Professional Documents
Culture Documents
Multiple Choice: Balance of Allowance For Overvaluation Account Before Adjustment P 35,000
Multiple Choice: Balance of Allowance For Overvaluation Account Before Adjustment P 35,000
MULTIPLE CHOICE
13-1:
13-2:
a
Goods available for sale:
At billed price (P30,000 + P180,000)
At cost (P210,000 / 120%)
Balance of Allowance for Overvaluation account before adjustment
13-3:
c
Inter-company inventory profit (IIP) before closing
Less: IIP from shipment from home office
Billed price
Cost (P300,000 / 120%)
IIP from beginning inventory at billed price
Divided by
Cost of branchs beginning inventory
13-4:
P300,000
250,000
Billed Price
P15,000
110,000
%
150%
150%
Cost
P10,000
73,333
5,000
150%
3,333
50,000
P 16,000
20%
P 80,000
Overvaluation
P 5,000
36,667
P41.667
1,667
P40,000
b
Shipment to branch, at billed price
Shipping cost
Total cost
Sold (50%)
Inventory
13-6:
P 66,000
a
Beginning inventory from HO
Shipments
Balance before adjustment
Ending inventory from HO
Required adjustments
13-5:
P210,000
175,000
P 35,000
P375,000
2,000
P377,000
188,500
P188,500
a
Shipment to branch, at cost
Shipping cost
Billed price
Sold (50%)
Inventory, at billed price
P312,500
2,000
P314,500
157,250
P157,250
17
13-7:
c
Home office account balance after closing branch profit
Less: branch profit
Investment in branch account balance before closing branch profit
13-8:
d
Branch ending inventory, at billed price
Acquired from home office, at billed price:
Cost (P6,000 / 20%)
Mark-up
Purchased from outsiders
13-9:
P765,000
130,000
P635,000
P 50,000
P30,000
6,000
36,000
P 14,000
b
Cost of goods sold Home office
Cost of goods sold Branch:
Billed price
Less: overvaluation (P110,000 P90,000)
Combined cost of goods sold
P590,000
P300,000
20,000
280,000
P870,000
13-10: c
13-11: d
Overvaluation of branch ending inventory acquired from HO:
Billed price
Cost (P28,600 / 130%)
Adjusted balance of allowance for overvaluation account
P 28,600
22,000
P 6,600
13-12: b
Shipment from home office
Expenses
Cash remittance to home office
Home Office account balance before closing
P 90,000
17,000
(70,000)
P 37.000
13-13: b
Shipment to branch, at cost
Ending inventory, at cost (P70,000 / 30%)
Cost of goods sold
Freight (P6,000 x P50,400/P72,000)
Total
P 72,000
( 21,600)
P 50,400
4,200
P 54,600
18
13-16: c
Sales
Cost of goods sold
Shipments from home office (P151,200/140%) P108,000
Inventory, 1/1 (P28,350 / 140%)
20,250
Inventory, 12/31 (P25,200 / 140%)
( 18,000)
Gross profit
Expenses
Branch profit as far as the home office is concerned
P270,000
110,250
P159,750
90,000
P 69,750
13-17: c
Unsold merchandise
Less: Merchandise acquired from home office, at billed price
Merchandise acquired from outsiders
Merchandise acquired from home, at cost (P7,500 / 20%)
Branch inventory at cost, 12/31
P 60,000
45,000
P 15,000
37,500
P 52,500
13-18: a
Branch inventory, 1/1
Acquired from home office at billed price:
Overvaluation [P99,900 (P390,000 P300,000)]
Cost (P9,900 / 30%)
Purchases from outsiders
P 54,600
P 9,900
33,000
42,900
P 11,700
13-19: c
Acquired from home office [(P60,000 x 80%) 120%]
Acquired from outsiders (P60,000 x 20%)
Branch inventory, 12/31 at cost
P 40,000
12,000
P 52,000
13-20: b
Sales (P148,000 + P144,000)
Cost of sales at cost to home office:
Shipment from home office (P108,000 / 120%) P90,000
Purchases
52,000
Inventory, 12/31 (no. 19 above)
(52,000)
Gross profit
Expenses (P76,000 + P24,000)
Branch net income (actual)
P192,000
90,000
P102,000
100,000
P 2,000
13-21: b
Allowance for overvaluation account balance
Overvaluation on the shipment (P200,000 x 25%)
Overvaluation on the branch beginning inventory
Cost of branch beginning inventory (P7,500 / 25%)
Branch beginning inventory at billed price
