CHAPTER 9

SUGGESTED ANSWERS

EXERCISES

Exercise 9 - 1
Books of Branch R
Home Office 15,000
Cash 15,000

Books of Branch S
Cash 15,000
Home Office 15,000

Books of the Home Office

Branch S 15,000
Branch R 15,000

Exercise 9 - 2
Books of Branch No. 1
Home Office 1,950
Shipments from Home Office 1,600
Freight-In 350

Books of Branch No. 5

Shipments from Home Office 1,600
Freight-In 400
Cash 350
Home Office 1,650

Books of the Home Office

Branch No. 5 1,650
Excess Freight 300
Branch No. 1 1,950
Exercise 9 – 3
Home Office Books
1. no entry

2. Branch 360,000
Shipments to Branch 240,000
Allowance for Markup in Branch Inventory 120,000
120,000/240,000 = 50%

3. no entry

4. Branch 134,000
Advertising Expense 40,000
Depreciation Expense 70,000
Utility Expense 24,000
AA1- Chapter 9 (2008 edition)
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5. no entry

Cash 360,000
Branch 360,000

6. no entry

7. Branch 58,000
Branch Income 58,000

8. Allowance for Markup in Branch Inventory 100,000

Branch Income 100,000
P300,000 x 50/150 = P100,000

9. Branch Income 158,000

Income Summary 158,000

Branch Books
1. Purchases 160,000
Accounts Payable 160,000

2. Shipments from Home Office 360,000

Home Office 360,000

3. Accounts Receivable 652,000

Sales 652,000

4. Advertising Expense 40,000

Depreciation Expense 70,000
Utility Expense 24,000
Home Office 134,000

5. Cash 470,000
Accounts Receivable 470,000

Home Office 360,000

Cash 360,000

6. Merchandise Inventory 60,000

Sales 652,000
Purchases 160,000
Shipments from Home Office 360,000
Advertising Expense 40,000
Depreciation Expense 70,000
Utility Expense 24,000
Income Summary 58,000

7. Income Summary 58,000

Home Office 58,000
AA1- Chapter 9 (2008 edition)
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Exercise 9 - 4
a. Merchandise inventory, beg. P150,000
Less Merchandise from home office at billed price
Markup on merchandise shipped to branch P 36,000
Markup on current shipment (P96,000 – P80,000) 16,000
Markup on beginning inventory P 20,000
x 120/20 120,000
Merchandise purchased from outsiders P 30,000

b. Allowance for Intercompany Inventory Profit 22,000

Branch Income 22,000
Bal. of allowance before adjustment P36,000
Adjusted balance of allowance acct
(P84,000 x 20/120) 14,000
Realized markup P22,000

Exercise 9 – 5
Home Office Books
1. Branch 450,000
Shipments to Branch 300,000
Allowance for Markup in Branch Inventory 150,000
150,000/300,000 = 50%

2. no entry

3. Allowance for Markup in Branch Inventory 116,000

Branch Income 116,000
Realized markup on beginning inventory
P600,000 x 55% = P330,000 x 25/125* P 66,000
Realized markup on current shipments
P450,000 x 1/3 = P150,000 x 50/150 50,000
Total P116,000
*(600,000 – 480,000) / 480,000 = 25%

Branch Books
1. Shipments from Home Office 450,000
Home Office 450,000

2. Accounts Receivable 870,000

Sales 870,000
P590,000 + P280,000 = P870,000

3. no entry

Exercise 9 – 6
1. Branch 820,000
Cash 80,000
Shipments to Branch 240,000
AA1- Chapter 9 (2008 edition)
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Land 300,000
Allowance for Markup in Branch Inventory 120,000
Allowance on Transfer of Land 80,000
120,000/240,000 = 50%

2. Branch 560,000
Shipments to Branch 400,000
Allowance for Markup in Branch Inventory 160,000
160,000/400,000 = 40%

3. Branch 130,000
Branch Income 130,000

4. Allowance for Markup in Branch Inventory 200,000

Branch Income 200,000
Realized markup on 1st inventory transfer P120,000
Realized markup on 2nd inventory transfer
(P640,000 – P360,000) x 40/140 80,000
Total P200,000

