For Midterm

Accounting for Special Transactions C. N.
Dait
Installment Sales
INSTALLMENT SALES
Installment sales contract is a special type of credit arrangement which provides for a series of payments
over a period of months or years.
Gross Profit Recognition under Installment Sales Method
When there is uncertainty as to the collectibility of the sales price, generally accepted accounting principle
requires that revenue recognition should await the actual receipt of cash. The most commonly applied method of
dealing with the uncertainty of cash collections is the installment sales method. Under this method of accounting, the
recognition of gross profit is deferred until cash is collected. Each cash collection on a contract is regarded as
including both a return of cost and a realization of gross profit in their ratio to the selling price.
Installment Sales of Merchandise – Pro-Forma Entries

1. Upon sale
Installment contracts receivable xx
Installment sales xx
Cost of installment sales xx

Inventory (or Shipments on installment
sales if periodic system) xx
2. Year-end adjusting/closing entries

Installment sales xx
Cost of installment sales xx
Deferred gross profit xx
Recognition of gross profit

Deferred gross profit xx
Realized gross profit (Collections X GPR) xx
To close the balance of Realized Gross Profit

Realized gross profit xx
Income summary xx
Gross Profit Rate (GPR) Calculations
GPR = (Gross profit/ Installment sales)
GPR = (DGP, beg. / Installment contract receivable, beg.)
GPR = ( DGP, end. / Installment contract receivable, end.)
Realized Gross Profit (RGP) Calculations

RGP = GPR X Collection
RGP = (DGP, beg – DGP, end)
Defaults and Repossessions

1. When a buyer fails to make any further installment payments, the seller may:
a. repossess the merchandise or property sold.
b. Recondition the merchandise, and
c. Resell the merchandise to recover the loss on the original sale.
2. Repossessed merchandise is recorded at market value or net realizable value.
Estimated resale price XX
Less reconditioning cost and normal profit margin XX
Net realizable value XX
===
3. The uncollected installment receivable balance of the defaulted contract is cancelled.
4. The balance of the DGP pertaining to the uncollected receivable is written off.
5. The resulting gain or loss on repossession is determined:
FMV of the repossessed merchandise XX
Less unrecovered cost : Installment contract receivable XX
Less DGP XX XX
Gain (Loss) on repossession XX
===
Trade- Ins
1. Part of down payment
2. Recorded at the actual value (same as FMV of repossessed merchandise)
Estimated resale price XX
Less expected reconditioning cost and normal profit margin XX
Actual value XX
1
===
3. Trade-in value allowed to customer is compared with actual value.

The excess of trade-in value over the actual value is an overallowance which must be deducted
from selling price of new merchandise.
4. Pro-forma entry:
Cash XX
Merchandise inventory – traded in XX
Installment contract receivable XX
Installment sales XX
Cost Recovery Method
When collections are so uncertain and when the nature of services or products sold do not permit
repossession or when the customers’ notes have no fair market value, the applicable method is the cost recovery
method. Under this method, no income is recognized on a sale until the cost of the item sold is fully recovered
through cash receipts. Collections are first applied to recovery of the cost of property sold. After the full recovery of
cost, all subsequent collections are treated as realization of gross profit.
END
2
Benson Appliance corporation reports income on installment basis and uses perpetual inventory system. The following
data are available:
Sales made during
Gross profit rate 46% 42% 40%
Installment contract receivable 30,000 50,000
Collections during 2018 30,000 34,000 60,000
Entries for the year 2018, recognition of gross profit at the end of 2018
ANSWER:
ICR 200k
sales(60k+140K) 200k
Cos of IS(60% *200k) 120k

Inventory 120k
Cash 124k
ICR 2018 60k
ICR 2017 34k
ICR 2016 30k
Sales 200k
Cost of IS 120k
DGP 2018 80k
DGP 2018(60k*40%) 24k

DGP 2017(34k*42%) 14,280
DGP 2016(30k*46%) 13,800
RGP 52,080
RGP 52,080
Income summary 52,080
A sale on installment basis was made in 2017 for P16,000 at a gross profit of P5,600. At the end of 2018, when the
installment account receivable had a balance of P7,000, it was ascertained that the customer would not be able to make
further payments. The merchandise was then repossessed. It was estimated that the repossession can be resold for P6,000
after reconditioning the same at P1,500 and commission of 10%.
Entries of repossession
ANSWER:
GPR=P5,600/P16,000-35%
NRV of Repossessed Merchandise

Estimated SP 6,000
less: Reconditioning cost 1,500
Commission (10% x P6,000) 600 (2,100)
NRV 3,900
ICR bal 7,000
DGP bal (P7,000 x 35%) 2,450
Unrecovered cost 4,550 (7,000 * 65%)
NRV 3,900
Unrecovered cost 4,550
Loss on repossession 650
Entry
Loss on repossession 650
Repossessed Mdse 3,900
DGP, 2017 2,450
ICR, 2017 7,000
GPR-2017 =
DGP 2017, beg/ICR 2017, beg
P44,000/P200,000
22%
GPR-2016 =
DGP 2016, beg/ICR 2016, beg
P100,000/P400,000
25%
RGP,2017
Collection * GPR
200k-400k * 22%
35,200
RGP,2016
Collection * GPR
400k-100k * 25%
75,000
The Video Store accounts for installment sales on the installment basis. At the beginning of 2018, ledge
ccounts include the following balances:
Installment Contract Receivable, 2016 Installment Contract Receivable, 2017

Deferred Gross Profit, 2016
P150,000
480,000
63,000
At the end of 2018, account balances before adjustment for realized gross profit on installment sales are
180,000
Installment Contract Receivable, 2016 Installment Contract Receivable, 2017
None
120,000
650,000
63,000
Installment Contract Receivable, 2018
180,000
installment sales in 2018 were made at 66 2/3% above cost of merchandise
Entries and gross profit realized in 2018
ANSWER:
Complete the following table
Computronics accounts for installment sales by reporting income in proportion of collections to s price. On December
31, 2018, the books show account balances as follows:
Installment contract receivable
2016 10,000
2017 40,000
2018 90,000
Deferred gross profit

8,000
26,000
105,000
The gross profit rates were 2016, 35% ; 2017, 30%; 2018, 40%.
Instructions:
1. Prepare the required adjusting entries on December 31, 2018.
2. Determine the cash collections in 2018 on accounts receivable of each year.
MM Company began operations on January 1, 2023 and appropriately uses the installment method of accounting. The
following data are available for 2023 and 2024:
Installment sales 1,200,000 1,500,000
Cash collection:
2023 400,000 500,000
2024 600,000
Gross profit on sales 30% 40%
The realized gross profit for 2024 is:
a. P240,000
b. 390,000
c. P440,000
d. 600,000
GRP * collection
Leyte Company, which began business on January 1, 2024, appropriately uses the installment sales method of
accounting The following data are available for 2024:
Installment accounts receivable, 12/31/24 200,000
Deferred gross profit 12/31/24 before recognition of RGP 140,000
Gross profit on sales 40%
The cash collection and the realized gross profit on installment sales for the year ended
D RGP 60,000 collection 150,000
The books of Harry Co. show the following balances on December 31, 2024:
Accounts receivable 313,750
deferred gross profit 38,000
Analysis of the accounts receivable reveal the following:
Regular accounts 207,500
Sales on an installment basis in 2023 were made at 30% above cost, in 2024, at 33 1/3 above cost Expenses paid was
P1,500 relating to installment sales. How much is the net income on installment sales?
D 10,250
LONG TERM CONSTRUCTION CONTRACT

On January 1, 2005, Cleveland Enterprises obtained a contract to construct a building. It was estimated at the beginning
of the contract that it would take three years to complete the project at an expected cost of P200,000. The contract price
was P250,000. The following information describes the status of the job at the close of production each year.
Compute the items listed below for each year assuming (round all percentages to two decimals) 1. The use of the
overtime/percentage-of-completion cost-to-cost method, and 2. The point-in-time/cost recovery (zero-profit) method.
Monroe Construction Company uses the percentage-of-completion (overtime) met accounting. In 20x4, Monroe began
work on a contract it had received which provided a contract price of P15.000.000. Other details follow:
Costs incurred during the year 7,200,000
Estimates costs to complete as ond december 31 4,800,000
Billing during the year 6,600,000
Collections during the year 3,900,000
What should be the gross profit recognized in 2024?
B 1,800,000
Cost to incurred 7,200,000
Estimate cost 4,800,000
Total estimate cost 12,000,000
Total estimate gross profit 3,000

Stage of completion 60% (7.2/12m)
Gross profit 1,800,000 (60% * 3,000)
Gamet inc began work in 20x4 on contract #3814 which provided for a contract price of 200.000 Other details follow
Costs incurred during the year 1,200,000 3,675,000
Estimates costs to complete as on december 31 3,600,000 0
Billing during the year 1,350,000 5,400,000
Collections during the year 900,000 5,850,000
Assume that Gomez uses the percentage-of-completion (overtime) method of accounting the portion of the total gross
profit to be recognized as income in 20x4 is
B 600,000
Gross profit 25*2,400,000 = 600,000
Assume that Gomez uses the cost recovery method (point-in-time) of accounting. The portion of the total gross profit to
be recognized as income in 2015 is
C 2,325,000
Tyro Construction Company has two projects for which it imported, as of December 31, 2015.
the following information:
Contract price.
20x4: Costs incurred. Percent completed.
2015 Corts incurred
P 4,800
P 3,400
75%
Using the percentage-of-completion (overtime) method on Project A to be recognized in 20x4 would be:
A 200,000
(75% * 267,000) = 200,000
Hayes Construction Corporation contracted to construCT Duiding for P1.500.000 Construction began in 20x4 and was
completed in 20x5. Data relating to the contract are summarized below:
Costs incurred.
20x4
Year Ended December 31
20x5 P450,000
Estimated costs to complete.
Hayes uses the percentage-of-completion method (overtime) as the basis for income
P600,000
recognition. For the years ended December 31, 20x4, and 20x5, respectively. Hayes should
C 300,000 150,000
Ube Construction Company has consistently used the overtime/percentage-of-completion method On January 10, 20x4,
Ube began work on a P6.000.000 construction contract. At the inception date, the estimated cost of construction was
P4,500,000. The following data relate to the progress of the contract:
Income recognized at
How much income should ube recognized for the year ended december 31, 2025?
A 300,000
Installment Sales
Quiz
August 25, 2021
1. Lane Company, which began operations on January 1, 2021, appropriately uses the installment method of
accounting. The following information pertains to Lane’s operations for the year 2021:
Installment sales ........................................................................ P1,000,000

Regular sales ............................................................................ 600,000
Cost of installment sales ............................................................ 500,000
Cost of regular sales ................................................................. 300,000
General and administrative expenses .......................................... 100,000
Collections on installment sales .................................................. 200,000
The deferred gross profit account in Lane’s December 31, 2021 balance sheet should be:
P150,000
P320,000
P400,000*
P500,000
a. P150,000 c. P400,000
b. 320,000 d. 500,000
ANS C
2. DT Company sells appliances on the installment basis. Below are information for the past three years:
2024 2023 2022

