Chapter 7: Home Office and Branch Accounting

1. Cebu branch submitted the following data to its home office in Manila for 2011, its first year of
operation:

Sales P2,300,000
Shipments from home office 1,850,000
Operating expenses 235,000
Home office 480,000

Shipments to the branch are billed at cost. The Dec 31 inventory of the branch was P255,500.

What is the balance of the Investment in Branch account on Dec 15,2011 on the home office books?

a. P950,500
b. P470,500
c. P950,000
d. P480,000

2. The home office of the Quezon City ships and bills merchandise to its provincial branch at cost. The
branch carries its own accounts receivable and makes its own collections. The branch also pays its
expenses.

The transactions for 2011 are reflected in the branch trial balance that follows:

Cash P20,000
Accounts receivable 80,000
Home office P180,000
Shipments from home office 250,000
Sales 225,500
Expenses 55,500
_______ _______
Total P405,500 P405,500

December 31, inventory P65,000

Assuming all the transactions are properly recorded, what is the balance of the Investment in Branch
account in the home office books?

a. P180,000
b. P195,000
c. P165,000
d. 175,000

3. The following data pertains to the shipments of merchandise from Home Office to Branch during
2011:

Home office’s cost of merchandise P350,000

Inter-office billings 420,000
Sales by branch to outsiders 520,000
Merchandise inventory on Dec 31, 2011 50,000

In the combined statement of comprehensive income of the Home Office and the Branch for the year
ended Dec 31, 2011, what amount of the above transactions should be included as sales?

a. P570,000
b. P520,000
c. P470,000
d. P350,000

4. Nike Corporation operates an number of branches in the provinces. On Dec 31, 2011, its Davao
branch showed a Home Office account balance of P54,700 and the home office books showed an
investment in Davao Branch account balance of 51,100. The following information may help in
reconciling both accounts:

1. A P24,000 shipment, charged by Home Office to Davao Branch, was actually send to and retained by
Cebu Branch.
2. A P30,000 shipment, intended and charge to Aklan Branch was shipped to Davao Branch and retained
by the latter.
3. A P4,000 emergency cash transfer from Cebu Branch was not taken up in the Home Office books.
4. Home Office collects a Davao Branch accounts receivable of P7,200 and fails to notify the branch.
5. Home Office was charged for P2,400 for merchandise returned by Davao Branch on Dec 30. The
merchandise is in transit.

Home Office erroneously recorded Davao Branch’s net income for 2011 at P32,550. The branch reported
a net income of P25,350.

What is the adjusted balances of the Home Office and Davao Branch reciprocal account on Dec 31,
2011?

a. P40,300
b. P54,700
c. P47,500
d. P43,500

5. The branch manager of Tower Cosmetics in Cebu submitted a report as of May 31, 2011 containing
the following information:

Petty Cash Fund P1,500

Sales 198,720
Sales return 3,600
Accounts written off 1,920
Shipments from Home Office 136,080
Accounts receivable- May 31, 2010 43,800
Accounts receivable- May 31, 2011 49,140
Inventory- May 31, 2010 37,170
Inventory- May 31, 2011 41,370
Expenses (reimbursed by H.O.) 57,930

Assuming all cash collected by the branch remitted to Tower Cosmetics Home Office, the remittances for
the period amounted to:

a. P187,860
b. P189,780
c. P195,120
d. P198,720

6. On Dec 31, the investments in Branch account in the Home Office books shows a balance of P50,000.
The following facts are ascertained:

1. Merchandise billed at P12,500 is in transit on Dec 31 from the home office to the branch.
2. The branch collected a home office accounts receivable for P3,500. The branch did not notify the
home office of such collections.
3. On Dec 30, the home office sent cash of P7.500 to the branch, But this was charged to General
Expenses; the branch has not received the cash as of Dec 31.
4. Branch profit for December was recorded by the home office at P2,400 instead of P2,040.
5. The branch returned supplies of P1,500 to the home office but the home office has not yet recorded
to receipt of the supplies.