5. Allowance on Transfer of Land 80,000

Branch Income 80,000

6. Branch Income 410,000

Income Summary 410,000

Exercise 9 - 7
Required balance of allowance (markup on branch ending inventory)
P9,600 x 20/120 P 1,600
Adjustment for realized markup 36,400
Balance of allowance before adjustment P38,000
Allowance on current shipment (P160,000 x 20%) 32,000
Allowance on branch beginning inventory P 6,000
Markup rate ÷ 20%
Branch beginning inventory, at cost P30,000

Exercise 9 - 8
a. Merchandise available for sale at billed price (P16,200 + P20,250) P36,450
Merchandise available for sale at cost (P36,450/135%) 27,000
Unrealized intercompany inventory profit balance before adjustment P 9,450

b. Unrealized Intercompany Inventory Profit 4,550

Branch Income 4,550
Balance before adjustment P 9,450
Adjusted balance (P18,900 x 35/135) 4,900
Realized markup P 4,550
AA1- Chapter 9 (2008 edition)
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Home Office Books

c. Shipments to Branch 400
Unrealized Intercompany Inventory Profit 140
Branch 540

Branch Books
Home Office 540
Shipments from Home Office 540

Exercise 9 – 9
1. P20,000 ÷ 25/125 = P100,000

2. Allowance for Markup in Branch Inventory 74,000

Branch Income 74,000
P100,000 + P350,000 – P80,000 = P370,000 x 25/125 = P74,000

Exercise 9 - 10
Separate cost of goods sold of the home office:
Inventory, beginning P 252,000
Purchases 2,800,000
Shipments to branch ( 600,000)
Cost of goods available for sale P2,452,000
Less Inventory, end 240,000 P2,212,000
Separate cost of goods sold of the branch:
Inventory, beginning
From outside purchases P 12,000
From home office (P36,000 / 120%) 30,000
Total P 42,000
Purchases 96,000
Shipments from home office (P720,000 / 120%) 600,000
Cost of goods available for sale P 738,000
Less Inventory, end:
From outside purchases P10,000
From home office (P42,000 / 120%) 35,000 45,000 693,000
Combined cost of goods sold P2,905,000

Exercise 9– 11
1. Total Resold On Hand
Shipments from home office P450,000 P360,000 P90,000
Shipments to branch 375,000 300,000* 75,000**
Markup P 75,000 P 60,000 P15,000

* 75,000 / 375,000 = 20%

** 90,000 / 120% = P75,000

2. Cost of Goods Sold 420,000

Inventory 420,000
P60,000 + P450,000 – P90,000 = P420,000
AA1- Chapter 9 (2008 edition)
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3. Billed Price Cost Markup

Inventory, beginning P 60,000 P 50,000 P 10,000
Shipments 450,000 375,000 75,000
Total P510,000 P425,000 P 85,000
Inventory, end 90,000 75,000 15,000
Cost of goods sold P420,000 P350,000 P 70,000

Exercise 9 - 12
a. Merchandise Inventory, January 1 P26,400
Add Shipments from Home Office 20,000
Cost of Goods Available for Sale P46,400
Cost of Goods Sold
Sales, net of Sales Returns (P15,000 - P2,000) P13,000
Sales rate 125% 10,400
Merchandise destroyed by fire at billed price P36,000
÷ 120%
Merchandise destroyed by fire at cost P30,000
b. Home Office Books
Branch Loss from Fire 30,000
Allowance for Markup in Branch Inventory 6,000
Branch 36,000
Branch Books
Home Office 36,000
Merchandise Inventory 36,000

Exercise 9 – 13
1. Branch Income 50,000
Cost of Goods Sold P230,000 x 15/115 30,000
Branch 20,000

2. Home Office 520,000

Branch 520,000

3. Allowance for Markup in Branch Inventory 9,000

Inventory 9,000

PROBLEMS
Problem 9 – 1
Billed Price Cost Markup
Beginning inventory:
Acquired from vendors P100,000 P100,000 -
Acquired from home office 40,000 32,000 P 8,000
Purchases from vendors 240,000 240,000 -
Shipments from Home Office P180,000 + P30,000 210,000 168,000 42,000
Total inventory available for sale P590,000 P540,000 P50,000
Less Ending inventory:
Acquired from vendors 40,000 40,000 -
Acquired from home office P60,000 + P30,000 90,000 72,000 18,000
Cost of goods sold P460,000 P428,000 P32,000
AA1- Chapter 9 (2008 edition)
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Problem 9 – 2
Home Office Books
a. Dagupan Branch 10,000
Cash 10,000

