| cea Review scitoor, oF rue PHILIPPINES | : MANILA | sovafceo anc accouvTic aD RErORTDE | OME OFFICE AND BRANCH ACCOUNTING CheRREROUERNANLE use Part: Theory of Accounts 1, Int separate stalement of financial postion of the home office, the investment in account shall be presented as { & ibility | i b Eig | e. Asset € Income 2, In the separate statement of financial postion of the branch the home office sceaat shall be presented a i ares i b. Eauity | © Asset | 4. Income ! 3. Tn the combined satement of finan poston prepared by te company, he inventory ofthe branch shal be messed and presented ef Lower fost ont realizable ave | b Con | €. Billed price | 4. Fair value | 4, The main ditferene between the net income reported inthe separate income statement ofthe ‘ranch ard the ne income reported bythe hore office fr the branch's operation s a Ovesstatemen} of begining and ending invertor reported bythe Basch 1, Ovestaement ofl gods eval forse ported bythe ranch & Overstatemend of ost of go sold rept byte branch d. Overstatement of shipment from home office reported by the branch j 5. Ifthe home office receives debit memo from the branch, the home office shall reford it in ite separate statement of financial position by i ‘Increasing the investment in branch aooount '. Decreasing the investment in brench account . Debiting the investment in branch account 4. Disclosure 6, Ifthe branch receives credit memo from the home office, the branch shall record i in its separate ‘statement of financial positon by Increasing the home office account CCredting the home office account Debiting the home office aecount Disclosure 7. Which of the following transactions will increase the home office account in the branch’s separate statement of financial position? 1. Net loss ofthe branch . Collection by the home office of branch’s receivable e Debit memo received from the home office 4d. Payment by the branch of home office's ibility 8. Which of the following transactions will decrease the investment in branch's account in the home office's separate statement of finnciel position? a Net income ofthe branch ' '. Payment of branch's lsblity by the home office © Credit memo received from the branch ' 4. Return by branch to home office of merchandise shippedPart 11; Problem Solving 1. Arthe end ofthe year the Investment in Bacolod accent of the home office is P300,S00, However, there are transactions discovered to have errors ‘© lacolad branch bought equipment on June 1, 2020 costing P6%.800 for the home office's use ‘end the policy is to record the asset in Bacolod’s books. uring that time the home office recorded the equipment and credited its reciprocal account ofits Bacolod branch ‘+ The policy of the company regarding the equipment’s depreciation is that it has @ life of 8yrs ‘with no salvage value and the straight-line metbod should be used. No entry has been made by the home office and branch ‘©The home office ships merchandise 10 Bacolod amounting to P96,700, Bacolod recorded the ‘transaction as PO? 500 © Bacolod pays the home office's creditors in the amount of P32,400 and sends a debit memo to the home eftice Upon receipt ofthe debit ntemo, the home office debited its reciprocal account jn we umount of P23,400 twice 1. Whatis the uaadjussed balance of the home office current account in the books of Bacolod at the end of the eur? 379,600 252.000 19,387. debit 19,387.S cect 3. What is ibe net ajustrocat of the home offier current acesunt in the books of Bacolod branch at the end of ihe year’ 4887S debit 487.5 evedit 3552 debit S582 credit 8609Page 3 2, Miles Company established a branch in Ayala by sending merchandise costing P924,500 and effecting a fun transfer of P400,000 cash on January 1, 2020. ‘The branch purchased computer equipmeat costing P420,000 on April 1. As per agreement the home office Will mains ll the property, plan and equipment records, ‘Ayala branch collecied P56,000 worth of Onigas branch's receivable on August 4. Cash remitance {o the home was P250,000 on September 28 ‘On November 21, Ayala branch retumed defective merchandise worth P125,000 to the home office. ‘Atthe end of the year, the company's contrler found out thatthe branch accountant had failed to record all the transactions initiated by the home office from the second half ofthe year. Because of this, there