P 57,500
50,000
P 7,500
30,000
P 37,500
19
13-22: b
Sales
Cost of goods sold cost to home office
Beginning inventory
P 30,000
Shipment from home office
200,000
Ending inventory (P40,000 / 125%)
( 32,000)
Gross profit
Expenses
Branch net income as far as the home office is concerned
P400,000
198,000
P202,000
100,000
P102,000
13-23: b
Branch inventory, 1/1
Acquired from home- at billed price
Overvaluation [P24,000 (P80,000 P60,000)] P 4,000
At cost [(P4,000 (P20,000 / P60,000)]
12,000
Acquired from outsiders
P 20,000
16,000
P 4,000
13-24: a
Sales
Cost of sales (at cost to home office)
Inventory, 1/1 (P12,000 + P4,000)
P16,000
Shipments from home office
60,000
Purchases
30,000
Inventory, 12/31 [(P20,000133 1/3%) +P6,000] (21,000)
Gross profit
Expenses
Branch net income (actual)
P200,000
85,000
P115,000
60,000
P 55,000
13-25: a
Inventory, 1/1
Shipments from home office
Overvaluation
Cost of goods available for sale
Percentage of mark-up (P72,500 / P362,500)
P 75,000
360,000
( 72,500)
P362,500
20%
13-26: b
20
13-27: a
Billing percentage above cost (P20,000 / P80,000)
Branch inventory, 6/1 at cost (P12,000 / 125%)
Home office inventory, 6/1
Purchases
Goods available for sale
Inventory, 6/30 at cost:
Branch (P10,000 / 125%)
Home office
Combined cost of goods sold
25%
P 9,600
40,000
160,000
P209,600
P 8,000
60,000
68,000
P141.600
13-28: d
Sales
Cost of goods sold
Gross profit
Expenses
Combined net income
P450,000
141,600
P308,400
150,000
P158,400
13-29: d
Sales
Cost of goods sold:
Inventory, 1/1: Home office
P57,500
Branch (P22,250 / 125%) 17,800 P 75,300
Purchases
410,000
Goods available for sale
P 485,300
Inventory, 12/31: Home office
P71,250
Branch (P29,250/120%) 24,375
95,625
Gross profit
Expenses
Combined net income
P687,500
389,675
P297,825
241,750
P 56,075
13-30: a
Sales
Cost of goods sold:
Inventory, 1/1:
Home office
Branch [P15,000 + (P49,000 / 122.5%)]
Purchases
Goods available for sale
Inventory, 12/31:
Home office
Branch [P11,000 + (P52,000 / 133 1/3%)]
Gross profit
Expenses
Combined net income
P669,000
P160,000
55,000
P110,000
50,000
P215,000
460,000
P675,000
160,000
515,000
P154,000
145,000
P 9,000
21
13-31: a
The entries made by the branch to record the interbranch transfer of merchandise are:
Books of Branch 1:
Home office
19,500
Freight in
3,500
Shipment from home office
16,000
Books of Branch 3:
Shipment from home office
16,000
Freight in
4,000
Cash
2,500
Home office
17,500
Therefore the home office would make the following entry:
Investment in Branch 3
17,500
Excess freight
2,000
Investment in Branch 1
19,500
13-32: a
Unadjusted balances
Error in recording shipment
Error in recording expense
Unrecorded cash remittance
Adjusted balances
(Branch books)
Home office
61,000
(10,000)
5,000
46,000
13-33: c
13-34: a
Home office books
Inv in Bacolod 25,000
Inv in Cebu
25,000
34,300
Home office 34,300
Expenses
62,500
Home office
62,500
22
23
PROBLEMS
Problem 13-1
(a)
Journal Entries
Home Office Books
Branch Books
18,000
3,000
Equipment
Home office
18,000
18,000
Rent expense
Home office
3,000
3,000
Shipment from HO
Home office
100,000
80,000
100,000
18,000
3,000
100,000
20,000
No entry
Operating expenses
Cash
Cash
11,000
11,000
105,000
Sales
(5) Cash
60,000
Investment in branch
(b)
60,000
Home office
Cash
105,000
60,000
60,000
(2)
(3)
Home office
61,000
Investment in branch
To eliminate reciprocal accounts computed
as follows:
Equipment purchased
P 18,000
Rent paid
3,000
Inventory shipped
100,000
Cash transfer
( 60,000)
Balance
P 61,000
Shipment to branch
Allowance for overvaluation of branch inventory
Shipment from home office
To eliminate inter-company shipments
Inventory, 12/31 (Income statement)
Inventory, 12/31 (Balance Sheet)
To reduce inventory, 12/31 to cost.