Assume all other transaction have been properly recorded.

What is the unadjusted balance of the Home Office account on the Branch books on Dec 31?

a. P64,140
b. P39,140
c. P14,000
d. P13,000

7. A reconciliation of the Dagupan Branch account of the Mandaluyong Company and the Home Office
account carried in the branch’s boos shows the following discrepancies at Dec 31,2011:

1. A credit for merchandise allowance for P300 was taken by the branch as P360.
2. A charge by the branch of P550 for an advance taken by the president when he visited the branch has
not yet been recorded by the home office.
3. The branch has not taken up P900 covered by a debit memo from the home office as share in
advertising expenses.

The investment in Dagupan Branch account in the home office books had a debit balance of P43,000 at
Dec 31, 2011. The reciprocal accounts were in agreement at the beginning of the year.

The unadjusted balance of the Home Office account in the branch’s books at Dec 31,2011 was:

a. P43,500
b. P42,950
c. P41,990
d. P41,490

8. The following were found in your examination of the interplant accounts between the home office
and the Butuan branch:

a. Transfer of fixed assets from home office amounting to P53,960 was not booked by the banch.
b. P10,000 covering marketing expense of another branch was charges by Home Office to Butuan.
c. Butuan recorded a debit note on inventory transfer from Home office of P75,000 twice.
d. Home Office recorded cash transfer of P65,700 from Butuan branch as coming from Davao Branch.
e. Butuan reversed a previous debit memo from Cagayan de Oro Branch amounting to P10,500. Home
office decided that this charge is appropriately Davao Branch’s cost.
f. Butuan recorded a debit memo from Home Office of P4,650 as P4,560.

The net adjustment DR (CR) to the investments in Butuan Branch account and to the Home Office
account are:
Investment in Butuan Home Office
a. P(75,700) P20,950
b. P75,700 (20,950)
c. (55,700) 75,000
d. (65,700) (74,000)

9. After examining on a comparative basis the inter-office account of the Bulacan. Company with its
suburban branch and the similar account carried on the latter’s books, the following discrepancies at the
close of the business on June 30,2011 were seen:

a. A change for labor by the Home Office, P500 was recorded twice by the branch.
b. A charge of P895 was made by the Home Office for freight on merchandise, but the amount was
recorded by the branch as P89.50.
c. A charge of P980 (furniture and fixture) on the Home Office Books was taken up by the branch as
P890.
d. A credit by the Home Office for P350 (merchandise allowances) was taken up by the Branch as P400
e. The Home Office charged the Branch P425 for interest on open account which the branch failed to
take up in full; instead, the Branch sent to the Home Office a wrong adjusting memo, reducing the
charge by P100 and set up a liability for the net amount.
f. The Home Office received P5,000, from the sale of a truck which it erroneously credited to the branch;
the branch did not charge the Home Office therewith.
g. The branch by mistake sent the Home Office a debit note for P370 representing its proportion of a bill
for repairs of truck, the Home Office did not record it.
h. the Branch inadvertently received a copy of the Home Office entry dated July 19, 2011 correcting item
(1) and entered a credit in favor of the home office as of June 30, 2011.

At June 30,2011, the unadjusted balance of the Investment in Branch account on the Home Office books
showed P175,520. At the beginning of the year, the inter-office accounts were in balance.

What is the unadjusted balance of the Home Office account on the branch books on June 20, 2011?

a. P184,279.50
b. P160,725.50
c. P184,729.00
d. P165, 279.50

10. Rustans, Philippines has two merchandise outlets, its Home Office in Manila and its Cebu City
branch. For control purposes, all purchases are made by the Home Office and shipped to the Cebu Cty
branch at cost plus 10%. On Jan 1, 2011 the inventories of the Home Office in Manila and the Cebu City
branch are P13,600 and P3.960 respectively. During 2011 Home Office purchased merchandise costing
P40,000 and shipped 40% of it to the Cebu City branch. At Dec 31,2011, the following journal entry to
prepare the books for the next accounting period was prepared by the branch:

Sales 32,000
Inventory, Dec 31 4,840
Inventory, Jan 1 3,960
Shipments from main store 17,600
Expenses 10,480
Home Office 4,800

What was the actual branch income for 2011 on a cost basis assuming the use of the provisions of the
Statement of Financial Accounting Standards?

a. P4,800
b. P6,320
c. P6,480
d. P6,840

11. On Sep 1, Star Company opened a branch in Dagupan City, shipping to it merchandise billed at
P60,000. During the month, additional shipments were made at a billed price of P24,000. Returns by the
branch of bad-order goods were credited for P1,680. At the end of the month, the branch reported its
inventory of P33,600 and its net loss for the month at P5,200. Shipments to and from the branch were
consistently billed at 120% of cost.

On Sep 30, the branch inventory at cost and the branch net income (loss) as far as the Home Office is
concerned are:

a. P28,000 and P2,920 respectively

b. P28,000 and (P5,200) respectively
c. P33,000 and P2,920 respectively
d. P33,600 and P5,200 respectively

12. Makati Company bills its Valenzuela Branch for merchandise at 140% of cost. At the end Of Jan 2011,
the branch reported the following information:

Merchandise from
Home Office
(At billed Price)
Inventory, Jan 1 P7,560
Shipments received 28,280
Inventory, Jan 31 8,400

What should be the balance of the allowance account for overvaluation of the branch inventory at Jan
31 before adjustments?

a. P2,400
b. P2,160
c. P9,080
d. P10,240

13. The Binondo branch of China Products Inc. buys merchandise from third parties and receives
merchandise from the home office for which it is billed at 20% above cost. Below are excerpts from the
trial balances and data on the home office and Binondo branch for the month just ended.

Home Office
Allowance for overvaluation of the branch merchandise P370,000
Shipments to Branch 850,000

Branch
Beginning inventory 1,440,000
Shipments from home office 1,020,000
Purchases 410,000
Month end additional data:
Ending inventory of branch P1,460,000
From Home office at Billed Price P1,170,000
From outsiders (at cost) P290,000

The total cost of goods sold of the Binondo branch at cost (net of overvaluation) for the month just
ended amounted to:

a. P1,410,000
b. P1,385,000
c. P1,235,000
d. P1,850,000

14. Shopper Company started a branch office in IloIlo City on June 1, 2011. On this date, the company
shipped to its branch merchandise billed at P90,000. On June 15, another shipment was made at the
billed prices of P36,000. During the month, he branch was credited for P2,520 for the damages goods
returned by the branch. On June 30,2011, the branch reported the following:

Inventory, June 30 P50,400

Net loss for the month (P7,800)

Shipments to and from the branch were uniformly billed at 120% of cost.

In the home office books, the IloIlo branch operations resulted in:

a. No net income or loss

b. Net income of P4,380
c. Net income of P12,180
d. Net loss of P7,800

15. Tarlac branch of Quezon City Company, at the end of its first quarter of operations, submitted the
following statement of comprehensice income:

Sales P300,000
Cost of sales:
Shipments from home office P280,000
Local purchases 30,000
_______
Total P310,000
Inventory at end 50,000 260,000
_______ _______
Gross margin on sales P40,000
Expenses 35,000
_______
Comprehensive income P5,000

Shipments to the branch were billed at 140% of cost. The branch inventory as at Sep 30 amounted to
P50,000 of which P6,600 was locally purchased. Markup onlocal purchases, 20% over cost. Branch
expenses incurred by Head Office amounted to P2,500.