Installment sales ................................ P750,000 P600,000 P400,000
Cost of sales ..................................... 450,000 375,000 260,000
Collections on:
2024 installment sales ................... 275,000
2023 installment sales ................... 180,000 240,000
2022 installment sales ................... 125,000 120,000 150,000
Repossessions on defaulted accounts included one made on a 2024 sale for which the unpaid balance
amounted to P5,000. The depreciated value of the appliance repossessed was P2,500
The realized gross profit in 2024 on collections of 2024 installment sales was:
P108,000
P110,000*
P221,250
P221,500
a. P108,000 c. P221,250
b. 110,000 d. 221,500
ANS B
Installment Sales
Quiz
August 25, 2021
3. The Central Plains Subdivision sells residential subdivision lots on installment basis. The following
information was taken from the company’s records as at December 31, 2024.
Installment Accounts Receivable:

January 1, 2024 .............................................................. P755,000
December 31, 2024 ........................................................ 840,000
Unrealized Gross Profit, January 1, 2024 ........................... 339,750
Installment Sales ................................................................. 950,000
How much is the balance of Unrealized Gross Profit as at December 31, 2024?
P378,000*
P339,750
P427,500
P389,250
a. P378,000 c. P427,500
b. 339,750 d. 389,250
ANS. A
4. Vic Corporation, which began business on January 1, 2020, appropriately uses the installment sales method
of accounting. The following data are available:
12/31/2020 12/31/2021
Balance of deferred gross profit on sales account:
2020 ................................................................. P300,000 P120,000
2021 ................................................................. 440,000
Gross profit rate on sales ........................................ 30% 40%
The installment accounts receivable balance at December 31, 2021 is:
P1,000,000
P1,100,000
P1,400,000
P1,500,000 *
a. P1,000,000 c. P1,400,000
b. 1,100,000 d. 1,500,000
ANS D
Installment Sales
Quiz
August 25, 2021
5. A refrigerator was sold to Rona for P16,000, which included a 40% markup on selling price. She made a
down payment of 20%, paid four of the remaining sixteen equal payments, and then defaulted on further
payments. The refrigerator was repossessed, at which time the fair value was determined to be P6,800.
The repossession resulted in the following loss/gain:
P56.80
P1,040.00*
P2,960.00
P4,056.80
a. P56.80 c. P2,960.00
b. 1,040.00 d. 4,056.80
ANS B
6. Gizelle, Inc. started operation at the beginning of 2020, selling home appliances exclusively on the
installment basis. Data for 2020 and 2021 follows:
2020 2021
Installment sales .................................. P600,000 P750,000
Cost of installment sales ....................... 420,000 450,000
2020 installment accounts, end .............. 285,000 22,500
2021 installment accounts, end .............. - 300,000
On May 31, 2021, a 2020 installment account of P37,500 was defaulted and the appliance was
repossessed. After reconditioning at a cost of P750, the repossessed appliance would be priced to sell for
P30,000. This selling price allows Gizelle to earn a normal margin on sales for the year.
The gain (loss) on repossession amounted to:
P3,000
(P9,000)*
P9,000
(P3,750)
a. P3,000 c. P9,000
b. (9,000) d. (3,750)
ANS B
Installment Sales
Quiz
August 25, 2021
7. The Blue Estate Realty Corporation sold a plot of real estate for P8,000,000. The property originally costing
P2,500,000 was subsequently improved for P3,560,000. The term of the sale were: 20% down payment,
balance payable in 12 monthly installments plus 36% interest per annum on the unpaid balance payable at
the start of each month. The present value of annuity of 1 in the contract is 9.954004.
After receiving the second monthly installment, the total collections to be applied to interest is:
P192,000
P240,000
P370,471*
P364,711.30
a. P192,000
b. P240,000
c. P370,471
d. P364,711.30
ANS C
8. The Blue Estate Realty Corporation sold a plot of real estate for P8,000,000. The property originally costing
P2,500,000 was subsequently improved for P3,560,000. The term of the sale were: 20% down payment,
balance payable in 12 monthly installments plus 36% interest per annum on the unpaid balance payable at
the start of each month. The present value of annuity of 1 in the contract is 9.954004.
After receiving the second monthly installment, the total realized gross profit from total collection is:
P629,367.30
P221,995.00
P1,240,165.70
P609,995.00*
a. P629,367.30
b. P221,995.00
c. P1,240,165.70
d. P609,995.00
ANS D
Installment Sales
Quiz
August 25, 2021
9. The recognition of realized gross profit is recorded by
Debiting Cash and Crediting Realized Gross Profit

Debiting Cash and Crediting Installment Contract Receivable
Debiting Deferred Gross Profit and Crediting Realized Gross Profit*
Debiting Realized Gross Profit and Crediting Deferred Gross Profit
10. Unrecovered cost is equal to the account defaulted balance multiplied by the cost percentage.
True*
False
11. If the market value of the old property traded in is less than the given trade in allowance, there
is an overallowance which is deducted from the installment sales price.
True*
False
12. Under cost recovery method, no income is recognized on a sale until the total installment
sales receivable is fully collected.
True
False *
END
ACCP303 Accounting for Special Transactions
Prelims, September 08, 2021
C. N. Dait
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. The New Heights Subdivision sells residential subdivision lots on installment basis. The
following information was taken from the company’s records as at December 31, 2023:
Installment Accounts Receivable

Jan. 1, 2023 P 755,000
Dec. 31, 2023 840,000
Deferred Gross Profit, Jan. 1 ,2023 339,750
Installment Sales 950,000
How much is the balance of Deferred Gross Profit as at December 31, 2023?
P378,000*
P339,750
P427,500
P389,250
____ 2. The Avenson, Inc. began operating at the beginning of the calendar year 2022 and, using the
installment method of accounting, presented the following data for the first year:
Installment Sales P400,000

Gross margin based on cost 66 - 2/3%
Inventory, Dec. 31, 2022 P 80,000
General and administrative expenses 40,000
Accounts receivable, Dec. 31, 2022 320,000
The balance of the deferred gross profit account as at Dec. 31, 2022 should be
P192,000
P128,000*
P96,000
P80,000
C. N. Dait
____ 3. Pontmercy Enterprise uses the installment method of accounting and it has the following data at
the year-end:
Gross margin on cost .............................................................. 66-2/3%

Deferred gross profit ........................................................... P192,000
Cash collections including down payments ............................ 360,000
What was the total amount of sales on installment basis?
P480,000
P552,000
P648,000
P840,000 *
____ 4. The following data pertain to installment sales of Journey’s Store. Down payment is 30%. Cost
of installment sales: 2009, P2,725,000; 2010, P3,925,000; 2011, P4,840,000. Mark up on cost is
40%. Collections after down payment are 45% during the year of sale; 35% during the year after
sale: 20% on the third year. What is the amount of deferred gross profit at December 31, 2010 to
be presented in the Statement of Financial Position?
P757,050*
P659,400
P431,750
P604,450
C. N. Dait
____ 5.
The following data were taken from the records of Charlie Company, before the accounts are
closed for the year ended December 31, 2012. The Company sells exclusively on installment
basis and uses installment method of recognizing revenue.
For the year ended For the year ended For the year ended
Dec. 31, 2010 Dec. 31, 2011 Dec. 31, 2012
Installment Sales P2,800,000 P3,500,000 P4,200,000
Cost of goods sold 2,100,000 2,100,000 2,730,000
Salaries expense 84,000 91,000 98,000
Rent expense 42,000 42,000 42,000
Balances as of December 31, 2010 December 31, 2011 December 31, 2012
Installment AR, 2010 P1,750,000 P840,000 P210,000
Installment AR, 2011 2,660,000 980,000
Installment AR, 2012 3,430,000
Deferred gross 437,500 210,000 210,000
profit,2010
Deferred gross 1,064,000 1,052,800
profit,2011
Deferred gross 1,470,000
profit,2012
On January 1, 2012, a customer defaulted and Charlie Company repossessed merchandise

appraised at P17,500 after costs of reconditioning of P2,520. The merchandise had been
purchased in 2011 by a customer who still owed the company a certain amount at the date of
repossession.
How much was the gain or loss on repossession?
P11,200 gain
P3,780 gain
P13,020 loss
P1,820 loss*
C. N. Dait
____ 6. C&A Builders Construction Company entered into two construction jobs which both commenced
in 2021.
Project 1 Project 2
Construction revenue P10,500,000 P 7,140,000
Construction cost incurred 6,000,000 7,000,000
Estimated future cost 3,000,000 1,560,000
Gen. & admin. expenses 500,000 250,000
Billings to clients 6,300,000 6,000,000
Collection 5,600,000 5,000,000
Based on the information given, how much gross profit(loss) would C&A Builders report in its
2021 income statement under the cost recovery method?
P1,000,000
(P1,420,000) *
(P 420,000)
(P1,000,000)
____ 7. On July 1, 2021, Fix Company contracted to construct a factory building for Galaxy Mfg. for a
total contract price of P2,688,000. The building was completed by December 1, 2023. The
company uses the input measures - cost to cost method.
2021 2022 2023

Contract cost incurred P1,024,000 P 832,000 P 464,000
Estimated cost to complete the 1,024,000 464,000 -
contract
Billings to Galaxy 1,024,000 1,120,000 544,000
What is the amount of profit(loss) to be recognized for the year ended December 31, 2022?
Excess of Construction in Progress over Progress Billings/Progress Billings over Construction in
Progress in 2021?
(P25,600); P320,000 current liability

P294,400; P320,00 due to
P25,600; P320,000 due from
(P25,600); P320,000 current asset*
C. N. Dait
____ 8. On January 1, 2021, Elektra Construction Corp began constructing a P3,500,000 contract. As of
year-end, the following are relevant information provided by the corporation:
2021 2022 2023

Construction in Progress P 735,000 P 2,248,750 ?
Estimated cost to complete 2,666,250 1,251,250 ?
Costs incurred 708,750 1,615,000 P 1,126,250
How much is the gross profit(loss) in 2022 using the percentage of completion method?
(P48,750)
(P101,250) *
(P75,000)
P125,000
____ 9. On January 1, 2021, Brave Construction Corporation began constructing a P2,100,000 contract.
The following are relevant information provided by the corporation: Brave uses percentage of
completion method. For the year ended December 31, 2022, Brave Construction billed its client
an additional 55% of the contract price.
2021 2022 2023

Construction in Progress P441,000 ? ?
Estimated cost to complete ? ? -
Costs incurred 425,250 969,000 P675,750
Excess of Construction in 84,000 330,750 -
Progress over Billings Current liability Current liability
How much is the estimated remaining cost in 2021?