b. Dagupan Branch 25,000

Baguio Branch 40,000
Shipments to Branch 65,000

c. Furniture and Fixtures 17,500

Cash 17,500

d. Expenses 800
Dagupan Branch 800

e. Baguio Branch 29,400

Sales Discounts 600
Accounts Receivable 30,000

f. Baguio Branch 15,000

Dagupan Branch 15,000

g. Shipments to Branch 2,500

Dagupan Branch 2,500

h. Dagupan Branch 1,800

Baguio Branch 1,800

i. Dagupan Branch 20,100

Shipments to Branch 20,000
Cash 100

j. Baguio Branch 20,110

Excess Freight 35
Dagupan Branch 20,145

Dagupan Branch Books

a. Cash 10,000
Home Office 10,000

b. Shipments from Home Office 25,000

Home Office 25,000

c. no entry

d. Home Office 800

Cash 800

e. no entry
AA1- Chapter 9 (2008 edition)
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f. Home Office 15,000

Cash 15,000

g. Home Office 2,500

Shipments from Home Office 2,500

h. Expenses 1,800
Home Office 1,800

i. Shipments from Home Office 20,000

Freight-In 100
Home Office 20,100

j. Home Office 20,145

Shipments from Home Office 20,000
Freight-In 100
Cash 45

Baguio Branch Books

a. no entry

b. Shipments from Home Office 40,000

Home Office 40,000

c. no entry

d. no entry

e. Cash 29,400
Home Office 29,400

f. Cash 15,000
Home Office 15,000

g. no entry

h. Home Office 1,800

Cash 1,800

i. no entry

j. Shipments from Home Office 20,000

Freight-In 110
Home Office 20,110

Problem 9 – 3
Requirement 1
Home Office Books
1. Baguio Branch 20,000
Cash 20,000
AA1- Chapter 9 (2008 edition)
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2. Baguio Branch 259,000

Shipments to Branch 185,000
Allowance for Markup in Branch Inventory 74,000

3. Cash 245,000
Baguio Branch 245,000

4. Baguio Branch 7,000

Cash 7,000

5 – 7 - no entry

Baguio Branch Books

1. Cash 18,000
Home Office 18,000

2. Shipments from Home Office 257,600

Home Office 257,600

3. Home Office 247,400

Cash 247,400

Accounts Receivable 2,400

Home Office 2,400

4. Expenses 7,000
Home Office 7,000

5. Cash 247,400
Accounts Receivable 40,600
Sales 288,000

6. Expenses 21,000
Cash 21,000

7. Merchandise Inventory, end P30,100 + P1,400 31,500

Sales 288,000
Income Summary 15,000
Merchandise Inventory, beginning P257,600 + P1,400 17,500
Shipments from Home Office 259,000
Expenses 28,000

Income Summary 15,000

Home Office 15,000

Requirement 2
Baguio Branch 15,000
Branch Income 15,000

Allowance for Markup in Branch Inventory 70,000

Branch Income 70,000
(P17,500 + P259,000 – P31,500) x 40/140
AA1- Chapter 9 (2008 edition)
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Branch Income 85,000

Income Summary 85,000

Requirement 3

Shipments from Home Office 1,400

Home Office 1,400

Cash 2,000
Home Office 2,000

Problem 9 - 4
Requirement 1
Triple D Bookstore
Statement of Recognized Income and Expenses - Quezon City Branch
For the Year Ended December 31, 2008
Sales P192,690
Cost of Goods Sold:
Merchandise Inventory, beginning P 31,500
Shipments from Home Office 128,000
Cost of Goods Available for Sale P159,500
Less Merchandise Inventory, end 22,750 136,750
Gross Profit P 55,940
Operating Expenses:
Advertising and Promotion P 6,400
Depreciation 2,400
Uncollectible Accounts Expense 1,250
Others 36,600 46,680
Net income P 9,260

