home Office BRANCH A BRANCH B
Inventory 1/1/2019 P 34,000 P 5,500 P 8,800
Branch A 100,000
Branch B 81,000
Purchases 500,000
Expenses 120,000 35,000 38,000
Shipment from HO 68,200 41,800
Home Office 94,000 75,000
Sales 500,000 150,000 120,000
Shipment to Branch A 73,700
Shipment to Branch B 46,200
Loading in Branch Invty,1/1/2019 1,300

Additional information:

 “SHIPMENT TO BRANCH” accounts were made at billed prices. Rate for

mark-up on 2019 shipments were same as last year for both branch.

 There were shipments in transit at year end

 INVENTORY ON HAND on December 31, 2019

---Home Office-P31,000---BRANCH A-P 7,260;---BRANCH B-P 8,250.

1. Combined total cost of goods sold is:

2. The merchandise inventory on the combined balance sheet as of

December 31,2019 would be:

3. How much is the total combined net income?

PROBLEM B
On December 1, Puring Company opened a branch in Cebu to which merchandise
billed at P30,000 was shipped. During the month, additional shipments were made
at billed prices of P12,000. During December, Cebu branch returned merchandise
that was defective and received credits of P750 on the returns. At the end of the
month, the branch record its inventory at P 18,500, which is from the following
sources;

Merchandise acquired from HO at Billed price-----------------------------P 16,500

Merchandise acquired from outsiders---------------------------------------- 2,000
Total inventory---------------------------------------------------------------------- P 18,500

A branch loss for December is calculated at P 2,600. The home office has followed
the practice of billing the branch at 20% above cost.

Compute:

4. The Balance Of The Allowance For Overvaluation Of Branch Inventory At

December 31 Before Adjustments

5. The Net Income (Loss) Of The Branch As Far As H.O Is Concerned:

PROBLEM C
Batangas (HO) company transfer inventory to its Laguna Branch at 120% above cost.
During 2019, the reciprocal account in the income statement of Laguna amounts to
P825,000. The branch’s balance sheet at the beginning of the year shows the
balance of inventory at billed price of P 384,000, P 330,000 of which came from the
HO. Purchases from outsider during the amounted to P194,000, 45% of which
remain unsold as of year-end. The HO debited its deferred profit account in the
amount of P464,400 at year-end.

6. How Much Is The Ending Inventory Per Branch Books?

7. How Much Is The True Cost Of Sales Of The Branch?

8. How Much Is The Deferred Profit Account In Books Of Home Office?

PROBLEM D
During May 2019 the home office in Manila establishes a branch in Cebu act as a
Sales agency. The following assets are sent to the agency on May 1:

Cash (for the working fund under the imprest system)--------P 100,000
Samples from the merchandise (Perpetual is used--------------- 240,000

During the month, the sales agency submits sales on account of P 1,500,000 duly
approved by the home office. Cost of merchandise shipped t o fill the orders from
customers obtained by the sales agency is P800,000. Home office disbursements
chargeable to the sales agency are as follows: furniture and fixtures P150,000:
manager’s and salesmen’s salaries, P88,000:and rent for two months,P70,000. On
May 15, the sales agency fund was replenished; paid vouchers submitted by the
agency amounted to P42,000. Sales agency samples are useful up to December 31
2019, which at this time are believed to have a salvage value of 15% of its cost.
Furniture and fixtures is depreciated at 30% per annum.

9. What Is The Net Income Of The Sales Agency For The Month Of May 2019?

10. The Journal Entry In The Books Of Manila Home Office On May 1
Transaction May Include?( Choose the letter only)

A. Debit Cash In Bank……………………….P100,000

B. Debit Merchandise Inventory…………..P240,000
C. Debit Working Fund-Cebu………………P240,000
D. Credit Merchandise Inventory…… …..P240,000

11. How Much Is The Total Assets Of The Agency In The Ho’s Books?
PROBLEM E
MOTDALI Corporation is maintaining a branch in MALABON. During the year the
HO shipped goods to the branch at a cost of P120,000. The branch submitted to the
HO the following report summarizing its operations for the period ended December
31, 2019.

Sales(30% on account)—P196,000; Expenses (50% unpaid)—P50,000; Purchases—

P25,000; Shipments from HO—P150,000; Inventory Beg(30% from Outsider)—
P30,000; Inventory End(40% from HO)—P90,000; Remittance to HO P60,000.

12. The Branch Cost Of Sales As Far As Ho Is Concerned Is:

13. The Required Balance Of The Allowance For Overvaluation Of Account Is:

14. How Much Is The Net Income Of The Branch In Its Books?

15. How Much Is The Ending Inventory Account In The Books Of The Branch?

PROBLEM F

Beautiful Co. established 2 branches, first is in Laguna and second one is in Cebu.
The Home Office instructed Laguna Branch to send cash of 25, 000 to Cebu Branch.

16. What is the entry to record this transfer on the home office books?

a. Investment in Cebu Branch 25, 000

Investment in Laguna Branch 25, 000

b. Home Office 25, 000

Cash 25, 000

c. Investment in Laguna Branch 25, 000

Investment in Cebu Branch 25, 000

d. No entry
PROBLEM G

Power Corp. shipped inventory to its Bacolod branch , costing P575,000 plus
freight. Power bills inventory to its branches at 120 percent of original cost, plus
the actual amount of shipping charges. At the end of the year, the Bacolod branch
had resold 50 percent of the inventory from the home office. Shipping costs paid
by Power were P7,000.