P1,599,750*
P1,155,000
P1,680,000
P1,584,000
C. N. Dait
10. On January 2, 2022, Blake Company sold a used machine to Cooper, Inc. for P900,000,
resulting in a gain of P270,000. On that date, Cooper paid P150,000 cash and signed a
P750,000 note bearing interest at 10%. The note was payable in three annual installments of
P250,000 beginning January 2, 2023. Blake appropriately accounted for the sale under the
installment method. Cooper made a timely payment of the first installment on January 2,
2023, of P325,000, which included accrued interest of P75,000. What amount of deferred
gross profit should Blake report at December 31, 2023?
P150,000*
P172,500
P180,000
P225,000
11. On December 31, 2022, Mill Company sold construction equipment to Drew, Inc. for
P1,800,000. The equipment had a carrying amount of P1,200,000. Drew paid P300,000 cash
on December 31, 2022 and signed a P1,500,000 note bearing interest at 10% payable in five
annual installments of P300,000. Mill appropriately accounts for the sale under the installment
method. On December 31, 2023, Drew paid P300,000 principal and P150,000 interest. For the
year ended December 31, 2023, what total amount of revenue should Mill recognize from the
construction equipment sale and financing?
P250,000*
P150,000
P120,000
P100,000
12. Omega sells automatic voltage regulators (AVRs) at a price of P1,200 and its cost is P700.
Charlie Computer buys a dozen AVRs on installment and trades-in 6 of the old units at an
allowance value of P300 each. Omega spends P25 to recondition a unit and sells them for
P315. Omega expects a 10% profit on used AVRs. How much is the over allowance for
trade-in granted by Omega.
P189
P249*
P339
P150
C. N. Dait
13. Grand Construction, Inc. has consistently used the percentage-of-completion

method of recognizing income. During 2023, Grand started work on a P3,000,000 fixed-
price construction contract. The accounting records disclosed the following data for the
year ended Dec. 31, 2023:
Cost incurred P 930,000

Estimated cost to complete 2,170,000
Progress billings 1,100,000
Collections 700,000
How much loss should Grand have recognized in 2023?
P230,000
P100,000*
P30,000
P-0-
14. Robin Construction Company has consistently used the percentage-of-completion

method of recognizing income. During 2021 Robin started work on a P7,500,000 fixed-
price construction contract which was completed in 2024. The accounting records
disclosed the following data:
Cumulative contract costs Estimated costs at

incurred completion
At 12/31/2021 P500,000 P5,000,000
At 12/31/2022 2,750,000 5,500,000
At 12/31/2023 5,000,000 6,000,000
How much income should Robin have recognized on this contract for the year ended Dec.
31, 2023?
P250,000*
P416,667
P500,000
P562,500
C. N. Dait
15. Denzel Construction Company uses the percentage-of-completion method of accounting.

During 2023, Denzel contracted to build an apartment house for Ryan for P10,000,000.
Denzel estimated that total costs would amount to P8,000,000 over the period of construction.
In connection with this contract, Denzel incurred P1,000,000 of construction costs during
2023. Denzel billed and collected P1,500,000 from Ryan in 2023. How much gross profit
should Denzel recognize in 2023?
P300,000
P250,000*
P187,500
P125,000
16. When using the installment sales method
gross profit is deferred until all cash is received, but revenues and costs are recognized in
proportion to the cash collected from the sale.
gross profit is recognized only after the amount of cash collected exceeds the cost of the item sold
revenue, costs, and gross profit are recognized proportionally as the cash is received from the sale
of product.
total revenues and costs are recognized at the point of sale, but gross profit is deferred in
proportion to the cash that is uncollected from the sale. *
17. The interest charge to installment sales which is payable together with the installment
payment is not recognized as income.
True
False*
18. The property received as trade-in is not considered as part of collection by the seller in
determining the realized gross profit.
True
False *
19. If the market value of the property received as trade in is less than the trade-in allowance ,
there is an overallowance which is deducted for the sales price to get the adjusted sales.
True*
False
20. To determine the deferred gross profit relating to the account defaulted, gross profit rate is
multiplied by
C. N. Dait
Cost of the repossessed merchandise
Fair market value of the repossessed merchandise
Original sales price of the repossessed merchandise
Account defaulted relating to the repossessed merchandise*
21. The realized gross profit represents the profit residing in the ending balance of the Installment
Contract Receivable.
True
False*
22. The sale of real estate on an installment basis by a non-dealer is similar to a sale of regular
asset except that the gain on sale is deferred.
True*
False
23. In accounting for a long-term construction contract for which there is a projected profit,
the balance in the Construction in Progress asset account at the end of the first year of work using
the percentage-of-completion method would be
Zero
equal to the actual cost incurred during the year
the same as the balance of Progress Billings on Construction contracts
equal to the sum of the actual cost incurred and the recognized gross profit during the year *
24. Under cost-to-cost method , the degree of completion is determined by comparing costs
already incurred with the most recent estimates of the total expected costs of the project.
True *
False
25. The “Construction- in- Progress” account contains cost incurred plus recognized profit.
True*
False
C. N. Dait
26. At the completion of the contract the total of Progress Billings will equal the contract price.
True*
False
27. Under the cost recovery approach/zero profit approach, no profit is recognized during a given
period even if a loss on the contract is projected prior to completion.
True
False*
28. The percentage-of-completion method of inventory valuation of long-term construction

contract
recognizes income upon completion of work.

recognizes income based on collection billings.
recognizes income based on the progress of work.*
does not recognize income at the balance sheet date.
29. A company uses the percentage-of-completion method to account for a four-year construction
contract. Progress Billings sent in the second year that were collected in the third year would
be included in the calculation of the income recognized in the second year

be included in the calculation of the income recognized in the third year
be included in the calculation of the income recognized in the fourth year
not be included in the calculation of the income recognized in any year*
30. At the completion of the contract, Construction-in-Progress and Progress Billings accounts
should be closed.
True*
False
END
HOME OFFICE AND BRANCH ACCOUNTING:
GENERAL PROCEDURES
CHAPTER 13
Introduction
In seeking out for increased sales, business organizations are constantly reaching out into more
distant areas. The establishment of sales control center in several areas may be the means of
achieving such marketing objective. Selling activities are conducted from sales offices at different
locations under the direction of the home office. Clients deal, not with the home office of the
business, but with a remote sales unit. Contact with the organization is more easily and quickly made.
The desired goods or services are more readily available in their area or location.
Agency and Branch Distinguished
The establishment of an outlying selling unit may take the form of an agency or a branch. The distinction between
an agency and a branch is based upon the functions assigned to the organization as well as the degree of
independence that it assumes in the exercise of such functions.
An agency is an organization in which:

1. It is established to display merchandise. Samples of the merchandise offerings as well as advertising
materials are provided by the home office
2. It does not stock merchandise to fill customer’s orders or pass on customer’s credit.
3. Merchandise orders obtained are sent to the home office for approval. If the sales price and the credit
terms are acceptable, the home office fills the orders and ships the goods to customers.
4. It is normally provided with a working fund that is to be used for the payment of expenses that can be
more conveniently settled through the agency. The imprest system is often adopted for the control of
agency cash.
5. It has no separate accounting or business entity. The home office may bear the responsibility for
maintaining the accounts that arise out of sales, billing the customers, and making collections. Expenses of
operating the agency other than those paid by the agency from its working fund are met by the home
office.
6. Its transactions are recorded in the books of the home office either at:
a. Separate records from the home office transaction, or
b. No separate records from the home office transaction.
In contrast, a branch is an organization that:
1. Sells goods out of a stock that it maintains;
2. Possesses the authority to engage in transactions as an independent business;
3. Makes sales to customers, passes on customer credit, collects receivables, incurs
expenses and performs other functions normally associated with the operations of a
separate business enterprise; and
4. Has a separate branch accounting systems similar to the systems of independent
businesses except in the manner of accounting for ownership equities and in
recording transactions between branches and the main office of the business.
The typical agency does not require a complete set of books. Ordinarily, summaries of
working fund receipts and disbursements and records of sales to customers are
sufficient, which when accompanied by supporting evidence in the form of paid
vouchers are sent to the home office. When the local manager or salespeople are to
be paid according to the volume of sales completed, sales records supply this
information.
Illustration 13-1: Agency Accounting
Assume that Anton Trading established a sales agency, the Junior Agency. The results of operations
are recorded separately from those of the other sales agencies.
The accounting entries prepared by the home office as a result of the establishment of Junior Agency
and their related transactions for the year 20x4, assuming the use of periodic inventory method:
Entries - Agency Transactions
7. End of the year adjustments:

a. Cost of goods sold identified with Junior Agency,P60,000
Cost of goods sold – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Shipments to Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
b. Depreciation expense for agency equipment, P2,000
Depreciation expense – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Accumulated depreciation – equipment – Junior Agency . . . . 2,000
Transactions 20x4
1. Establishment of petty cash fund, P10,000
c. Replenishment of agency’s working fund
Working Fund – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Utilities expense – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Advertising expense – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Other expenses – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
2. Shipped merchandise to agency for use as samples, P4,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000
Samples inventory – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Shipments to Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
d. Agency samples inventory amounted to P1,000 net realizable
Value
3. Purchase of agency equipments, P20,000
Advertising expense – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Equipment – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Samples inventory – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
8. Closing entries:
4. Payment of salaries to employees of agency, P5,000
a. To close sales revenue account:
Salaries expense – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Income Summary – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
5. Sales orders from agency are filled and customers are billed,
b. To close cost of goods sold account:
P100,000 and goods are delivered by the home office
Income Summary – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Cost of goods sold – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Sales – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
c. To close expenses account:
6. The following expenses were incurred out of working fund:
utilities, P2,000; advertising expense, P3,000 and other
Salaries expense – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
expenses, P4,000.
Depreciation expense – Junior Agency . . . . . . . . . . . . . . . . . . . . . 2,000
No entry required – imprest fund system
Utilities expense – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Advertising expense – Junior Agency (P3,000 + P3,000) . . . . . . . 6,000
Other expenses – Junior Agency . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
d. To close the Agency Income Summary to General Income

Summary
Income Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000
In adopting the imprest fund system for the agency working fund:
1. The home office writes a check to the agency for the amount of the fund.
2. Establishment of the working fund is recorded on the home office books by a debit to the
agency working fund account and a credit to Cash.
3. The agency will request fund replenishment whenever the fund runs low and at the end of
each fiscal period. Such request is normally accompanied by an itemized and authenticated
statement of disbursements and paid vouchers.
4. Upon sending the agency a check in replenishment of the fund, the home office debits
expense or other accounts for which the disbursements from the fund were reported and
credits Cash.
Agency Accounting Records Not Separate from the Home Office
The home office may record transactions of the agency in the revenue and expense accounts used
for its own transactions if there is no desire to summarize agency operations separately. After these
accounts are closed, the income summary account reports the results of combined operations.
Agency Accounting Records Separate from the Home Office
If the home office wishes to determine the net income of each of its agencies as well as of the home
office:
1. It will maintain separate sales revenue and expense accounts for the individual sales units. A
supplementary record of the cost of goods sold by each sales unit must also be kept.
2. The shipments to agency account balance are subtracted from the sum of the home office
beginning inventory and purchases in determining the merchandise available for home office
sales. The ending inventory, when subtracted from merchandise available for home office sales,
gives the cost of goods identified with home office sales.
3. Following the adjusting entries, agency sales revenue and expenses accounts are closed into an
income summary account for each agency. Agency income summary accounts are
subsequently transferred to the general income summary account in which the income or loss
from home office activities will also be summarized.
Accounting for Branches
Although a branch operates as a separate business unit, it is subject to control by the home office.
The degree of self-management to be exercised by a branch is determined by the home office.
General policies and standards adopted by the business are usually applied to all of the branches.
Outside of this realm, however, the branch manager may be given complete authority, with
effectiveness of management and control judged on the basis of the branch financial reports. Other
procedures to be observed by the branch are as follows:
1. A branch’s cash and merchandise and such other assets as may be needed are supplied by
the home office.
2. The branch may purchase merchandise from outsiders to satisfy certain local needs for goods
not available from the affiliated unit.
3. The branch ships merchandise, bills its customers, makes collections on account, and deposits
the sums in its own bank account. The bank balance is drawn upon making payment for
purchases of goods and services.
A system is sometimes adopted whereby both the branch and the home office maintain detailed
records of branch transactions.
At the end of the period the home office adjusts and closes the branch accounts and determines
the branch net income.
Records Maintained at the Branch
Generally, the branch accounting system is maintained at the branch. The branch keeps the books of original
entry and posts to ledger records. Financial statements are prepared by the branch periodically and are
submitted to the home office. Statements that are submitted by the branch are usually verified by the company’s
internal auditors.
Reciprocal Accounts
When complete self-balancing books are kept by the branch, an account called Home Office Current takes the
place of the customary capital accounts. The Home Office account is a quasi-ownership account equity that
shows the net investment by the home office in the branch.
This home office current account is credited:

1. Cash, goods, or services received from the home office, and
2. For profits resulting from branch operations.
On the other hand, the account is debited:

1. For remittances made by the branch to the home office, and
2. For losses from operations.
When the branch closes its books at the end of every accounting period, the Branch Income
Summary account is closed to Income Summary Account which will eventually be disposed to the
Home Office Current account.
The home office, in turn, keeps a reciprocal account, called Branch Current, or Investment in
Branch.
This noncurrent asset (Branch Current or Investment in Branch) account is debited:

1. For cash, goods, or services transferred to the branch and
2. For branch income.
Conversely, the account is credited:

1. For remittances from the branch or other assets received from the branch and
2. For branch losses.
Thus, the Investment in Branch account reflects the equity method of accounting. A separate
investment account is generally maintained by the home office for each branch.
If there is only one branch, the account title is likely to be Investment in Branch; if there are
numerous branches, each account title includes a name or number to identify each branch.
Property, Plant and Equipment Used by the Branch
Depreciable branch assets are normally carried on the home office books. This procedure may be
followed when depreciation rates are to be uniformly applied to certain groups of assets, whether
used by the branch or the home office, and when insurance policies are to be acquired by the
home office for all assets.
Accounting for Property, Plant and Equipment Used by the Branch
Equipment is purchased by the home office for the branch; the entry for the acquisition on the:
Home office books:
Equipment—Branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxx
Cash or Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . xxx
Branch books:
No entry required.
In contrast, if the branch will purchase the equipment, then the entry for the acquisition:
Home office books:
Equipment—Branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxx
Branch Current (or Investment in Branch) . . . . . . . . . . . xxx
Branch books:
Home Office Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxx
Cash or Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . xxx
Expenses Incurred by the Home Office but Charged to Branch
Certain expenses relating to the branch operations are sometimes paid by the home office. Branches are notified by
the home office of expenses incurred in their behalf, and such charges are recorded on the branch books so that
branch income statements may provide complete summaries of the operations of the separate sales organizations.
Billing Methods for Merchandise Shipped to Branch
Three alternative methods are available to the home office for billing merchandise shipped to its branches. The
shipments may be:
1. At home office cost (at original cost)
2. At billed price or a percentage above home office cost (original cost plus mark-up based on cost), or
3. At the branch’s retail selling price (mark-up based on billed price).
It should be noted that shipment of merchandise to a branch does not constitute a sale because ownership of the
merchandise does not change.
Billing at home office cost is the simplest procedure and is widely used. It avoids the complication of unrealized gross
profit in inventories and permits the financial statements of branches to give a meaningful picture of operations.
The first method is illustrated all throughout this chapter and this practice is under the general procedures in
accounting for inter-office transactions. In contrast, the second and third methods are part of the special procedures
discussed in the next chapter.
Accounting for the Operations of a Branch
Assume that on January 1, 20x4 the Manila Company establishes its first branch in Bulacan. Separate
books are to be kept by the branch, and financial statements are to be submitted to the home office
at the end of each month. Merchandise is to be billed at cost. Depreciable assets are to be carried
on the books of the home office. Both the home office and the branch books use the periodic
inventory method. Transactions during 20x4 for the month of branch operations are as follows:
Journal entries to record these transactions and related year-end events on the books of Bulacan
branch are shown below. The illustration also shows entries on the home office books to reflect
reciprocal home office items, and adjusting and closing entries.
Journal and Adjusting Entries – Home Office and Branch
1. Received cash of P40,000 from the home office.

Home Office Books Branch Books
1. Branch Current . . . . . 40,000 Cash . . . . . . . . . . . . . . . . . . . . . 40,000
Cash . . . . . . . . . . . . 40,000 Home Office Current. . . . . 40,000
2. Purchased equipment with a five-year life for P20,000 cash.

2. Equipment—Branch . . 20,000 Home Office Current . . . . . . . 20,000
Branch Current . . . 20,000 Cash . . . . . . . . . . . . . . . . . . 20,000
3. Received merchandise shipments from home office at the P32,000

home office cost.
3. Branch Current . . . . . . . . 32,000 Shipments from home office . . 32,000 Adjusting entries:
Shipment to branch cost 32,000 Home Office Current . . . . . . 32,000 a. Salaries payable at year-end were P2,000. depreciation of
4. Purchased merchandise from outside suppliers for P8,000 cash equipment for the year was P4,000
4. Purchases . . . . . . . . . . . . . . . . . . 8,000 a. Salaries expense . . . . . . . . . . . . 2,000
Cash . . . . . . . . . . . . . . . . . . . . 8,000 Salaries payable . . . . . . . . . 2,000
5. Sold merchandise for P60,000 cash b. depreciation of equipment for the year was P4,000
5. Cash . . . . . . . . . . . . . . . . . . . . . . 60,000
Sales . . . . . . . . . . . . . . . . . . . . 60,000 b. Branch Current . . . . . . . . 4,000 Depreciation expense . . . . . . . 4,000
Accumulated Home Office Current . . . . . . 4,000
6. Returned P2,000 of the merchandise acquired from home office. Depreciation-
6. Shipment to branch cost 2,000 Home Office Current . . . . . . . . 2,000 Equipment—Branch. . 4,0000
Branch Current . . . . . . 2,000 Shipments from Home Office 2,000 P20,000/5 years=P4,000
7. Paid expenses as follows: Salaries, P12,000; Utilities, P2,000; Rent

expense, P6,000; Miscellaneous expenses, P4,000
7. Salaries expense . . . . . . . . . . . . 12,000
Utilities expense . . . . . . . . . . . . . 2,000
Rent expense . . . . . . . . . . . . . . . 6,000
Miscellaneous expenses . . . . . . 4,000
Cash . . . . . . . . . . . . . . . . . . . 24,000
8. Remitted P30,000 to the home office.
8. Cash . . . . . . . . . . . . . . . . . 30,000 Home Office Current . . . . . . . . 30,000
Branch Current . . . . . . 30,000 Cash . . . . . . . . . . . . . . . . . . . 30,000
After the above entries have been posted, the reciprocal Branch Current account on the books of the home office will
show a debit balance of P24,000 before income summary accounts are closed. The balance of the account is
determined as follows:
Home Office books:

Branch Content
Cash sent to branch ……………………………… P40,000 Equipment acquired by branch …………………… P20,000
Shipment to branch ………………………………. 32,000 Shipment returns ……………………………………….. 2,000
Depreciation charged to branch ……………… 4,000 Remittance …………………………………………… 30,000
Balance forwarded …………………………………… 24,000
Total ………………………………………………….. P 76,000 Total ……………………………………………………… P 76,000
Balance …………………………………………….. P 24,000
After the above entries have been posted, the reciprocal Home Office Current account on the books of the branch will
show a credit balance of P24,000 before income summary accounts are closed. The balance of the account is
determined as follows:
Branch books:
Home Office Current
Equipment acquired ……………………………… P 20,000 Cash sent to branch ………………………………….. P 40,000
Shipment returns …………………………………… 2,000 Shipment from home office ………………………… 32,000
Remittance ………………………………………… 30,000 Depreciation charged by home office ………….. 4,000
Balance forwarded ……………………………… 24,000
Total …………………………………………………. P 76,000 Total ……………………………………………………… P 76,000
Balance …………………………………………………. P 24,000
The related closing entries on the books of the home office and the branch are given below:
10. Merchandise branch inventory at year-end consisted of P2,000 merchandise acquired from outside suppliers and P10,000
acquired from home office.
Home office: sales, P95,000; beginning inventory, P40,000; purchases, P90,000; ending inventory, P25, 000
Closing Entries – Home Office and Branch

Closing Entries Closing Entries
10. Sales . . . . . . . . . . . . . . . . . . . . . . 95,000 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Shipments to branch . . . . . . . . 30,000 Merchandise inventory,
Merchandise inventory, December 31 . . . . . . . . . . . . . . . . . . . . 12,000
December 31 . . . . . . . . . . . . . 25,000 Purchases . . . . . . . . . . . . . . . . . . .. . 8,000
Merchandise inventory, Shipments from home office . . . . . 30,000
January 1. . . . . . . . . . . . 40,000 Salaries expense . . . . . . . . . . . . . . . 14,000
Purchases . . . . . . . . . . . . 90,000 Utilities expense . . . . . . . . . . . . . .. . 2,000
*Salaries expense . . . . . . . 3,000 Rent expense . . . . . . . . . . . . . . . . . 6,000
*Utilities expense . . . . . . 2,000 Depreciation expense . . . . . . . . . . 4,000
*Depreciation expense . . . 2,500 Miscellaneous expense . . . . . . .. . . 4,000
*Miscellaneous expense. . 2,500 Income Summary . . . . . . . . . . . .. . . 4,000
Income Summary . . . . . . . 10,000
Branch Current . . . . . . . . . . 4,000 Income Summary . . . . . . . . . . . . . . . . . . 4,000

Branch Income Summary 4,000 Home Office Current . . . . . . . . . . . . 4,000
Branch Income Summary. . 4,000

Income Summary . . . . . 4,000
Income Summary . . . . . . . . 14,000

Retained Earnings . . . . . 14,000
* figures are assumed.
Preparation of Branch and Home Office Statements
The trial balances as of December 31, 20x4 of Manila Company and its branch are shown below. Figures previously assumed in the
preceding illustration are recorded therein including other figures which are deemed essential for illustration purposes
Debit Credit Debit Credit
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P106,500 P 18,000
Marketable securities . . . . . . . . . . . . . . . . . . . . 10,000 -
Merchandise inventory, January 1 . . . . . . . . . 40,000 -
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 -
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Accumulated depreciation -Equipment . . . . 2,500
Equipment – branch . . . . . . . . . . . . . . . . . . . . . 20,000
Accumulated depreciation – equipment
– branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Branch Current . . . . . . . . . . . . . . . . . . . . . . . . . . 24,000
Salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 14,000
Depreciation expense – equipment –branch 4,000
Depreciation expense – equipment . . . . . . . . 2,500 -
Utilities expense . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 2,000
Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . - 6,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . 2,500 4,000
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 -
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 20,000
Salaries payable . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
Retained earnings, January 1 . . . . . . . . . . . . . . 70,000 -
Home Office Current . . . . . . . . . . . . . . . . . . . . . 24,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000 60,000
Shipments to branch . . . . . . . . . . . . . . . . . . . . . 30,000
Shipments from home office . . . . . . . . . . . . . . 30,000
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __90,000 ________ ___8,000 _______
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P371,500 P371,500 P 86,000 P 86,000
Additional information:
Merchandise inventory, December 31:
Home office books, P25,000
Branch books, P12,000
Based on the preceding data, income statements and balance sheets prepared individually for the home office and the branch are shown below:
Individual Income Statements
Manila Company – Home Office

Income Statement
For the Year Ended December 31, 20x4
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 95,000
Less: Cost of Goods Sold:
Merchandise inventory, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . P 40,000
Add: Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __90,000
Cost of goods available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 130,000
Less: Shipments to branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __30,000
Cost of goods available for own sale . . . . . . . . . . . . . . . . . . . . . . . . . P100,000
Less: Merchandise inventory, December 31 . . . . . . . . . . . . . . . . . . . __25,000 __75,000
Gross profit on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 20,000
Less: Operating expenses:
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 3,000
Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___2,500 __10,000
Net income from own operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 10,000
Add (deduct): Branch net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . ___4,000
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 14,000
Manila Company – Bulacan Branch