Requirement 2
Branch 9,260
Branch Income 9,260

Allowance for Markup in Branch Inventory 27,350

Branch Income 27,350
P136,750 x 25/125

Branch Income 36,610

Income Summary 36,610

Problem 9 - 5
Branch Books
a. Sales 78,000
Merchandise Inventory, end 12,000
Income Summary 10,000
Merchandise Inventory, beginning 10,000
Shipments from Home Office 80,000
Selling Expenses 4,000
Administrative Expenses 6,000
AA1- Chapter 9 (2008 edition)
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b. Home Office 10,000

Income Summary 10,000

Home Office Books

a. Sales 310,000
Shipments to Branch 64,000
Merchandise Inventory, end 30,000
Merchandise Inventory, beginning 25,000
Purchases 300,000
Selling Expenses 20,000
Administrative Expenses 30,000
Income Summary 29,000

b. Branch Income 10,000

Branch 10,000

c. Allowance for Overvaluation in Branch Inventory 15,600

Branch Income 15,600
P18,000 - (P12,000 x 25/125) = P15,600

d. Branch Income 5,600

Income Summary 5,600

e. Income Tax 12,110

Income Tax Payable 12,110

f. Income Summary 12,110

Income Tax 12,110

g. Income Summary 22,490

Retained Earnings 22,490

Problem 9 - 6
Requirement 1
Triple F Products Inc. - Branch
Trial Balance
December 31, 2008

Debit Credit
Cash 12,800
Accounts Receivable 48,160
Merchandise Inventory 27,280
Accounts Payable 2,040
Home Office 68,900
Sales 256,000
Cost of Sales 191,620
Operating Expenses 47,080 _______
326,940 326,940
AA1- Chapter 9 (2008 edition)
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Requirement 2
Home Office Books
a. Sales 640,600
Income Summary 41,360
Cost of Sales 452,840
Operating Expenses 146,400

b. Branch 17,300
Branch Income 17,300

c. Allowance for Overvaluation of Branch Inventory 17,420

Branch Income 17,420
P191,620 x 10/110
P21,100 ÷ (P202,400 + P29,700 – P21,100) = 10%

d. Branch Income 34,720

Income Summary 34,720

e. Income Tax 26,628

Income Tax Payable 26,628

f. Income Summary 26,628

Income Tax 26,628

g. Income Summary 76,080

Retained Earnings 76,080

Branch Books
a. Merchandise Inventory P202,400 – P189,200 13,200
Home Office 13,200

b. Sales 256,000
Income Summary 17,300
Cost of Sales 191,620
Operating Expenses 47,080

c. Income Summary 17,300

Home Office 17,300
Requirement 3

Combined net income (P41,360 + P34,720 – P26,628) P49,452

Combined Merchandise Inventory:

Home Office P156,640
Branch [ P27,280 + P13,200) ÷110% 36,800 P193,440
AA1- Chapter 9 (2008 edition)
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Problem 9 - 7

Triple G Company
Combined Statement of Recognized Income and Expenses
for Home Office and Branch
For the Year Ended December 31, 2008

Sales P325,000
Cost of goods sold:
Merchandise inventory, beginning P107,500
Purchases 215,000
Cost of goods available for sale P322,500
Less Merchandise inventory, end 81,300 241,200
Gross profit P 83,800
Operating expenses 50,000
Net income before Income Tax P 33,800
Income Tax 11,830
Net Income P 21,970

Inventory: Beginning Ending

Home Office P 80,000 P55,000
Branch P7,500 + (P24,000/120%) 27,500 P5,500 + (P26,000/125%) 26,300
Total P107,500 P81,300
** P37,500 – P30,000 = P7,500/ P30,000 = 25%
Requirement 2
Davao Branch Books
a. Sales 75,000
Merchandise Inventory, end 31,500
Income Summary 12,500
Shipments from Home Office 37,500
Purchases 15,000
Expenses 10,000
Merchandise Inventory, beginning 31,500

b. Income Summary 12,500

Home Office 12,500
Requirement 3
Home Office Books
a. Davao Branch 12,500
Branch Income 12,500

b. Allowance for Markup in Branch Inventory 6,300

Branch Income 6,300
Markup on branch beginning inventory
(P24,000 x 20/120) P 4,000
Markup on shipments 7,500
Allowance balance before adjustments P11,500
Markup on branch ending inventory
(P26,000 x 25/125) 5,200
Realized markup P 6,300
AA1- Chapter 9 (2008 edition)
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c. Sales 250,000
Shipments to Branch 30,000
Merchandise Inventory, end 55,000
Income Summary 15,000
Purchases 200,000
Expenses 40,000
Merchandise Inventory, beginning 80,000