17. What amount should the inventory be reported in the branch's

balance sheet?

18. Using the data above, at what amount should the branch's inventory
from the home office be reported in the Balance sheet of Power
Corp. as a whole?

PROBLEM H

On December 31, 2011, the branch manager of Rachelle Company in Marikina City
submitted the following data to the home office:

Petty Cash Fund 10,000.00

Sales 564,000.00
Sales returns 4,000.00
Accounts written-off 10,000.00
Shipments from home office 300,000.00
Accounts receivable, January 1, 2019 90,000.00
Accounts Receivable, December 31, 2019 100,000.00
Inventory, January 1, 2019 60,000.00
Inventory, December 31, 2019 70,000.00
Expenses (charged by Home Office) 120,000.00
All cash collected on accounts receivable are remitted to the home office.

19. The balance of the Home Office Current Account on January 1, 2019 is:

20. The net income of the Marikina Branch for the year ending December 31,
2019 is:
21. The total remittance for the year 2019 is:

PROBLEM I

The following transactions were entered in the branch current account of Makati
head Office for the year 2019:
Investment in Branch – Ortigas
Beg. Balance, 1/1/19 459,258 33,300 Collection of AR, 9/1/19
Shipments to branch, 4/1/19 212,400
Cash forwarded, 6/1/19 15,000
Operating expenses charged
to the Branch 2,880

 Shipments to the branch during the year were made at 20% above cost
 The balance of the allowance for Overvaluation of Branch Inventory account was
P21,300 at the beginning, and the allowance was written down to P14,700 at year-
end.
 On December 1,2019, the home office purchased a piece of equipment amounting to
P36,000 for its branch in Ortigas. The said equipment has a useful life of five years
and will be carried in the books of the branch, but the home office recorded the
purchase by debiting equipment.
 The branch recorded the depreciation of the equipment by debiting the Home Office
Current account and crediting Accumulated Depreciation.
 Debit memo regarding the allocation of operating expenses to the Ortigas branch
was received by the branch on January 2,2020.
 The Ortigas branch reported net income of P197,730.
 It also remitted cash t the home office on December 31,2019 amounting to P33,000
which the home office received and recorded on January 1,2020
 The interoffice accounts were in agreement at the beginning of the year.

22. How much is the adjusted balance of the Branch Current account on
December 31,2019 before the necessary closing entries were made?

23. What is the amount of adjustment in the allowance for Overvaluation of

Branch Inventory Account?

24. How much is the net income of Ortigas branch that will be reported in the
combined income statement of Makati Company?

25. What is the amount of the Home Office Current account that will be
reported in the books of Ortigas branch after closing entries are made?
26. Reciprocal accounts are also:

a. Intercompany accounts
b. Intra company accounts
c. Imaginary accounts
d. An income statement account

27. The home office ships merchandise below cost. What journal entry should
the branch make to record receipt of the shipment?

a. Dr. Home office

Cr. Shipment from home office
b. Dr. Home office
Cr. Inventory
c. Dr. Shipment from Home office
Cr. Allowance for evaluation
d. None of the above

28. Which of the following is true?

I. Investment in branch is an asset in Branch books

II. Investment in branch is an asset in Home office books
III. Investment in branch is a liability in Home office books
IV. Investment in branch is an equity account in Home office books

a. I only
b. II only
c. I and II
d. I and IV

PROBLEM J

MAHAL Corp.’s shipments to and from its KITA Branch are billed at 120% of cost.
On December 31, KITA reported the following data at billed price INVENTORY beg--
-----P33,600; SHIPMENTS FROM HO—P840,000; SHIPMENTS RETURN---P48,000;
INVENTORY END------P36,000.

29. What is the balance of allowance for over valuation of branch inventory on
December before the adjustments?
30. What is the TRUE Cost of Sales of the branch on December?

PROBLEM K

Comparative trial balances of the home office TEA CORP. and its two branches at
December 31, 2010 were as follows:
HOME OFFICE NA BRANCH BOY BRANCH

Cash P 5,000 P 15,000 P 22, 000

Accounts Receivable 80,000 30,000 40,000
Inventories 150,000 60,000 48,000
NA Branch 170,000
BOY Branch 165,000
Plant Asset 730,000 250,000 200,000
Purchases 900,000
Shipments from HO 300,000 240,000
Expenses 300,000 75,000 50,000
Totals P2,500,000 P 730,000 P 600,000

Accounts payable P 100,000 P 45,000 P 30,000

Other liabilities 80,000 15,000 5,000
Loading in Branch Inventories 108,000
Share Capital @ P10par 500,000
Retained Earnings 262,000
Home Office 170,000 165,000
Sales 1,000,000 500,000 400,000
Shipment to Branches 450,000 - -
Totals P2,500,000 P 730,000 P 600,000

Additional information:
Home Office and branch inventories at December 31, 2010 were:

HO-------P 120,000
NA BRANCH@ billed price-------P 72,000
BOY BRANCH@ billed price------P 96,000

31. How much beginning inventory will TEA CORP report for the whole company?

32. From above information, how much net incomes will TEA corp. report for the
year ended 2010 for the whole company?

33. How much is the beginning Loading in Branch Inventories account?

34. How much is the ending Loading in Branch Inventories account?

35. How much is the ending inventories of TEA CORP report for the whole company?