Income Statement
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 60,000
Merchandise inventory, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . P 0
Add: Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Shipments from home office . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Cost of goods available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 38,000
Less: Merchandise inventory, December 31 . . . . . . . . . . . . . . . . . . __12,000 __26,000
Gross profit on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 34,000
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 14,000
Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___4,000 __30,000
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 4,000
Individual Balance Sheets
Manila Company – Home Office

Balance Sheet
December 31, 20x4
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 106,500
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Merchandise inventory, December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 25,000
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___2,500 22,500
Equipment – branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 20,000
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___4,000 16,000
Branch Current (P24,000 + P4,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___28,000
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 253,000
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 20,000
Stockholders’ Equity:
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 150,000
Retained earnings:
Retained earnings, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 70,000
Add: Combined Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __14,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 84,000
Less: Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___1,000 ___83,000
Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 233,000
Total Liabilities and Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . P 253,000
Manila Company – Bulacan Branch

Balance Sheet
December 31, 20x4
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 18,000
Merchandise inventory, December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __12,000
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
P 30,000
Liabilities and Capital
Salaries payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 2,000
Home Office Current
Home Office Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 24,000
Add: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___4,000 _ 28,000
Total Liabilities and Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 30,000
Preparation of Combined Statements for Home Office and Branches
Worksheet for Combined Financial Statements, December 31, 20x4
Adjusted Trial Balances Eliminations Combined Income Statement Combined Balance Sheet
Debits Home Office Branch Dr. Cr. Dr. Cr. Dr. Cr.
Cash . . . . . . . . . . . . . . . . P106,500 P18,000 P124,500
Marketable securities … 10,000 10,000
Merchandise
inventory, January 1… 40,000 P40,000
Shipments from home
Office . . . . . . . . . . . . . . 30,000 30,0001
Purchases . . . . . . . . . . . 90,000 8,000 98,000
Land . . . . . . . . . . . . . . . . 45,000 45,000
Equipment * . . . . . . . . . . 45,000 45,000
Branch Current . . . . . . . 24,000 24,0002
Salaries expense . . . . . . 3,000 14,000 17,000
Depreciation expense.. 2,500 4,000 6,500
Utilities expense . . . . . . . 2,000 2,000 4,000
Rent expense . . . . . . . . 6,000 6,000
Miscellaneous
expenses . . . . . . . . . . . 2,500 4,000 6,500
Dividends paid . . . . . . . ___1,000 _______ 1,000
Total . . . . . . . . . . . . . . P371,500 P86,000
Merchandise
inventory, December
31 (to Balance Sheet).. P25,000 P12,000 37,000
Credits Home office Branch Dr. Cr. Dr. Cr. Dr. Cr.
Accumulated depreciation –
equipment . . . . . . . . P 6,500 P 6,500
Accounts payable . . . . 20,000 20,000
Salaries payable . . . . . . 2,000 2,000
Capital stock . . . . . . . . . 150,000 150,000
Retained earnings,
January 1 . . . . . . . . . . 70,000 70,000
Home Office Current . . 24,000 24,0002
Sales . . . . . . . . . . . . . . . . 95,000 60,000 P155,000
Shipments to branch . . __30,000 _______ 30,0001
Total . . . . . . . . . . . . . . P371,500 P86,000
Merchandise
inventory, December
31 (to Income
Statement) . . . . . . . . . . P25,000 P12,000 _______ ______ _______ __37,000 ________ _______
P54,000 P54,000 P178,000 P192,000 P262,500 P248,500
Net Income
(to Balance Sheet) . . . __14,000 ________ ________ __14,000
Total . . . . . . . . . . . . . . P192,000 P192,000 P262,500 P262,500
1 To eliminate
reciprocal accounts
2 To eliminate shipments
*The equipment of the home office and the branch are maintained under one account
Based on the working paper prepared in the preceding page, the following combined statements of Manila Company are presented:
Manila Company
Combined Income Statement
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 155,000
Merchandise inventory, January 1 . . . . . . . . . . . . . . . . . . . . . . . . P 40,000
Add: Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __98,000
Cost of goods available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . P 138,000
Less: Merchandise inventory, December 31 . . . . . . . . . . . . . . . __37,000 _101,000
Gross profit on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 54,000
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 17,000
Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,500
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___6,500 __40,000
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 14,000
Manila Company
Combined Balance Sheet
December 31, 20x4
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 124,500
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Merchandise inventory, December 31 . . . . . . . . . . . . . . . . . . . . . . . . . 37,000
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 45,000
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___6,500 ___38,500
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P_255,000
Liabilities and Stockholders’ Equity
Liabilities:
Salaries payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 2,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . __20,000
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 22,000
Stockholders’ Equity:
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 150,000
Retained earnings:
Retained earnings, January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 70,000
Add: Net income from own operations . . . . . . . . . . . . . . . . . . . . __14,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 84,000
Less: Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ___1,000 ___83,000
Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 233,000
Total Liabilities and Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . P 255,000
Reconciliation of Reciprocal Accounts
Theoretically, the balances of the reciprocal accounts, i.e. the Branch Current account (Investment in Branch) and the Home Office Current account,
should always be equal.
On the other hand, it may not show identical reciprocal balances on one occasion because of certain interoffice data that have been recorded by
one office but not by the other.
The home office, for example, debits the branch immediately upon the shipment of merchandise to the branch. The branch, however, does not credit
the home office account until it receives the merchandise, which may be several days after shipment by the home office. The fact that the reciprocal
account balances are not identical is of no concern during the fiscal period.
The situation is comparable to that of reconciling the ledger account for Cash in Bank with the balance in the monthly bank statement. The lack of
agreement between the reciprocal ledger account balances causes no difficulty during an accounting period, but at the end of each period the
reciprocal account balances must be brought into agreement before combined financial statements are prepared.
The data to be considered in reconciling the two accounts may be classified as follows:
1. Debits in the branch account without corresponding credits in the home office account.
2. Credits in the branch account without corresponding debits in the home office account.
3. Debits in the home office account without corresponding credits in the branch account.
4. Credits in the home office account without corresponding debits in the branch account.
The items (Nos. 1 to 4) listed can be analyzed from the diagram below:
Home Office books:
Branch Current
xxx xxx
Branch Books:
Home Office Current

xxx xxx
Assume that the home office and branch accounting records of Marcellano Company and its Bonafe branch on December 31,
20x4 contain the following data:
Home Office Books

Branch Content
Nov. 30 Balance ……………………………………. P 31,250 Dec. 5 Cash Received from branch ………………. P 10,000
Dec. 31 Depreciation charge to branch ……… 2,000 18 Collection of branch trade receivable …. 500
31 Shipments to branch ……………………. 4,000
Total …………………………………………………… P 37,250 Total ………………………………………………………. P 10,500
Balance ………………………………………………. P 26,750
Branch Books:
Home Office Current
Dec. 4 Cash sent to home office ……………….. P 10,000 Nov. 30 Balance ……………………………………….. P 31,250
28 Acquired equipment …………………… 1,500 Dec. 31 Collection of home office trade
receivable ………………………………….... 1,000
31 Depreciation charged by home office ... 200
Total …………………………………………………… P 11,500 Total ………………………………………………………. P 32,450
Balance …………………………………………………. P 20,950
Comparison of the two reciprocal ledger accounts discloses five reconciling items described as follows:
1. A debit of P2,000 in the Branch Current account was erroneously recorded by the branch in the Home Office Current
account as P200, resulting to a difference of P1,800 (P2,000 – P200). The home office entry is assumed to be correct
since it is the one that initiates the transaction. The following entry is required on the books of the branch:
Depreciation expense . . . . . . . . . . . . . . . . . 1,800
Home Office Current . . . . . . . . . . . . . . . . 1,800
2. A debit of P4,000 in the Branch Current account without a related credit in the Home Office Current account.
On December 31, 20x4, the home office shipped merchandise costing P4,000 to the branch. The home office debits
its reciprocal ledger account with branch on the date merchandise is shipped but the branch credits its reciprocal
account with the home office when the merchandise is received few days later. The required journal entry on
December 31, 20x4 in the branch accounting records, assuming the used of periodic inventory system should appear
below:
Shipments from Home Office—in transit . . . 4,000
Home Office Current . . . . . . . . . . . . . . . . 4,000
In taking physical inventory on December 31, 20x4, the branch must add to the inventories on hand the P4,000 of
merchandise in transit. This inventory will appear in the branch balance sheet and eventually in the combined
financial statements.
3. A credit of P500 in the Branch Current account without a related debit in the Home Office Current account. On December 18,
20x4, trade accounts receivables of the branch were collected by the home office. The collection was recorded by the home
office by a debit to Cash and credit to Branch Current account. No journal entry was made by the branch;
Therefore, the following journal entry is required in the accounting records of the branch on December 31, 20x4
Home Office Current . . . . . . . . . . . . . . . . . . 500
Accounts receivable – trade . . . . . . . . . 500
4. A debit of P1,500 in the Home Office ledger account without a related credit in the Branch Current account. On December 28,
20x4, the branch acquired equipment for P1,500. Because the equipment used by the branch is carried in the accounting
records of the home office, the journal entry made by the branch was a debit to Home Office Current and a credit to Cash. No
journal entry was made by the home office; therefore, the following journal entry is required on December 31, 20x4, in the
accounting records of the home office:
Equipment - Bonafe branch . . . . . . . . . . . . 1,500
Branch Current . . . . . . . . . . . . . . . . . . . . . 1,500
5. A credit of P1,000 in the Home Office ledger account without a related debit in the Branch Current account. On December 31,
20x4, trade accounts receivables of the home office were collected by the branch. The collection was recorded by the branch
by a debit to Cash and a credit to Home Office Current account. No journal entry was made by the home office; therefore, the
following journal entry is required in the accounting records of the home office on December 31, 20x4:
Branch Current . . . . . . . . . . . . . . . . . . . . . . . 1,000
Accounts Receivable - trade . . . . . . . . . 1,000
It should be noted that the cash remittance of P10,000 is not a reconciling item since it was properly recorded in their respective
books.
The effect of the foregoing end-of-period adjusting journal entries to update the reciprocal accounts, as shown by
the following reconciliation:
Marcellano Company – Home Office and Bonafe Branch

December 31, 20x4

Branch Home Office
Current (Dr.) Current (Cr.)
Balances before adjustments . . . . . . . . . . . . . . . . . . . . . P 26,750 P 20,950
Add: (1) Error made by branch in recording
depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800
(2) Merchandise shipped to branch still in
transit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
(5) Home office trade accounts receivable
collected by branch . . . . . . . . . . . . . . . . . . . . 1,000
Less: (3) Branch trade accounts receivable
collected by home office . . . . . . . . . . . . . . . . ( 500)
(4) Equipment acquired by branch . . . . . . . . . . . ( 1,500) _______
Adjusted balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 26,250 P 26,250
Chapter 7
Home Office and Branch Accounting
Companies may increase their volume of sales by establishing sales outlets in various areas.
These sales outlets may be a branch or an agency.
When a company operates a branch, the branch must maintain accounting records to facilitate
its reporting responsibility to the home office.
Problems dealing with Home Office and Branch Accounting appear in almost every CPA
examination. Candidates should be familiar with the problems involving the following:
1. Uses of the reciprocal accounts.