61,000
80,000
20,000
100,000
5,000
5,000
24
(c)
105,000
25,000
3,000
100,000
11,000
16,000
16,000
16,000
Problem 13-2
a.
Branch Books
Equipment
Shipment from home office
Cash
Home office
50,000
60,000
10,000
Purchases
Cash or accounts payable
30,000
Prepaid rent
Home office
10,000
Cash
Accounts receivable
Sales
40,000
50,000
Advertising expense
Salary expense
Cash
8,000
5,000
Home office
Cash
120,000
30,000
10,000
90,000
13,000
10,000
10,000
Home office
Accounts receivable
3,000
Rent expense
Prepaid rent
5,000
3,000
5,000
25
Investment in branch
120,000
Equipment
Shipment to branch
Allowance for overvaluation of branch inventory
Cash
To record assets sent to branch
Investment in branch
Cash
To record rent expense of the branch
10,000
Cash
10,000
10,000
Cash
3,000
Investment in branch
To record collection of branch receivable.
b.
20,000
10,000
10,000
Investment in branch
To record cash remittance from branch
-
50,000
40,000
3,000
Income Statement
Sales
Cost of goods sold
Shipment from home office at cost
Purchases
Goods available for sale
Ending inventory:
From home office (1/3)
From outsiders (1/4)
Gross profit
Expenses:
Advertising expense
Salary expense
Rent expense
Net income
P90,000
P40,000
30,000
70,000
P13,333
7,500
(20,833)
P 8,000
5,000
5,000
49,167
P40,833
18,000
P22,833
Problem 13-3
a.
P 86,000
( 32,000)
34,500
1,000
3,000
46,000
3,000
P141,500
26
b.
c.
Reconciliation Statement
Unadjusted balances, 1/31
Unrecorded cash transfer
Error in recording transfer (overstated)
Expense allocation not recorded
Adjusted balances, 1/31
P 54,000
34,500
1,000
3,000
64,000
( 74,000)
P 82,500
Investment in Branch
P141,500
( 74,000)
Home Office
P 82,500
18,000
( 3,000)
P 67,500
P 67,500
Problem 13-4
a.
b.
Books of Branch X
Shipment from home office
Freight-in
Home office
5,000
300
Home office
Shipment from office
5,800
5,800
Books of Branch Y
Shipment from home office
Freight-in
Home office
c.
5,300
5,000
600
5,600
5,300
Investment in branch Y
Inter-branch freight expense
Investment in branch X
5,000
600
Shipment to branch X
Shipment to branch Y
5,000
5,000
300
5,600
5,000
27
Malakas Company
Combination Worksheet
Year Ended December 31, 2008
Malakas
Davao
Debits
Cash
Accounts receivable
Inventory, 12/31
Investment in branch
Land, bldg, and equipment
Shipment from office
Purchases
Depreciation expense
Advertising expense
Rent expense
Miscellaneous expense
Inventory, 1/1
Total debits
25,000
108,000
209,000
207,000
340,000
348,000
25,000
36,000
12,000
40,000
175,000
1,525,000
18,000
25,000
42,000
112,000
96,000
8,000
15,000
5,000
20,000
35,000
376,000
Credits
Accumulated depreciation
Accounts payable
Notes payable
Home office
80,000
37,000
220,000
-
16,000
15,000
176,000
Common stock
Retained earnings, 1/1
Sales
Shipment to branch
Inventory, 12/31
100,000
240,000
529,000
110,000
209,000
127,000
42,000
Adjustments and
Eliminations
Debit
Credit
(4) 14,000
(5) 16,000
(7)207,000
(3) 14,000
(6)110,000
43,000
133,000
249,000
452,000
(1) 9,000
(1) 6,000
(1) 2,000
(2) 10,000
348,000
33,000
60,000
23,000
62,000
200,000
877,000
(7)207,000
96,000
52,000
220,000
-
(1) 17,000
(3) 14,000
100,000
(2) 10,000
(230,000)
(655,000)
(6)110,000
(5) 16,000
(4) 14,000
(249,000)
(179,000)
Income Retained
Statement Earnings Balance
Dr (Cr)
Dr (Cr)
Sheet
(179,000)
(409,000)
1,525,000
376,000
388,000
388,000
(409,000)
877,000
(2)
(3)
Advertising expense
Rent expense
Miscellaneous expenses
Home office
Unrecorded expenses allocated to the branch
9,000
6,000
2,000
17,000
10,000
14,000
14,000
28
(4)
(5)
(6)
(7)
14,000
16,000
Shipment to branch
Shipment from home office
To eliminate inter-company shipments
110,000
Home office
Investment in branch
To eliminate reciprocal accounts
207,000
14,000
16,000
110,000
207,000
Problem 13-6
a.