On Sep 30, the branch inventory at cost and the net income realized by the home office from the Tarlac
branch operation are:
Branch inventory at cost Net income realized
a. P37,600 P72,600
b. P50,000 P55,000
c. P31,600 P5,000
d. P37,600 P70,100

16. Ayala Branch was billed by Home Office for merchandise at 140% of cost. At the end of its first
month, Ayala Branch submitted among other things, the following data:

Merchandise from Home office (at billed price) P98,000

Merchandised purchased locally by branch 40,000
Inventory, Dec 31 of which P7,000 are of local purchase 28,000
Net sales for month 180,000

The branch inventory at cost and the gross profit of the branch as far as the home office is concerned
are:

Branch Inventory at Cost Gross Profit

a. P92,000 P22,000
b. P22,000 P92,000
c. P22,000 P70,000
d. P20,000 P90,000
17. The Coffee Blends Corporation decided to open a branch a Manila, Shipments of merchandise, to the
branch totaled P54,000 which included a 20% mark-up on cost. All accounting records are to be kept at
the home office.

The branch submitted the following report summarizing its operations for the period ended Dec 31,
2011.

Sales P74,000
Sales on cash basis 22,000
Collection on account 60,000
Expenses paid 38,000
Expenses unpaid 12,000
Purchases of merchandise for cash 26,000
Inventory on hand, Dec 31; 80% from home office 30,000
Remittance to home office 55,000

The branch 12/31 inventory at cost the branch net income (loss) as far as home office is concerned are:

Branch Inventory at cost Branch net income (loss)

a. P26,000 (P1,000)
b. P25,000 (P4,000)
c. P26,000 P1,000
d. P20,000 P800

18. Trial balances before adjustments for the home office and the branch of the King Company show the
following items in Dec 31. The home office bills the branch at 20% above cost.

Home
Office Branch
Allowance for overvaluation of branch merchandise P3,600
Shipments to branch 8,000
Purchases 2,500
Shipment from home office 9,600
Merchandise inventory, Dec 1 15,000

What part of the branch inventory as of Dec 1 represented purchases from outsiders?

a. P3,000
b. P5,000
c. P2,000
d. P1,800

19. The Manila Sales Co. established a branch in San Pablo City early last year. It shipped merchandise
and billed the branch for P300,000 to its opening. For the year, it made additional shipments at billed
price of P120,000. Within the year, the branch shipped back P7,500 inventory and got the credit memo
for said returns. On the last working day of the year, an inventory account was made. Ending inventory
of P185,000 was established consisting of purchases from third parties at P20,000, with the balance
coming from home office shipments at billed price. The home office billed the branch at 20% above
cost. The total purchases of the branch from outside suppliers amounted to P72,500. The total goods
available for sale by the branch at cost (net of overvaluation and returns) amounted to:

a. P416,250
b. P485,000
c. P422,500
d. P435,250

20. The income statement submitted by the Bulacan Branch to the Home Office for the month of Dec
2011 is shown below. After effecting the necessary adjustments the true net income of the branch was
ascertained to be P156,000. The branch inventories were:

12/01/11 12/31/11
Merchandise from home office 70,000 84,000
Local purchases 10,000 16,000
_______ _______
Total P80,000 P100,000
Sales P600,000
Cost of sales:
Inventory, Dec 1 P80,000
Shipments from home office 350,000
Local purchases 30,000
_______
Total available for sale P460,000
Inventory, Dec 31 100,000 360,000
_______ _______
Gross margin 240,000
Operating expenses 180,000
_______
Total comprehensive income for Dec 2011 P60,000

What is the balance of the “Allowance for overvaluation in Branch Inventory” account at Dec 31, 2011?

a. P10,000
b. P16,000
c. P24,000
d. P34,000

21.Mahiyan Commercial Corporation operates a branch in IloIlo City. Selected accounts taken from the
books of Mahiyain and its branch show balances as of Dec 31, 2011 as follows:

Home
Office Branch
Merchandise inventory, Jan 1 P12,000 P8,000
Purchases 150,000 30,000
Shipments from home office - 93,750
Shipments to branch 75,000
Branch inventory allowance 19,750
Sales 115,000 176,200
Merchandise inventory, Dec 31 14,000 10,350

The ending inventory of the branch includes items costing P4,350 which were acquired from suppliers
than the home office:

As far as the home office is concerned, the cost of sales of the IloIlo City Branch was:

a. P97,120
b. P102,850
c. P121,400
d. P131,850

22. The Neneng Corporation established its San Pedro branch in March 2011. During the first year of
operations, the home office shipped to the branch merchandise which had cost P120,000. Three-fourths
of these merchandise was sold by the branch for P141,000. Operating expenses of the branch amounted
to P27,000.