d. Branch Income 18,800

Income Summary 18,800

e. Income Tax 11,830

Income Tax Payable 11,830

f. Income Summary 11,830

Income Tax 11,830

g. Income Summary 21,970

Retained Earnings 21,970

Problem 9 – 8

Requirement 2
a. Plant Assets 4,000
Branch 4,000

b. Home Office 2,000

Accounts Receivable 2,000

c. Cash 5,000
Branch 5,000

d. Expenses 1,000
Home Office 1,000

e. Shipments from Home Office 3,000

Home Office 3,000

f. Retained Earnings 2,500

Inventory 2,500
P15,000 x 20/120

g. Home Office 11,000

Branch 11,000

h. Sales 48,000
Shipments from Home Office 48,000
 AA1- Chapter 9 (2008 edition)
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Problem 9 – 8
Triple J Wholesale Company
Work Sheet for Combined Financial Statements
For the Year Ended December 31, 2008

Adjustments and
Trial Balance Eliminations Income Statement Balance Sheet

Debits Home Office Branch Debit Credit Debit Credit Debit Credit
Cash 36,000 8,000 (c ) 5,000 49,000
Accounts Receivable 35,000 12,000 (b) 2,000 45,000
Inventory 70,000 15,000 (f) 2,500 82,500 74,500 74,500
Plant Assets, net 90,000 (a) 4,000 94,000
Branch 20,000 (a) 4,000
(c ) 5,000
(g) 11,000
Purchases 290,000 24,000 314,000
Shipments from Home Office 45,000 (e) 3,000 (h) 48,000
Expenses 44,000 16,000 (d) 1,000 61,000
Income Tax (i) 36,400 36,400
585,000 120,000
Credits
Accounts Payable 36,000 13,500 49,500
Accrued Expenses 14,000 2,500 16,500
Income Tax Payable (i) 36,400 36,400
Home Office 9,000 (b) 2,000 (d) 1,000
(g) 11,000 (e) 3,000
Ordinary Share Capital 50,000 50,000
Retained Earnings 45,000 (f) 2,500 42,500

Sales 440,000 95,000 (h) 48,000 487,000

585,000 120,000 112,900 112,900 493,900 561,500
Net income 67,600 67,600
561,500 561,500 262,500 262,500

Inventory, beg: Invent ory, end:

Home Office P55,000 Home Office P70,000
Branch P2,000 + P21,000/120% 19,500 Branch 12,500
P74,500 P82,50
 AA1- Chapter 9 (2008 edition)
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Problem 9 – 9
Triple M Company
Work Sheet for Combined Financial Statements
For the Year Ended December 31, 2008

Adjustments and Combined

Trial Balance Eliminations Cost of Goods Sold Income Statement Balance Sheet
Debits HO Branch Debit Credit Debit Credit Debit Credit Debit Cred8t
Cash 17,000 200 a. 1,700 20,700
b. 1,800
Inventory 23,000 11,550 e. 1,000 33,550 44,770 44,770
Sundry Assets 200,000 48,450 248,450
Investment in Branch 60,000 a. 1,700
g. 58,300
Purchases 190,000 190,000
Shipment from Home 105,000 c. 5,000 f. 110,000
Office
Freight-in from Home 5,500 d. 250 5,750
Office
Sundry Expenses 42,000 24,300
Income Tax h. 15,460 15,460
532,000 195,000 66,300
Credits
Sundry Liabilities 35,000 3,500 d. 250 38,750
Income Tax Payable h. 15,460 15,460
Ordinary Share Capital 200,000 200,000
Retained Earnings 31,000 31,000
Home Office Equity 51,500 g. 58,300 b. 1,800
c. 5,000
Sales 155,000 140,000 295,000
Shipments to Branch 110,000 f. 110,000
Allowance for Markup in 1,000 e. 1,000
BI
532,000 195,000 193,510 193,510 229,300 44,770
Cost of Goods Sold 184,530 184,530
229,300 229,300 266,290 295,000
Net income 28,710 28,710
295,000 295,000 313,920 313,920
Merchandise inventory, end:
Home office P30,000
Branch [((P15,400 / 110%) + (P15,400 x 5%)] = P14,000 + P770 14,770
Total P44,770
 AA1- Chapter 9 (2008 edition)
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Problem 9 – 10