isa significant discrepancy between the balances of the reciprocal accounts. ‘counts, the controller instructed the accounting “in Ayala general ledger tothe branch. For the purpose of reconciling the reciprocal a “staff ofthe home office to send a copy of the kivestment Investment in Ayala TH Merchandise wo branch 924,500] 4/2 Equipment acquisition 240,000 W/L Fund wansfer 400,000} 9/30 Remittance 25,000 712. Merchandise to branch 135,000 | 11/22. Retum of goods from branch 12,500 8/31 Fund tansfer 195,000 10VS Expense paid for branch 29,000 1. What is the unadjusted balance of the Home Office account? a 598,500 b. 585,500 723,500 4 335,500 ‘What is the adjusted balance of the reciprocal accounts? a $44,500 $74,500 © 901,000 4. $96,500 36093. The following information is given regarding AAA Company: ‘© The reciprocal account in the separate income statement of the home office amount to 225,000, ‘© During the year 2020 (current yeas), the home office bills merchandise to the branch at 215% of cos. ‘¢ The beginning inventory ofthe branch is P249,375. ‘+ During the 2020, the branch purchased from vendors merchandise amounting to P150,000. ‘+ The ending inventory of the branch as shown in the combined financial statements is 267,128. ‘© Theallowance for overvaluation before adjustment is P320,000. ‘The beginning inventory ofthe branch from the home office at cost i P1S3,125. ‘* The unrealized profit atthe end of the year must be decreased by 55,000 1, Whatis the cost of goods sold in the combined financial statements at the end of 2020? a. 351,000 ’. 354,900 296,000 4 306,190 ‘What is the total goods available for sale recorded in the branch's books at the end of 2020? a 883,125 b. $63,125 © 624375 d. 821,875 86094, Home office bills its branch for merchandise shipments at 30% above cost Page 5 ‘The following are some of the account balances on the books of home office and its branch as of December 31,2022: | Home Office Books ventory, January | P3500 shipments from Home Office 1,575,000 Shipments to Branch 253,780 Branch Inventory Allowance 91.875 Sales 2,100,000 Operating Expenses 507,500 | ‘Branch Books P 101,500 263,900 eins 1,260,009 192,50} Per physical count, the ending inventory of the branch is P73,500 including goods from outside purchases of P4475; the ending inventory of the Bome office is P210,000. I 2 ‘What isthe amount of the unrealized profit in the separate books of the home office on January 1,20237 a 21,000 b. 15,750 © 19.250 4. 52,500 ‘What isthe branch beginning inventory in 2022 that came from outside purchases? a 48,475 b. 19,250 ©. 33,250 a 0, ‘What isthe Cost of goods availble forse ofthe branch? i eee 679.815 781375 | 705.250 715400 peer a 280,000 b. 277.725 283,500 4. 328,475 ‘What is the combined net income forthe year? a. 957,950 b. 942,725 ©. 876,750 4. 919.275 8609Page 6 5. ‘The home office in Quezon City ships and bills merchandise to its provincial branch at cost. The carries its own accounts receivable and makes its own collections. The branch also pays its ‘expenses The branch transactions for 2020 are reflected inthe following information: Cosh 20,000 ‘Accounts receivabie 80,000 Home Office 180,000 Shipments from Home Office 250,000 ales 225,500 Expenses $5,500 December 31, 2020 inventary 65,000 ‘What isthe balance of the Investment in Branch account in the home office book? a 180,000 . 195,000 e, 165.000 4. 175,00 6. On June 1. 2020. the Greenbelt Muin Office established a sales agency in Ortigas. The main office sent samples ofits merchandise amouing to P8.400 and a working fend amounting to P72,000 to bbe maintained on the umprest basis The semples sent were intended to last until January 1, 2021. The agency transmitted to the home office sale of gcods costing P'291,600 but the home office was not able to fill up 35% of the suid transmivied sales orders. Collections trom customers smonrtod t0 82.175. not of $Me sale discount. Payments made by the jagency during June, July an Anyust were anal rent 70,200, advertising expense 4,650 and utiles 76,300. The «gency eso purchased an equipment ox Jaly 1, 2020 worth P11,000 which will be depreciated at 15% por annum. The aross profit rate om sales agency order is 20% of gross sales ‘What isthe income of the agency for the three months ended August 31, 2020? 18610 14.285 1414750 10,685 peer END 8609