How much total comprehensive income will the branch report if merchandise is billed by the home
office to the branch at 25% above cost?

a. P800
b. P1,200
c. P1,500
d. P8,000

23. A branch store in Marikina was established by Marco Co. on March 1. Shipments of merchandise,
billed to this branch at 125% of cost, were as follows:

March 5 P120,000
March 10 50,000
March 20 35,000

On March 24, the branch returned defective merchandise worth P3,050 and on March 31, it reported a
net loss of P6,200 and merchandise inventory of P85,000.

In the home office books, the branch total comprehensive income (loss) is:

a. (P6,200)
b. P17,190
c. P20,240
d. P23,390

24. The Chivas Regal owns the Royal Crown in the Quezon City and a branch in Davao City. During 2011,
the home office shipped to the branch supplies costing P120,000 at a billed price of 20% above cost. The
inventories of supplies at the branch were as follows: Jan 1, 2011, P90,000; Dec 31, 2011, P108,000. On
Dec 31, 2011, the home office holds inventories of P160,500 which includes P10,500 held on
consignment.

How much is the inventories in a combined statement of financial position as of Dec 31, 2011?

a. P210,000
b. P240,000
c. P270,000
d. P30,000

25. The IloIlo Company operates a branch in Davao, and the profit and loss data for the home office and
the branch fro 2011 follow:
Home Office Branch
Sales P250,000 P75,000
Purchases from outsiders 200,000 15,000
Shipment to branch:
Cost to home Office 30,000
Billing price to branch 37,500
Expenses 40,000 10,000
Inventories, Jan, 2011:
Home office, at cost 80,000
Branch:
From outsider, at cost 7,500
From Home Office at 20% above cost 24,000
Inventories, Dec 31, 2011:
Home Office, at cost 55,000
Branch:
From outsiders, at cost 5,500
From Home Office at 2011 billing 26,000

The combined total comprehensive income (loss) of the home office and the branch on Dec 31, 2011 is:

a. P30,800
b. P(33,800)
c. P33,800
d. P27,000

26. Manila Inc. established a branch in Cebu to distribute part of the goods purchased by the home
office. The home office prices inventory shipped to the branch at 20% above cost. The following account
balances were taken from the ledger maintained by the home office and the branch:

Manila Inc. Cebu Branch

Sales P600,000 P210,000
Beginning inventory 120,000 60,000
Purchases 500,000 -
Shipment to branch 130,000 -
Shipment from home office - 156,000
Operating expenses 72,000 36,000
Ending inventory 98,000 48,000

All of the branch inventory is acquired from the home office –

The combined total comprehensive income of the home office and the branch is:

a. P170,000
b. P70,000
c. P278,000
d. P132,000

27. Selected accounts from the Dec 31, 2011 trial balances of Heart Co. and its branch follow:

Heart Branch
Inventory, Jan 1 P46,000 P23,100
Investment in Branch 116,600 -
Purchases 380,000 -
Shipments from home office - 209,000
Freight in - 10,450
Expenses 104,000 58,100
Home Office - (106,600)
Sales (310,000) (280,000)
Shipments to branch (200,000) -
Branch merchandise markup (22,000) -

As of Dec 31, 2011, a shipment with a billing price of P11,000 was in transit to the branch. Freight cost,
typically 5% of the billing price, is inventoriable. Merchandise on hand at year-end were: at home office,
P64,000 at cost; at branch, P33,000 at billing price.