Eliminating Entries
(1)
(2)
(3)
(4)
(5)
Home office
Investment in branch Silver
395,000
Home office
Investment in branch Opal
260,000
395,000
260,000
20,000
16,000
Inventory
Inventory from home office
90,000
40,000
36,000
90,000
40,000
29
Ginto Company
Balance Sheet Working Paper
December 31, 2008
Cash
Accounts receivable
Inventory
Inventory from home office
Land
Buildings and equipment
Investment in branch Silver
Investment in branch Opal
Total debits
Accumulated depreciation
Accounts payable
Bonds payable
Common stock
Retained earnings
Home office
Unrealized intra-company profit
Silver
Opal
Total credits
b.
Home
Office
81,000
100,000
260,000
Silver
Branch
20,000
40,000
50,000
70,000
Opal
Branch
15,000
25,000
44,000
56,000
70,000
700,000
395,000
260,000
1,866,000
30,000
350,000
20,000
200,000
560,000
360,000
2,055,000
280,000
110,000
400,000
300,000
700,000
-
120,000
45,000
80,000
20,000
480,000
175,000
400,000
300,000
700,000
395,000
260,000
60,000
16,000
1,866,000
560,000
360,000
Eliminations
Debit
Credit
(4) 90,000
Combined
116,000
165,000
444,000
( 3) 36,000
(4) 90,000
(5) 40,000
(1)395,000
(2)260,000
120,000
1,210,000
(1)395,000
(2)260,000
(3) 20,000
(5) 40,000
(3) 16,000
821,000
821,000
2,055,000
Ginto Company
Combined Balance Sheet
December 31, 2008
Assets
Cash
Accounts receivable
Inventory
Land
Buildings and equipment
Less: Accumulated depreciation
Total assets
Liabilities and Stockholders Equity
Liabilities
Accounts payable
Bonds payable
Total liabilities
Stockholders Equity
Common stock
Retained earnings
Total liabilities and stockholders equity
P 116,000
165,000
444,000
120,000
P1,210,000
480,000
730,000
P1,575,000
P 175,000
400,000
P 575,000
P 300,000
700,000
1,000,000
P1,575,000
30
Problem 13-7
a.
b.
Books of Branch P
Shipment from home office
Freight-in
Home office
8,000
50
Home office
Shipment from home office
Freight-in
Cash
8,120
8,000
50
70
Books of Branch Q
Shipment from home office
Freight-in
Home office
c.
8,050
8,000
80
8,080
8,050
Investment in branch Q
Inter-branch freight expense
Investment in branch P
8,080
40
Shipment to branch - P
Shipment to branch Q
8,000
8,000
50
8,120
8,000
Problem 13-8
Debits:
Cash = P36,000 (add the book values and include the P9,000 transfer in transit)
Accounts receivable = P118,000
Inventory, 12/31 = P151,000 (branch balance would be P81,000 when the shipment in transit is
included. This balance must be adjusted to cost of P54,000
(P81,000 150%) and then add to home office balance of P97,000.
Investment in branch = 0 (eliminated)
Land, buildings and equipment = P460,000
Shipment from home office = 0 (eliminated)
Purchases = P429,000
Depreciation expense = P28,000 (add the two book values and the year-end allocation)
Advertising expense = P58,000 (add the two book values and the year-end allocation)
Rent expense = P30,000 (add the two book values and the year-end allocation)
Miscellaneous expense = P100,000 (add the two book values and the year-end allocation)
Inventory, 1/1 = P145,000 (branch balance is adjusted to cost of P24,000 (P36,000 / 150%),
and then added to home office balance.
Total debits = P1,555,000 (add the above totals)
31
Credits
Accumulated depreciation = P108,000
Accounts payable = P104,000
Notes payable = P180,000
Home office = 0 (eliminated)
Common stock = P60,000 (home office balance)
Retained earnings, 1/1 = P248,000 (home office balance after reduction of P12,000 unrealized
profit in beginning inventory of branch. Cost is P24,000
(P36,000 / 150%) which indicates the P12,000 unrealized.