Triple N Commercial
Working Paper for Combined Financial Statements for Home Office and Branch
For the Year Ended December 31, 2008

Adjusted Branch Home Office Combined

Trial Balance Adjustments Trial Balance Eliminations Income Statement Income Statement Balance Sheet

Debits HO Branch HO Branch HO Branch Debit Credit Debit Credit Debit Credit Debit Credit
Cash 50,100 1,260 a. 5,320 b. 2,100 55,420 3,360
58,780
Accounts Receivable (net) 350,000 135,660 c. ( 2,500) 350,000 133,160
483,160
Inventory – Home office 64,400 64,400 64,400
70,000
Branch 32,340 32,340 a.
2,940 29,400 32,200 102,200
Fixed Assets (net) 210,000 210,000
210,000
Branch Current 163,120 a. (5,320) 157,800 c.
157,800
Purchases 532,000 532,000 532,000
Shipments from Home 294,000 d. 14,000 308,000 b.
Office 28,000 280,000
Sundry Expenses 119,980 83,440 119,980 83,440 119,980
83,440
Income Tax f. 23,667 e. 10,976 23,667 10,976 10,976 23,667

1,489,600 546,700 23,667 24,576 1,513,267 571,276

Credits
Accounts Payable 30,500 10,500 30,500 10,500
41,000
Mortgage Payable 67,500 67,500
67,500
Income Tax Payable f. 23,667 e. 10,976 23,667 10,976
34,643
Home Office Current 144,200 b. 2,100

c. ( 2,500)
d. 14,000 157,800 c. 157,800

Sales 434,000 392,000 434,000 392,000

392,000 434,000
Shipments to Branch 308,000 308,000 b. 28,000
280,000
Allowance for 2,940 2,940 a. 2,940
Overvaluation
Ordinary Share Capital 600,000 600,000
600,000
Retained Earnings 46,660 46,660
46,660
1,489,600 546,700 23,667 24,576 1,513,267 571,276 188,740 740,047
188,740 403,816 424,200 784,000 854,140 789,803
Branch net income
20,384 20,384
Home Office net income 43,953
43,953

424,200 424,200 784,000 784,000 854,140 854,140

Inventory, end:
Home Office P 70,000
Branch [(P21,420 + P14,000) / 110%] 32,200
Total P102,200
AA1- Chapter 9 (2008 edition)
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MULTIPLE CHOICE

1. B 3. C 5. D 7. D
2. B 4. D 6. B 8. D

9 A

10 C
11 C
12 D P13,200 + P350 = P13,550
13 C P11,000 + P350 = P11,350

14 A P12,000 x 20/120 = P2,000

15 D Inventory, beginning (P165,000 / 125%) P132,000

Shipments (P110,000 / 125%) 88,000
Merchandise available for sale from home office at cost P220,000
Cost of merchandise sold from home at cost
Sales, net of returns and allowances P165,250
Less Sales from merchandise purchased from
outsiders (P7,500 x 120%) 9,000
Sales from merchandise from home office P156,250
÷ 125%
Cost of sales at billed price P125,000
Billed price rate ÷ 125% 100,000
Inventory destroyed by fire P120,000

16 D Balance of allowance before adjustment P370,000

Required balance of allowance (P1,170,000 x 20/120) 195,000
Realized markup P175,000

17 C Sales P141,000
Cost of goods sold (P120,000 x 3/4 x 125%) 112.500
Gross profit P 28,500
Operating expenses 27,000
Net income reported by the branch P 1,500

18 A P50,400/120% P42,000

19 B P90,000 + P36,000 – P2,520 – P50,400/120% = P60,900

20 B Net income (loss) reported by branch (P 7,800)

Realized markup
(P90,000 + P36,000 – P2,520 - P50,400 = P73,080) x 20/120 12,180
True net income of the branch P 4,380

21 B Net income reported by branch P 4,800

Realized markup [(P3,960 + P17,600 – P4,840) x 10/110] 1,520
AA1- Chapter 9 (2008 edition)
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Actual branch income P 6,320