2. Preparation of a Reconciliation Statement.
3. Billing of Merchandise by Home Office to Branch above cost.
4. Preparation of Combined Financial Statements.
Uses of the Reciprocal Accounts
In recording inter-office transactions, two reciprocal accounts are used, namely, the Investment
in Branch (Branch Current) account used by the home office which is classified as an asset; and
the Home Office (HO Current account) used by the branch which is classified as a liability.
The reciprocal nature of the Investment in Branch and the Home Office accounts and the way in
which they are affected by various inter-office transactions are shown below:
(Home Office Books) (Branch Books)

Investment in Branch Home Office
xx Assets transfer to branch xx
xx Assets transfer from branch xx
xx Branch profit xx
xx Branch loss xx
Preparation of Reconciliation Statement
The balances of the two reciprocal accounts should at all times equal. If the balances of the
reciprocal accounts are not equal before the preparation of separate statement of financial
position, a reconciliation statement is to be prepared. This is done to determine the causes of
the inequality between the two accounts. The accounts are then adjusted to determine their
adjusted balances. The following are the usual causes that the candidate should take note:
1. Transactions have been recorded by the branch but not by the home office.
2. Transactions have been recorded by the home office but not by the branch.
3. Errors in recording have occurred in one or both books.
4. Transactions have not yet been recorded on either set of books.
Billing of Merchandise by Home office to Branch above Cost
Merchandise shipped to branch by the home office may be billed at an amount above cost.
Under this method of billing, the profit recognized by the branch will be less that its actual
profit, because its cost of goods sold is overstated insofar as the home office is concerned.
The problems involving billing of merchandise to branch above cost are the following
1. Computation of branch at inventory at cost.

2. Computation of the actual or true branch profit insofar as the home office is
concerned.
Computation of Branch Inventory at Cost
Candidates should use the following formula:
a. If branch are all acquired from the home office, the formula is:
Branch inventory acquired from home office at billed price Pxx

Divide by billing percentage of cost %
Branch inventory at cost Pxx
b. If branch inventory includes merchandise acquired from outsiders, the formula is:
Branch inventory acquired from home office at cost:

Merchandise at billed price Pxx
Divide by billing percentage of cost % Pxx
Add: inventory acquired from outsiders xx
Branch inventory at cost xx
Computation of Actual Branch Profit insofar as Home Office is Concerned
The actual or true branch insofar as the home office is concerned is computed as follows:
Branch profit (loss) as reported Pxx

Add: Overvaluation of branch cost of goods sold (Schedule 1) xx
Actual branch profit insofar as home office is concerned Pxx
Schedule 1
Allowance
Billed Percent for Over-
Price ÷ of Cost = Cost valuation
Branch inventory, beg. (acquired from HO) Pxx Pxx Pxx Pxx
Add: Shipments during the period xx xx xx xx
Total before adjustment
Less: Branch inventory, end (acquired from HO) xx xx xx xx
Overvaluation of branch COGS (Realized Profit) Pxx
Preparation of Combined Financial Statements
The balance sheets and the income statements of the home office and the branch must be
combined for external reporting purposes. Working papers are usually prepared to eliminate
accounts affected in recording inter-office transactions before financial statements are
prepared.
Candidates should remember the following working paper elimination procedures:
1. Eliminate reciprocal accounts.

2. Eliminate inter-company transfer accounts.
a. Shipment to Branch and Shipment from Home Office accounts.
b. Allowance for Overvaluation of Branch Inventory.
3. Eliminate the overvaluation in branch beginning inventory.
4. Eliminate the overvaluation in branch ending inventory.
Combined Statement of Financial Position. The reciprocal accounts “Investment in Branch” and
“Home Office” accounts are not presented as well as the Allowance for Overvaluation account.
Combined Statement of Comprehensive Income. The merchandise inventories, beginning and

ending inventories are presented at cost. The Shipment to Branch and Shipment from Home
Office accounts are not presented.
Transactions between Branches
Occasionally, branch operations require that merchandise or other assets be transferred from
one branch to another. A branch does not maintain a reciprocal account with another branch
but records the transfer in the Home Office account. For example, if Bicol Branch ships
merchandise to Laguna Branch, Bicol Branch debits Home Office account and credits
Inventories (assuming that the perpetual inventory system is used). Upon receipt of the
merchandise, Laguna Branch debits Inventories and credits Home Office account. The home
office records the transfer between branches by a debit to Investment in Laguna Branch and a
credit to Investment in Bicol Branch.
The transfer of merchandise from one branch to another does not increase the cost of
inventories by the freight costs incurred because of the indirect routing. The amount of freight
costs properly included in inventories at a branch is limited to the cost of shipping the
merchandise directly from the home office to its present location. Excess freight costs are
recognized as expenses of the home office.
Accounting System for Sales Agencies
An agency is simply an extension of the sales territories in which orders are received from
customers and then transmitted to the home office for shipping and billing. They do not have
merchandise available for sale, but they keep samples inventory.
A sales agency neither keeps a complete set of books nor uses a double-entry system of
accounts. Usually, a record of sales to customers and a list of cash payments supported by
vouchers are sufficient.
An imprest system is usually adopted by the home office for the working fund of the sales
agency.
PROBLEMS
1. Cebu branch submitted the following data to its home office in Manila for 2013, its first year
of operation:
Sales P2,300,000
Shipments from home office 1,850,000
Operating expenses 235,000
Home office 480,000
2. The home office in 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 2013 are reflected in the branch trial balance that follows:
Cash P20,000
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. P175,000
3. The following data pertains to the shipments of merchandise from Home Office to Branch
during 2013:
Home office’s cost of merchandise P350,000

Inter-office billings 420,000
Sales by branch to outsiders 520,000
Merchandise inventory on December 31, 2013 50,000
In the combined statement of comprehensive income of the Home Office and the Branch for
the year ended December 31, 2013, 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 a number of branches in the provinces. On December 31, 2013,
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 P51,100. The following
information may help in reconciling both accounts:
1. A P24,000 shipment, charged by Home Office to Davao Branch, was actually sent to and
retained by Cebu Branch.
2. A P30,000 shipment, intended and charged 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
December 30. The merchandise is in transit.
Home office erroneously recorded Davao Branch’s net income for 2013 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 accounts on
December 31, 2013?
a. P40,300
b. P54,700
c. P47,500
d. 43,500
5. The branch manager of Tower Cosmetics in Cebu submitted a report as of May 31, 2013
containing the following information:
Petty Cash Fund P1,500

Sales 198,720
Sales Returns 3,600
Accounts Written Off 1,920
Shipments from Home Office 136,080
Accounts Receivable – May 31, 2012 43,800
Accounts Receivable – May 31, 2013 49,140
Inventory – May 31, 2012 37,170
Inventory – May 31, 2013 41,370
Expenses (reimbursed by H.O.) 57,930
Assuming all cash collected by the branch is 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 December 31, the Investment 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 December 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 collection.
3. On December 30, the home office sent cash of P7,500 to the branch, but
this was charged to General Expense; the branch has not received the cash
as of December 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 the receipt of the supplies.
Assume all other transactions have been properly recorded.
What is the unadjusted balance of the Home Office account on the branch books on December
31?
a. P64,140
b. P39,140
c. P14,000
d. P13,000
7. A reconciliation of the Dagupan Branch account of Mandaluyong Company and the Home
Office account carried in the branch’s books shows the following discrepancies at December 31,
2013:
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 December 31, 2013. 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 December
31, 2013 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 branch.
b. P10,000 covering marketing expense of another branch was charged by Home Office
to Butuan.
c. Butuan recorded a debit note on inventory transfers 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 adjustments DR (CR) to the Investment in Butuan Branch account and to the Home
Office account are:
Investment in Butuan Home Office

a. P(75,700) P20,950
b. 75,700 (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, 2013 were seen:
a. A charge 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
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 (f) and entered a credit in favour of the Home Office as of June 30,
2013.
At June 30, 2013, 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 30,
2013?
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 City branch at cost plus 10%. On January 1, 2013 the inventories of the Home Office in
Manila and the Cebu City branch are P13,600 and P3,960 respectively. During 2013 the Home
Office purchased merchandise costing P40,000 and shipped 40% of it to the Cebu City branch.
At December 31, 2013, the following journal entry to prepare the books for the next accounting
period was prepared by the branch:
Sales 32,000
Inventory, December 31 4,840
Inventory, January 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 September 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 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 September 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. P33,600 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
January, 2013, the branch reported the following information:
Merchandise from
Home Office
(At Billed Price)
Inventory, January 1 P7,560
Shipments received 28,280
Inventory, January 31 8,400
What should be the balance of the allowance account for overvaluation of the branch inventory
at January 31 before adjustment?
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 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 1,460,000
From Home Office at Billed Price P1,170,000
From Outsiders (at cost) 290,000
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 1,2013. On this date, the company
shipped to its branch merchandise billed at P90,000. On June 15, another shipment was made at billed
prices of P36,000. During the month, the branch was credited for P2,520 for the damaged goods
returned by the branch. On June 30,2013, 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 P4,280
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 comprehensive income:
Sales P300,000
Cost of Sales:
Shipments from Home office P280,000
Local Purchases 30,000
Total 310,000
Inventory at end 50,000 260,000
Gross margin on sales 40,000
Expenses 35,000
Comprehensive income P 5,000
Shipments to the branch were billed at 140% of cost. The branch inventory as at September 30
amounted to P50,000 of which P6,600 was locally purchased. Markup on local purchases, 20% over cost.
Branch expenses incurred by Head Office amounted to P2,500.
On September 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

Merchandise purchase locally by branch 40,000
Inventory, December 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 in Manila. Shipments of merchandise to
the branch totalled 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 December
31, 2013.
Sales on account P74,000

Sales on Cash basis 22,000
Collections of account 60,000
Expenses paid 38,000
Expenses unpaid 12,000
Purchase of merchandise for cash 26,000
Inventory on hand, December 31; 80% from home office 30,000
Remittance to home office 55,000
The branch 12/31 inventory at cost and the branch net income (loss) as far as the 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 P 800c
18. Trial balances before adjustments for the home office and the branch of the King Company show the
following items on December 31. The home office bills the branch at 20% above cost.
Home Office Branch