Sales = P704,000
Shipment to branch = 0 (eliminated)
Inventory, 12/31 = P151,000
Total credits = P1,555,000 (add the above totals)
Reconciliation Statement
Investment in Branch account balance (Home office books)
Unrecorded cash transfer
Adjusted balance
P177,000
( 9,000)
P168,000
P123,000
21,000
24,000
P168,000
Problem 13-9
Home Office Books
(1) Investment in branch
Shipment to branch
Unrealized inventory profit
(2) Cash
Investment in branch
Closing entries:
(3) Sales
Inventory, 12/31
Shipment to branch
Purchases
Expenses
Income summary
(4) Investment in branch
Branch income summary
Branch income summary
Investment in branch
Case A
60,000
Case B
75,000
60,000
-
61,200
60,000
15,000
61,200
61,200
130,000
8,000
60,000
60,000
30,000
61,200
61,200
130,000
8,000
60,000
150,000
17,200
30,800
61,200
130,000
8,000
60,000
150,000
17,200
30,800
150,000
17,200
30,800
13,000
13,000
500
14,000
500
Case C
90,000
13,500
14,000
27,000
500
13,000
43,800
43,800
43,800
14,000
13,000
43,800
43,800
43,800
32
60,000
81,000
(3) Cash
64,000
Case B
75,000
60,000
81,000
14,000
61,200
90,000
81,000
81,000
64,000
64,000
(4) Expenses
Cash
90,000
75,000
81,000
Accounts receivable
Case C
81,000
64,000
64,000
14,000
14,000
64,000
14,000
14,000
61,200
61,200
14,000
61,200
61,200
61,200
Closing entries
(6) Sales
Inventory 12/31
Shipment from HO
Expenses
Income summary
81,000
6,000
13,000
Home office
Income summary
81,000
7,500
60,000
14,000
13,000
81,000
9,000
75,000
14,000
500
90,000
14,000
14,000
13,000
500
14,000
500
14,000
33
Home Office
Branch
Eliminations
Debit
Credit
Combined
Income Statement
Sales
Merchandise inventory, 12/31
Shipment to branch
Total credits
130,000
8,000
60,000
198,000
150,000
17,200
167,200
30,800
14,000
104,000
(14,000)
150,000
31,200
181,200
43,800
30,800
(14,000)
43,800
30,800
(14,000)
43,800
39,000
45,000
8,000
28,800
120,800
(11,200)
17,000
9,000
27,800
62,000
14,000
103,800
81,000
9,000
90,000
90,000
20,000
30,000
40,000
30,800
120,800
211,000
14,000
225,000
(3) 3,000
(2) 60,000
(2) 90,000
(3) 3,000
(1) 28,800
14,800
(2) 30,000
(14,000)
28,800
14,800
(1) 28,800
121,800
121,800
20,000
40,000
43,800
103,800
34
Problem 13-10
(1)
Branch A
Branch B
Debits
Cash
Inventories
33,000
70,000
22,000
21,000
13,000
15,000
50,000
45,000
42,000
80,000
25,000
23,000
57,000
45,000
Expenses
90,000
410,000
25,000
150,000
20,000
116,000
40,000
100,000
50,000
15,000
11,000
45,000
30,000
Credits
Current liabilities
Capital stock
Retained earnings, Jan. 1
Home Office
Allow. for overvaluation of
Branch inv. Branch A
Allow. for overvaluation of
Branch inv. Branch B
Sales
13,000
12,000
195,000
410,000
Balance
Sheet
68,000
A (12,000)
B 8,000
D 45,000
D 42,000
B (8,000)
C 25,000
110,000
98,000
(165,000)
(135,000)
276,000
66,000
100,000
50,000
A 12,000
D (87,000)
C (13,000)
C (12,000)
90,000
150,000
75,000
116,000
360,000
Net income
Income
Statement
60,000
60,000
276,000
Home Office
Inventory, January 1,
Purchases
Shipment to branch
Shipment from home office
Goods available for sale
Inventory, Dec. 31
Cost of sales
P 80,000
160,000
( 90,000)
P150,000
( 70,000)
P 80,000
Investment in
Branch A
Investment in
Branch B
P 18,000
P24,000
60,000
P 78,000
( 21,000)
P 57,000
36,000
P 60,000
(15,000)
P 45,000
35
(2)
Books of
Branch A
Home Office
P 45,000
Books of
Branch B
Home Office
P 30,000
12,000
8,000
P 53,000
10,000
P 52,000
8,000
10,000
P 53,000
P 52,000
Schedule 1:
Sales
Cost of sales:
Beginning inventory
Shipment from home office
Goods available for sale
Ending inventory
Cost of sales
Gross profit
Expenses
Net profit
Branch A
P90,000
P18,000
60,000
78,000
21,000
57,000
33,000
25,000
P 8,000
Branch B
P75,000
P24,000
48,000
72,000
27,000
45,000
30,000
20,000
P10,000
36