22 B Branch ending inventory, at cost (P4,840 / 110%) P 4,400

Home office ending inventory 11,200
Ending inventory to be reported in the combined balance sheet P15,600

23 D Net income reported by the branch P 5,000

Realized markup[P280,000 - (P50,000 – P6,600)] x 40/140 67,600
True net income of the branch P 72,600

24 B Branch inventory from home office (P43,400 /140%) P31,000

Branch inventory from outside purchases 6,600
Total cost of branch inventory, end P37,600

25 D P60,000 - P7,500 P52,500

26 A P60,000 - (P7,500 x 120/20) P15,000

27 B Sales P 292,500
Cost of goods sold (P180,000 + P45,000 - P60,000) (165,000)
Operating expenses ( 72,000)
Realized markup [(P180,000 x 20/120) - P7,500 22,500
True net income of the branch P 78,000

28 A Unadjusted balance of allowance account P99,900

Markup on 2008shipments from home office
(P390,000 – P300,000) 90,000
Markup on beginning inventory P 9,900
x 130/30 P 42,900
Total merchandise inventory beg 54,600
Merchandise from outside purchases P 11,700

29 D Sales P540,000
Cost of goods sold
(P54,600 + P390,000 + P144,600 - P48,750) (540,450)
Operating expenses ( 51,000)
Realized markup [P99,900 - (P39,000 x 30/130)] 90,900
True net income of the branch P 39,450

30 C P39,000 x 30/130 = P9,000

31 D Sales (net of discount of P1,480) P115,520

Cost of goods sold (P104,000 - P12,500) ( 91,500)
Operating expenses ( 20,000)
Net income reported by branch P 4,020

32 C Net income reported by branch P 4,020

Realized markup (P91,500 x 25/125) 18,300
True net income of the branch P 22,320
AA1- Chapter 9 (2008 edition)
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33 C Sales P 37,400
Cost of goods sold (P5,000 + P2,000 + P26,400 – P4,500) ( 28,900)
Operating expenses ( 3,000)
Realized markup [P2,800 – (P3,960 x 10/110)] 2,440
True profit of Cebu branch P 7,940

34 D Sales P110,000
Cost of goods sold
(P16,000 + P80,000 – P24,000 – P20,000) ( 52,000)
Operating expenses ( 10,000)
Net income of the home office P 48,000
Net income of the branch 7,940
Combined net income of the home office and branch P 55,940

35 C Sales P155,000
Cost of sales:
Inventory, beginning P 23,000
Purchases 190,000
Goods available for sale P213,000
Shipments to branch (P110,000/110%) 100,000
Goods available for own sale P113,000
Less Inventory, end 30,000 83,000
Gross profit P 72,000
Expenses 52,000
Net income P 20,000

36 A Sales P140,000
Cost of sales:
Inventory, beginning (P11,550 – P1,000) P 10,550
Shipments from HO, including freight-in 105,750
Goods available for sale P116,300
Less Inventory, end
[(P10,400 + P5,000)/110%] + P520 + P250 14,770 101,530
Gross profit P 38,470
Expenses 28,400
True branch net income P 10,470

37 D (P10,400 + P5,000) x 10/110 P1,400

38 B Unadjusted balance of allowance account P 57,500

Markup on 2008 shipments (P200,000 x 25%) 50,000
Markup on beginning inventory P 7,500
x 125/25
Branch beginning inventory at billed price P 37,500
AA1- Chapter 9 (2008 edition)
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39 C Sales P400,000
Cost of goods sold (P37,500 + P250,000 - P40,000) (247,500)
Operating expenses (100,000)
Net income reported by branch P 52,500

40 C Net income reported by branch P 52,500

Realized markup (P247,500 x 25/125) 49,500
True net income of the branch P102,000

41 B Beginning inventory P 8,000

Purchases 30,000
Shipments from home office 93,750
Ending inventory ( 10,350)
Cost of goods sold reported by branch P 121,400
Realized markup [P19,750 - (P6,000 x 25/125)* ( 18,550)
Cost of goods sold at cost P 102,850