What is the combined total comprehensive income of Heart Company and its branch for 2011?

a. P77,000
b. P84,900
c. P76,000
d. P76,100

28. Apo Supply Company is engaged in merchandising both at its home office in Makati and at its branch
in Davao City. Selected accounts taken from the trial balances of the Home Office and the branch as of
Dec 31, 2011 follow:
Makati Branch
Debits

Inventory, Jan 1, 2011 P23,000 P11,550

Davao branch 58,300 -
Purchases 190,000 105,000
Freight in from home office - 5,500
Sundry expenses 52,000 28,000
Credits

Home Office - P53,300

Sales 155,000 140,000
Sales to branch 110,000 -
Allowance for overvaluation of
Branch Inventory at Jan 1, 2011 1,000 -

Additional information:
- The Davao City branch gets all of its merchandise from the home office. The home office bills the goods
at cost plus a 10% mark-up. T Dec 31, 2011, a shipment with a billed value of P5,000 was still in transit.
Freight on this shipment was P250 and is to be treated as part of the inventory.
- Inventories on Dec 31, 2011, excluding the shipment transit, follow:

Home Office, at cost P30,000

Branch, at billed price (excluding freight of P520) 10,400

What is the combined total comprehensive income (loss) of the home office and the branch on Dec 31,
2011?

a. P30,470
b. P20,870
c. (P10,000)
d. (P30,470)

29. On Nov 2, 2011, the home office of Toby Sports Company recorded a shipment of merchandise to its
Bulacan Branch as follows:

Investment in branch – Bulacan 60,000

Shipment to branch 50,000
Allowance for overvaluation of
Branch inventory 8,000
Cash (for freight charges) 2,000

The Bulacan branch sells 40% of the merchandise to outside customers during the rest of the period.
The books of the home office are closed on Dec 31 of each year.

On Jan 10, 2012, the Bulacan branch transfer half of the original shipment to the Baguio branch, and the
Bulacan branch pays P1,000 freight for the shipment . If the shipment had been made by the home
office to Baguio branch, that freight charges would have been P1,500

What is the entry of the Bulacan branch to record the receipt of the shipment from the home office on
Nov 2, 2011?

a. Shipments from home office 50,000

Accounts receivable 8,000
Freight in 2,000
Home office 60,000
b. Shipment from home office 60,000
Home office 60,000
c. Shipment from home office 58,000
Freight in 2,000
Home office 60,000
d. Shipment from home office 50,000
Freight out 2,000
Home office 52,000

30. Using the same data in No. 29, at what amount should the 60% of the merchandise remaining unsold
at Dec 31, 2011 be included in the inventory of the Bulacan Branch?

a. P31,200
b. P36,000
c. P36,800
d. P34,800

31. Using the same data in No. 29, what is the entry in the books of Bulacan branch to record the
transfer on Jan 10, 2012?

a. Baguio branch 31,000

Shipment from home office 31,000
b. Home office 31,000
Inventory 31,000
c. Home office 31,000
Inventory 30,000
Cash 1,000
d. Home office 32,000
Cash 1,000
Freight 2,000
Inventory 29,000

32. Using the same data in No. 29, what is the entry in the books of Baguio branch to record the transfer
on Jan 10, 2012?

a. Shipments from bulacan branch 30,200

Bulacan branch 30,200
b. Shipments from home office 29,000
Freight in 1,500
Home office 30,500
Cash 1,000
c. Shipments from home office 29,000
Freight in 1,500
Home office 30,500
d. Shipments from home office 30,000
Freight 1,000
Home office 31,000
33. Using the same data in No. 29, what is the entry in the home office books to record the inter-branch
transfer on Jan 2, 2012?

a. Investment in branch – Baguio 30,500

Excess freight 1,500
Investment in branch – Baguio 32,000
b. Investment in branch – Baguio 30,500
Investment in branch – Bulacan 30,500
c. Investment in branch – Bulacan 32,500
Investment in Branch – Baguio 32,500
d. Investment in branch – Baguio 30,500
Excess freight 500
Investment in branch – Bulacan 31,000

34. Papa,Inc. of Makati opens a sales agency in Pasig City and working a fund of P100,000 is established
on imprest basis. The first payment from the fund is P5,000 for rent of the store space.

