UNIVERSITY OF THE EAST – Caloocan Campus

College of Business Administration – Department of Accounting, Law and Taxation

Accounting for Special Transactions

PROBLEM I:
Sharp Company’s Subic branch submitted the following information for 2008. Subic branch’s first year of operation
shows:
Sales P 203,500
Expenses 18,755
Shipments from Home office 186,120
Home office current 48,125
Shipments to branches are billed at cost. Subic further reported an ending inventory of P25,245.

1. How much net profit should the branch report to the home office for the year 2008?
2. What is the correct balance of the branch current account on December 31 in the home office books?

PROBLEM II:
Violet Shipment Co. operates a branch in Cabanatuan City. At the end of the year, the branch account in the books
of the home office at Manila shows a balance of P150,000. The following information are ascertained:
a. The home office ha billed the branch the amount of P37,500 for merchandise, which was in transit on
December 31.
b. A home office accounts receivable for P10,500 was collected by the branch. Said collections was not
reported to the home office by the branch
c. Supplies of P4,500 was returned by the branch to the home office but the home office has not yet reflected
in its records the receipt of the supplies
d. The branch made a profit of P10,100for the month of December but the home office erroneously recorded
it as P11,180.
e. The branch has not received the cash in the amount of P25,000 sent by the home office on December 31.
This was charged to General Expense
All other transactions are presumed to have been properly recorded.

3. What is the balance of the Home Office account on the books of the branch as of December 31, before
adjustments?
4. What is the adjusted balance of the reciprocal accounts?

PROBLEM III:
The National Home Company ships and bills its Provincial branch merchandise at cost. The branch carries its own
accounts receivable, makes its own collections and pays it expenses
The transaction in 2008 are reflected in the branch trial balance as follows:
Debit Credit
Cash 11,900
National Home Co. Current 90,000
Shipments from National Home Co. 120,000
Accounts Receivable 62,500
Expenses 8,100
Sales 112,500
Branch inventory on December 31, 2008 is P30,000

5. How much is the net profit of the branch?

6. How much should be the balance of the Branch current account in the home office books?

PROBLEM IV
On December 31, 2000, the Branch Current in the Home Office books shows a balance of P50,000. The following
facts are ascertained:
a. Merchandise billed at P12,500 is in transit on December 31 from the home office to the branch.
b. The branch collected a home office accounts receivable for P3,500. The branch office did not notify the
home office of such collection.
c. On December 30, the home office sent cash of P7,500 to the branch, but this charged to general
expense; the branch has not yet received the cash as of December 31.
d. Branch profit for December was recorded by the home office at P2,400 instead of P2,040.
e. The branch returned supplies of P1,500 to the home office but the home office has not yet recorded
the receipt of the supplies.
Assume all other transactions have been properly recorded.
UNIVERSITY OF THE EAST – Caloocan Campus
College of Business Administration – Department of Accounting, Law and Taxation
Accounting for Special Transactions

7. What is the unadjusted balance of the Home Office Current account on the branch books on December 31,
2002?
8. The reconciled balance of the reciprocal accounts on December 31, 2002 should be:

PROBLEM V
Just before the books are closed, the unadjusted balance for the home office and branch were: P77,200 and
P42,640, respectively. Examination of the accounts revealed the following:
a. The branch remitted P20,800 cash but the home office received it the following year.
b. Merchandise billed to the branch at P14,560 were in transit.
c. The home office collected P800 receivable of the branch. The branch was not notified.

9. What was the reconciled balance of the investment in branch and home office account?

PROBLEM IX
Camiguin branch submitted the following data to it’s home office in Manila for 2007, it’s first year of operation:
Sales P 2, 300,000
Shipments from home office 1,850,000
Operating Expenses 235,000
Home Office 480,000
Shipments to the branch are billed at cost. The December 31 inventory of the branch was
P 255,500.

10. What is the balance of the Investment in Branch Account on December 15, 2007 on the home office books?