*P93,750 – P75,000 = P18,750/P75,000 = 25%

42 C The amount of the realized markup of P18,550

43 C Adjusted net income P156,000

Reported net income 60,000
Realized markup P 96,000
Cost of sales at cost
(P70,000 + P350,000 – P84,000) – P96,000 ÷ P240,000
140%

44 C P84,000 x 40/140 P24,000

45 A 72,500 ÷ (75,000 + 444,000 -84,000 – 72,500) 20%

46 D P444,000 / 120% P370,000

47 D Sales P 600,000
Cost of goods sold (P75,000 + P444,000 - P84,000) (435,000)
Operating expenses (200,000)
Realized markup [P72,500 - (P84,000 x 20/120)] 58,500
Adjusted profit of the branch P 23,500

48 C P84,000 x 20/120 = P14,000

49 A P84,000 – P14,000 = P70,000

50 B Home office inventory (P160,500 - P10,500) P 150,000

Branch inventory (P108,000/120%) 90,000
Inventories reported in the combined balance sheet P 240,000
 AA1- Chapter 9 (2008 edition)
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Problem 9 – 8
Triple J Wholesale Company
Work Sheet for Combined Financial Statements
Adjustments and
Trial Balance Eliminations Income Statement Balance Sheet

Debits Home Office Branch Debit Credit Debit Credit Debit Credit
Cash 36,000 8,000 (c ) 5,000 49,000
Accounts Receivable 35,000 12,000 (b) 2,000 45,000
Inventory 70,000 15,000 (f) 2,500 82,500 74,500 74,500
Plant Assets, net 90,000 (a) 4,000 94,000
Branch 20,000 (a) 4,000
(c ) 5,000
(g) 11,000
Purchases 290,000 24,000 314,000
Shipments from Home Office 45,000 (e) 3,000 (h) 48,000
Expenses 44,000 16,000 (d) 1,000 61,000
Income Tax (i) 36,400 36,400
585,000 120,000
Credits
Accounts Payable 36,000 13,500 49,500
Accrued Expenses 14,000 2,500 16,500
Income Tax Payable (i) 36,400 36,400
Home Office 9,000 (b) 2,000 (d) 1,000
(g) 11,000 (e) 3,000
Ordinary Share Capital 50,000 50,000
Retained Earnings 45,000 (f) 2,500 42,500

Sales 440,000 95,000 (h) 48,000 487,000

585,000 120,000 112,900 112,900 493,900 561,500
Net income 67,600 67,600
561,500 561,500 262,500 262,500

For the Year Ended December 31, 2008

 AA1- Chapter 9 (2008 edition)
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Problem 9 – 9
Triple M Company
Work Sheet for Combined Financial Statements
For the Year Ended December 31, 2008

Adjustments and Combined

Trial Balance Eliminations Cost of Goods Sold Income Statement Balance Sheet
Debits HO Branch Debit Credit Debit Credit Debit Credit Debit Cred8t
Cash 17,000 200 a. 1,700 20,700
b. 1,800
Inventory 23,000 11,550 e. 1,000 33,550 44,770 44,770
Sundry Assets 200,000 48,450 248,450
Investment in Branch 60,000 a. 1,700
g. 58,300
Purchases 190,000 190,000
Shipment from Home 105,000 c. 5,000 f. 110,000
Office
Freight-in from Home 5,500 d. 250 5,750
Office
Sundry Expenses 42,000 24,300
Income Tax h. 15,460 15,460
532,000 195,000 66,300
Credits
Sundry Liabilities 35,000 3,500 d. 250 38,750
Income Tax Payable h. 15,460 15,460
Ordinary Share Capital 200,000 200,000
Retained Earnings 31,000 31,000
Home Office Equity 51,500 g. 58,300 b. 1,800
c. 5,000
Sales 155,000 140,000 295,000
Shipments to Branch 110,000 f. 110,000
Allowance for Markup in 1,000 e. 1,000
BI
532,000 195,000 193,510 193,510 229,300 44,770
Cost of Goods Sold 184,530 184,530
229,300 229,300 266,290 295,000
Net income 28,710 28,710
295,000 295,000 313,920 313,920
Merchandise inventory, end:
Home office P30,000
Branch [((P15,400 / 110%) + (P15,400 x 5%)] = P14,000 + P770 14,770
Total P44,770
AA1- Chapter 9 (2008 edition)
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