What is the entry in the books of the home office to record the payment of rent by the agency?

a. Rent expense – Pasig agency 5,000

Cash 5,000
b. Pasig agency 5,000
Cash 5,000
c. Rent expense – Pasig agency 5,000
working fund 5,000
d. No entry.

35. Mama, Inc. opened a sales agency in San Pedro Laguna in 2011. The following is a summary of the
transaction of the sales agency:

Sales orders sent to home office 120,000

Sales orders filled by home office in 2011 95,000
Freight on shipment agency 2,000
Collections, net of 10% discount 81,000
Selling expenses paid from the agency working fund 5,500
Administrative expenses charged to agency 5% of gross sales
Samples shipped agency:
Cost 8,200
Inventory, Dec 2011 4,550

The company’s gross profit rate on agency sales is 30% excluding the freight cost on shipments to
agency.

What is the total comprehensive income of the agency for 2011?

a. P3,600
b. P5,600
c. P1,600
d. P6,300

36. A Makati home office transfer inventory to its Pasig branch at 140% of cost. During 2011, the
reciprocal account in the statement of comprehensive income of the home office amounts to P328,125.
On Dec 31, 2011, the home office adjusted the branch income summary by debiting the Allowance for
Overvaluation of Branch inventory account in the amount of P81,250. The branch’s statement of
financial position at the beginning of the year shows P105,000 of inventory acquired from the home
office.

How much is the ending inventory of the branch per books?

a. P200,000
b. P161,250
c. P280,000
d. P80,000

37. On July 31, 2011, the home office in Manila establishes a sales agency in Bulacan. The following
assets are sent to the agency:
Cash (working fund to be operated under the imprest system) P22,000
Samples of merchandise 36,000
During the month of Aug, the following transactions occurred:
 The sales agency submits sales order of P272,000, sales per invoice was billed at P268,000. Cost
of sales to customers is P124,000.
 Collections during the month amount to P58,200, net of 3% discount.
 Home Office disbursements chargeable to the agency are as follows:
Furniture 40,000
Salaries for the month 21,600
Annual rent of office space 36,000
 On Aug 31, the sales agency working fund is replenished. Paid vouchers submitted by the sales
agency amounting to P17,925. Samples are useful until Dec 31, 2011 which, at this time, are
believed to have a salvage value of 15% of cost. Furniture is depreciated at 185 per annum.

What is the total comprehensive income of the sales agency for the month of Aug?

a. P91,425
b. P93,225
c. P92,955
d. P5,425

38. The home office in Makati shipped merchandise costing P55,500 to Pasig branch, prepaid the freight
amounting to P4,200. The home office transfer inventory to the branch at a 20% markup above cost.
Pasig branch was subsequently instructed by the home office to transfer the merchandise to Alabang
branch wherein the latter paid freight of P2,800. If the shipment was made directly from Makati to
Alabang, the freight cost would have been P6,200.

Which of the following is to as a result of the interbranch transfer of merchandise?

a. The home office debits Alabang branch current for P73,000

b. Alabang branch debits the home office for P70,000
c. Pasig Branch credits freight in for P6,200
d. The home office will credit Pasig branch current for P70,800

39. The following are some of the account balances on the books of the home office and its branch on
Dec 31,2011.
Home Office Books Branch Books
Inventory, Jan 1, 2011 P20,000 P58,000
Shipments from home office 150,800
Purchases 900,000 200,000
Shipments to branch 145,000
Allow, for overvaluation of branch inventory 52,500
Sales 1,200,000 720,000
Operating expenses 290,000 110,000

Per physical count, the ending inventory of the branch is P42,000 including goods purchased from
outsiders of P27,700 while the ending inventory of the home office is P120,000. Home Office bills its
branch for merchandise shipments at 30% above cost.

What is the amount of the unrealized inventory profit in the books of the home office on Dec 31, 2011?

a. P9,000
b. P7,260
c. P12,000
d. P3,300

40. Using the data in No. 39, how much is the combined total comprehensive income on Dec 31, 2011?

a. P538,700
b. P547,400
c. P541,700
d. P498,200