Allowance for overvaluation of branch merchandise P3,600
Shipment to branch 8,000
Purchases P2,500
Shipment from home office 9,600
Merchandise Inventory, December 1 15,000
What part of the branch inventory as of December 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 prior to its opening. For the year, it made additional shipments at
billed price of P120,000. Within the year, the branch shipped backP7,500 inventory and got the credit
memo for the said returns. On the last working day of the year, an inventory count 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
December,2013 is shown below. After affecting the necessary adjustments the true net income of the
Bulacan Branch inventories were:
12/01/2011 12/31/2011
Merchandise from Home Office P70,000 P84,000
Local purchases 10,000 16,000
Total 80,000 100,000
Sales 600,000
Cost of Sales:
Inventory, December 1 80,000
Shipments from home office 350,000
Local purchases 30,000
Total available for sale 460,000
Inventory, December 31 100,000 360,000
Gross Margin 240,000
Total comprehensive for December 2011 P60,000
What is the balance of the “Allowance for Overvaluation in Branch Inventory” account at December 31,
2013?
a. P10,000
b. P16,000
c. P24,000
d. P34,000
21. Mahiyain Commercial Corporation operates a branch in Iloilo City. Selected accounts take from the
books of Mahiyain and its branch show balances as of December 31,2013 as follows:
Home office Branch
Merchandise inventory, January P12,000 P8,000
1
Purchase 150,000 30,000
Shipments from home office - 93,750
Shipments to branch 75,000 -
Branch inventory allowance 19,750 -
Sales 115,000 176,500
Merchandise inventory, 14,000 10,350
December 31
The ending inventory of the branch includes items costing P4,350 which were acquired from suppliers
other 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 201. During the first year of
operations, the home office shipped to the branch merchandise which had cost of 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 Quezon City and a branch in Davao City. During 2013, 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: January 1,2013, P90,000; December 31,2013,
P108,000. On December 31,2013, the home office holds inventories of P160,500 which includes
P10,500 held in consignment.
How much is the inventories in a combined statement of financial position as of December 31,2013?
a. P210,000
b. P240,000
c. P270,000
d. P300,000
25. The Iloilo Company operate a branch in Davao, and the profit and loss data for the home office and
the branch for 2013 follows:
Home office Branch
Sales P250,000 P75,000
Purchases from outsiders 200,000 15,000
Shipments to branch:
Cost to home office 30,000
Billing price to branch 37,500
Expenses 40,000 10,000
Inventories, Jan. 1,2013:
Home office, at cost 80,000
Branch:
From outsiders, at cost 7,500
From home office, at 20% above cost 24,000
Inventories, December 31,2013:
Home office, at cost 55,000
Branch:
From outsiders, at cost 5,500
From home office at 2013 billing 26,000
The combined total comprehensive income (loss) of the home office and the branch on
December 31,2013 is:
a. P30,800
b. P(30,800)
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 process 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 December 31,2013 trial balances of Heart Co. and its branch follows:
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 December 31,2013, 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 a 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 2013?
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 as its
Branch in Davao City. Selected accounts taken from the trial balances of the Home office and the
branch as of December 31,2013 follows:
Makati Branch
Debits
Inventory, Jan. 1,2013 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 P- P53,300

Sales 155,000 140,000
Sales to branch 110,000 -
Allowances for overvaluation of
Branch inventory at Jan. 1,2013 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. At December 31,2013, 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 December 31,2013, excluding the shipment in 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
December 31,2013?
a. P30,470
b. P20,870
c. P(10,000)
d. P(30,470)
29. On November 2,2013, the home office of Toby Sports Company recorded a shipment of
merchandise to its Bulacan as follows:
Investment in branch – Bulacan 60,000
Shipments 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 December 31 of each year.
On January 10,2014, 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, the freight charges would have been P1,500.
What is the entry of the Bulacan brancg to record the receipt of the shipment from the home office on
November 2,2013?
a. Shipments from home office 50,000
Freight in 2,000
Home office 60,000
b. Shipments from home office 60,000
Home office 60,000
c. Shipments from home office 58,000
Freight in 2,000
Home office 60,000
d. Shipments 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 December 31,2013 be included in the inventory of the Bulacan Branch?
a. P31,200
b. P36,000
c. P36,800
d. P34,800
39. Using the same data in No. 29, what is the entry in the books of Bulacan Branch to record the
transfer of January 10,2014?
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 in 2,000
inventory 29,000
32. Using the same data in No. 29, what is the entry in the books of Baguio branch to recorf the
transfer on January 10,2014?
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. shipment from home office 30,000
freight in 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 January 10,2014?
a. investment in branch – Baguio 30,500
excess freight 1,500
investment in branch – Bulacan 32,000
b. investment in branch – Baguio 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
34. Papa, Inc. of Makati opens a sales agency in Pasig City and a working funn 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 2013. The following is a summary of the
transactions of the sales agency:
Sales orders sent to home office P120,000

Sales orders filled by home office in 2013 95,000
Freight on shipment of 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% gross sales
Samples shipped to agency:
Cost 8,200
Inventory, December 31,2013 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 2013?
a.P3,600
b.P5,600
c. P1,600
d.P6,300
36. A Makati home office transfers inventory to its Pasig branch at 140% of cost. During 2013, the
reciprocal account in the statement of comprehensive income of the home office amounts to P328,125.
On December 31,2013, 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 31,2013, 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 August, 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 P40,000
Salaries for the month 21,600
Annual rent of office space 36,000
 On August 31, the sales agency working fund is replenished. Paid vouchers submitted by the
sales agency amounting to P17,925. Samples were useful until December 31,2013 which at this
time are believed to have a salvage value of 15% of cost. Furniture is depreciated at 18% per
annum.
What is the total comprehensive income of the sales agency for the month of August?
a. P91,425
b. P93,225
c. P92,955
d. P58,425
38. The home office in Makati shipped merchandise costing P55,500 to Pasig branch, prepaid the
freight amounting to P4,200. The home office transfers 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 true as a result of the interbranch transfer of merchandise?

a. The home office debits Alabang Branch Current for P73,600
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
December 31,2013.
Home office books Branch books
Inventory, January 1,2013 P20,000 P58,000
Purchases 900,000 200,000
Shipments to branch 145,000
Allow. For overvaluation of 52,500
branch inventory
Sales 1,200,000 720,000
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 December
31,2013?
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 December
31,2013?
a. P538,700
b. P547,400
c. P541,700
d. P498,200
e. ANSWERS
1. A 6. B 11. A 16. B 21. B 26. A 31. D 36. C

2. C 7. D 12. D 17. C 22. C 27. C 32. C 37. C
3. B 8. A 13. C 18. A 23. B 28. A 33. A 38. D
4. C 9. A 14. B 19. A 24. B 29. C 34. D 39. C
5. A 10. B 15. A 20. C 25. C 30. B 35. A 40. A
SOLUTIONS AND EXPLANATIONS

1. Since the balances of the reciprocal accounts “Home Office” account and “Investment in
Branch” account are equal, then the balance of the Home Office account after closing
the branch profit is to be computed. The computation is:
Home office account balance before branch profit P480,000
Add: Profit (loss)
Sales P2,300,000
Cost of sales
Shipments from HO P1,850,000
Inventory, dec. 31 255,500 1,594,500
Gross profit P705,500
Home office account balance, December 31,2011 P950,500
2.
Home office account balance before branch profit P180,000
Add: Profit (loss)
Sales P225,500
Cost of sales
Shipments from HO P250,000
Inventory, dec. 31 65,000 185,000
Expenses 55,500 (15,000)
Home office account balance, December 31,2011 P165,000
Therefore the balance of the Investment in Branch a account is also P165,000.
3. In preparation of combined statements of the home office and the branch, all inter-
office transactions are eliminated as if it had never occurred. Therefore, the only
transaction that should be presented are transactions to outsiders, which is in this
problem, the P520,000 sales by branch to outsiders.
4. To compute the adjusted balances of the reciprocal accounts a reconciliation statement
is to be prepared as follows:
(branch books) home office (HO books) Investment in
account Davao Branch Account
Unadjusted balances, Dec. P54,700 P51,1100
31,2013
Add(deduct) the following adjustments:
1. shipment charged Davao (24,000)
branch but actually sent to
Cebu branch
2. shipment charged to 30,000
Aklan branch but actually
sent to Davao branch
3. no effect
4. Merchandise returned by (7,200)
Davao branch accounts
receivable
5. merchandise returned by
Davao branch still in transit (2,400)
to home office
6. overstatement of Davao _______ (7,200)
branch net income
(P32,550-P25,350)
Adjusted balances, dec. P47,500 P47,500
31,2013
5. The P187,860 is computed as follows:

Accounts receivable, 5/31/12 P43,800
Net sales (P198,720 – P3,600) 195,120
Total 238,920
Less: Accounts receivable, 5/31/13 P49,140
Accounts written off 1,920 51,060
Remittance P187,860
6. P39,140 is computed as follows:
Investment in branch account balance, P50,000
12/31 (HO books)
Add(deduct):
Merchandise in transit (12,500)
Collection of HO accounts receivable 3,500
by branch
Erroneous recording of Branch profit (360)
Supplies returned by Branch (1,500)
HO account balance, 12/31 (Branch P39,140
books)
7. The P41,490 unadjusted balance of Home office is computed as follows:

Unadjusted balance, Investment in Branch account, 12/31 P43,000
Less: Merchandise allowance (error) P60
Branch advances to President 550
Advertising expense charged to branch 900 1,510
Unadjusted balance, home office account, 12/31 P41,490
8. Dr. (Cr.) Adjustment to investment in Butuan Branch account

Marketing expense of another branch charged to Butuan (b) P(10,000)
Butuan’s remittance credited to Davao branch (d) (65,700)
Dr. (Cr.) adjustment to Butuan branch
Account in the home office books P(75,700)
Dr. (Cr.) Adjustment to Home office account:

Fixed assets transfer not booked by Butuan (a) P(53,960)
Inventory transfer recorded twice by Butuan (c) 75,000
Error in recording DM for P4,650 as P4,560 (f) (90)
Dr. (Cr.) adjustment to Butuan branch
Account in the home office books P20,950
9. unadjusted balance of investment in branch account, 6/30 P175,520

(a) Charge for labor 500
(b) charge for freight (805.5)
(c) purchase of furniture & fixture (90)
(d) merchandise allowance (50)
(e) charge for interest (425)
(f) proceeds from sale of truck 5,000
(g) charge for truck repairs (370)
(h) proceeds from sale of truck 5,000
Unadjusted balance of Home office account, 6/30 P184,279.5
10.
Sales P32,000
Cost of sales
Inventory, jan.1 3,960
Inventory, dec. 31 (4,840) 16,720
Gross profit 15,280
Expenses 10,480
Net income per branch books 4,800
Add: overvaluation of COS
Billed price (above) 16,720
Cost to HO (16,720/110%) 15,200 1,520
Actual branch income at cost basis P6,320
11. Branch Inventory at Cost:

Branch inventory at billed price P33,600
Divided by the billing percentage cots ÷120%
Branch inventory of cost P28,000
Branch net income as far as the HO is concerned:

Branch net loss, as reported (P5,200)
Add: overvaluation of COS of the
Branch:
Total shipment to Branch
Billed price (P60,000+24,000) P84,000
Cost (P84,000/120%) 70,000 P14,000
Less: branch returns -
Billed price P1,680
Cost (P1,680/120%) 1,400 280
Net shipment P13,720
Less: Inventory, 9/30
Billed price P33,600
Cost 28,000 5,600 8,120
Branch net income P2,920
12. The balance of the Allowance for Overvaluation of Branch Inventory account
represents the overvaluation of branch inventory on January 1 and overvaluation of the
shipment received. Computation is as follows:
Billed price Billing Cost Over valuation
÷ percentage =
Inventory, Jan. 1 P7,560 140% P5,400 P2,160
Add: shipment 28,280 140% 20,200 8,080
Balance of allowance before adjustment P10,240
13.
Beginning inventory P1,440,000
Purchase 410,000
Shipment from HO 1,020,000
Good available for sale 2,870,000
Ending inventory 1,460,000
Cost of sales 1,41,000
Less: Overvaluation
Beginning inventory & shipments 370,000
Less: ending inventory
Billed price P1,170,000
Cost (P1,170,000/120%) 975,000 195,000 175,000
Cost of goods sold (net) P1,235,000
14. According to the HO books, Iloilo branch will have a P4,380 net income as computed
below:
Branch net loss (P7,800)
Add: Overvaluation of Cost of sales of Branch -
Total shipment to Branch:
Billed price (90,000+36,000) P126,000
Cost (P126,000/120%) 105,000 P21,000
Less: Branch returns
Billed price P2,520
Cost(2,520,/120%) 2,100 420
Net shipment to Branch P20,580
Less: inventory, 6/30
Cost(P50,400/120%) 42,000 8,400 12,180
Branch net income P4,380
15. P37,600 is computed as follows:

Acquired from HO:
Billed price (P50,000-P6,600) P43,400
Divide by billing percentage of cost 140% P31,000
Branch inventory at cost, 9/30 P37,600
Below is the computation of Home office income from branch operation of P70,100.
Branch net income (5,000-2,500 P2,500
expense)
Add: overvaluation of branch cost
of sales:
Shipment from Home Office:
Cost(P28,000/140%) 200,000 P80,000
Less: inventory, end -
Billed price (50,000-6,600) P43,400
Cost(P43,400/140%) 31,000 12,400 67,600
Branch net income realized by HO P70,100
16. branch inventory, at cost, 12/31:

Acquired from HO (P21,000/140%) P15,000
Total P22,000
Branch gross profit:

Net sales P180,000
Cost of sales insofar as Home office is concerned
Shipment from HO, at cost P70,000
(P98,000/140%)
Purchases 40,000
Cost of goods available for sale 110,000
Inventory, at cost 12/31:
Acquired from HO (P21,000/140%) P15,000
Local purchases 7,000 22,000 88,000
Gross profit insofar as HO is concerned P92,000
17. below is the computation of Branch ending inventory at cost:
Acquired from HO (80% x P30,000 ) / 120% P20,000

Add: Acquired from outsiders (20% x P30,000) 6,000
Branch inventory at cost, 12/31 P26,000
The P1,000 net income is derived as follows:
Sales (P74,000 + P22,000) P96,000

Cost of sales insofar as Home office is concerned
Shipment from HO, at cost P45,000
(P54,000/120%)
Purchases 26,000
Cost of goods available for 71,000
sale
Inventory, at cost 12/31: 26,000 45,000
Expenses (P38,000+P12,000) 50,000
Branch net income insofar as Home office is concerned P1,000
18. Merchandise inventory, December 1 P15,000

Less: Merchandise acquired from HO at billed price
Overvaluation (3,600 – P1,600) P2,000
Cost (P2,000/20%) 10,000 12,000
Merchandise acquired from outsiders P3,000
19.
Total shipment from office P420,000
Returns (7,500)
Purchases 72,500
Goods available for sale, at billed price 485,000
Less: overvaluation of shipment:
Cost (420,000/120%) 350,000 70,000
Returns:
Billed price P7,500
Cost (7,500/120%) 6,250 (1,250) 68,750
Goods available for sale, at cost P416,250
20. before computing the balance of the allowance account, the percent of billing price to
cost should be computed first as follows:
Branch net income, per HO P156,000

Branch net income, per branch 60,000
Realized mark-up on merchandise from the
Home office already sold by the branch P96,000
Shipment from home office P350,000

Less: increase in portion of Branch inventory
Acquired from home office 14,000
Portion already sold by branch P336,000
Less: Mark-up thereon (above) 96,000
Cost of portion already sold by branch P240,000
Per cent of billing price to cost: P336,000/240,000 140%
The balance of the “Allowance for Overvaluation in Branch inventory” account as

December 31,2013 after adjustment represent the overvaluation of the branch ending
inventory acquired from the home office computed as follows:

Cost (P84,000/140%) 60,000
Balance of the allowance account P24,000
21. branch inventory, January 1 P8,000

Purchases 30,000
Merchandise available for sale P131,750
Less: branch inventory, Dec. 31 10,350
Branch cost of sales, per branch books P121,400
Less: Mark- up on merchandise from the HO
Already sold by the branch: P19,750
Branch inventory allowance
Less: mark-up on portion of Dec. 31 inventory
Acquired from home office:
(P10,350-P4,350) x 25/125 1,200 18,550
Branch cost of sales, as far as the home office is concerned P102,850
Note: shipments of merchandise from the home office to the branch are billed at 125%
of cost, determined as follows:
Shipments from Home Office = P93,750 =125%

Shipments to Branch = P75,000
22.
Sales P141,000
Less: cost of sales at Billed price (Sch. 1) 112,500
Gross profit 28,500
Expenses 27,000
Total comprehensive income to be reported by the Branch P1,500
Schedule 1
Cost of shipment to branch P120,000
Add: 25% mark-up 30,000
Billed price of shipment to branch 150,000
Portion sold x¾
cost of sales at billed price P112,500
23. reported branch loss P(6,200)

Add: overvaluation in branch cost of sales
Shipment to branch P205,000
Less: returns 3,050
Ending inventory 85,000 88,050
Cost of sales, at billed price 116,950
Cost of sales, at cost to HO
(116,950/125%) 93,560 23,390
Branch total comprehensive income, per HO books P17,190
24. The combined inventories on dec. 31, 2013 statement of financial position computed as
follows:
Home office (P160,500 – P10,500) P150,000

Branch, at cost (108,000/120%) 90,000
Combined inventories, 12/31 P240,000
25.
Sales P325,000
Less: cost of sakes
Jan. 1 inventories, at cost (sch 1 ) 107,500
Purchases 215,000
Merchandise available for sale P322,500
Less: dec. 31 inventories, at cost (sch 1 ) 81,300 241,200
Gross profit on sales P83,800
Less: expenses 50,000
Total comprehensive income P33,800
Schedule 1:
Inventories
Jan.1 Dec. 31
Home office P80,000 55,000
Branch, at cost
Acquired from outsiders 7,500 5,500
Acquired from HO:
Jan. 1 (P24,000/120%) 20,000
Dec. 31 (P26,000/125%) _______ 20,800
Combined P107,500 P81,300
2013 billing (7,500/30,000) = 125%
26.
Sales P810,000
Cost of sales
Beg. Inventory
HO P120,000
Branch, at cost 50,000 P170,000
(P60,000/120%)
Purchases 500,000
Total 670,000
Ending inventory:
HO 98,000
Branch, at cost 40,000 138,000 532,000
(P48,000/120%)
Gross profit 278,000
Combined net income P170,000
27.
Sales (P310,000 + P280,000) P590,000
Cost of sales:
Inventory, 1/1 (sch1) P67,100
Purchases 380,000
Freight in (P220,000x5%) 11,000 391,000
Goods available for sale 458,100
Inventory, 12/31 (sch1) 104,000
Freight in (P220,000x5%) 2,200 106,200 351,900
Expenses (P104,000+P58,100) 162,100
Combined total P76,000
Comprehensive income
Schedule 1 : Combined inventories – at cost

Inventories
January 1 December 31
Home office, at cost P46,000 P64,000
Branch at cost
Inventory, Jan. 1:
Mark-up (sch2) 2,000 21,00
Inventory, Dec. 31:
At cost 40,000
[(P33,000+P11,000)/110%*]
*Billing %: (209,000 + 11,000)/200,000 = 110%
Schedule 2: mark-up on Branch beginning inventory

Branch merchandise markup before adjustment P22,000
Less: overvaluation of shipments [(P209,000 + P11,000)-P200,000] 20,000
Mark up of branch beginning inventory P2,000
28.
Sales P295,000
Cost of sales:
Inventory, 1/1
Home office P23,000
Branch, at cost (11,550-1,000) 10,550
Freight in (5,500-1,000) 5,750 39,300
Purchases, Home office 190,000
Total 229,300
Inventory, 12/31
Home office P30,000
Branch, at cost 14,000
[(10,400+5,000/110%]
Freight in(P520+250) 770 44,770 184,530
Sundry expneses 80,000
Combined total comprehensive P30,470
income
29. Choice (c) is correct, because the branch should record the shipment from the office at
billed price (P50,000 + P8,000), and should treat the freight charged by the office as
inventoriable cost.
30.
Shipments from home office at billed price P58,000
Unsold 60%
Ending inventory P34,800
Freight in (P2,000 x 60%) 1,200
Total P36,000
31. In the books of Bulacan branch (sending branch) the inter-branch transfer should be treated
as if it was returned to the home office. Inventory account should be credited in place of
the Shipment from Home office account which was already closes at the end of 2010.
Therefore entry (d) is correct.
32. In the books of Baguio branch (receiving branch) the inter-branch transfer should be treated
as if it was received from the home office. And the freight to be recognized should be the
freight from the office. Therefore choice (c) is correct.
33. In the books of the home office the inter-branch transfer can be cleared by debiting the
receiving branch (Baguio) and crediting the sending branch (Bulacan). Excess freight
account should be charged for the difference which is treated as an expense of the home
office. Therefore choice (a) is correct.
Alternative entry: If the allowance for overvaluation of branch inventory account is classified by
branch:
Investment in Branch – Baguio 30,500

Allowance for overvaluation of Branch Inventory-Bulacan
(P8,000 x 50%) 4,000
Excess freight 1,500
Investment in Branch – Bulacan 32,000
Allowance for overvaluation Branch inventory- Baguio 4,000
34. The expenses paid by the branch are not recorded in the home office books. It is only
recognized upon replenishment of the working fund (petty cash fund).
35. Sales P95,000

Sales discount (P81,000 / 90%)x 10% 9,000
Net sales 86,000
Cost of sales (P95,000 x 70%)+ 200 68,500
Gross profit 17,500
Expenses:
Selling expenses P5,500
Administrative expenses (P95,000 x 5%) 4,750
Samples expenses (P8,200 – P4,550) 3,650 13,900
Net income P3,600
36. Branch beginning inventory – acquired from home office P105,000

Shipment from home office – at billed price (P328,125 x 140%) 459,375
Goods available for sale at billed price 564,375
Branch ending inventory per books P280,000
37. Sales P268,000

Sales discount (P58,200 ÷ 97%)x 3% 1,800
Net sales
Cost and expenses:
Cost sales P124,000
Salaries 21,600
Rent expense (P36,000 x 1/12) 3,000
Expenses 17,925
Samples (P36,000 x 85%)x 1/5 6,120
Depreciation (P40,000 x 18% x 1/12) 600 173,245
Net income P92,955
38. Choice (d) is correct due to the following entries to record the interbranch transfer of
merchandise:
Pasig Branch Books:

Home office 70,800
Freight in 4,200
To record transfer of merchandise to Alabang.
Alabang Branch Books:

Freight in 6,200
Cash 2,800
Home office 70,000
To record receipt of merchandise from Pasig.
Home Office Books:

Alabang branch current 70,000
Excess freight 800
Pasig branch current 70,800
To record interbranch transfer of merchandise.
39. The unrealized inventory profit balance on December 31 is the difference between the
branch ending inventory at billed price and cost. Computed as follows:
Branch ending invty per physical count – from HO (42,000 – 27,000) P14,300
Shipment in transit:
Shipment from HO at BP (145,000 ÷ 130%) P188,500
Shipment from HO per books 150,800 37,700
Correct branch ending inventory at billed price P52,000
Branch ending at cost (52,000 ÷ 130%) 40,000
Unrealized inventory profit, December 31, 2008 P12,000
40. The combine net income is computed by preparing a combined income statement as
follows:
Sales P1,920,000
Cost of sales:
Inventory, January 1 (Sch. 1) P69,000
Purchases 1,100,000
Goods available for sale 1,169,000
Inventory, December 31 (Sch. 1) 187,700 981,300
Expenses 400,000
Combined net income P538,700
Schedule 1:
Inventory at cost
January 1 December 31
Home office P20,000 P120,000
Branch: Acquired from HO (Sch. 2) 30,000 40,000
Acquired from outsiders (58,000 – 39,000) 19,000 27,700
Total 49,000 67,700
Schedule 2:
Allow for overvaluation before adjustment P52,800
Overvaluation in the Shipments:
Shipment from HO at BP (P145,000 x 130%) P188,500
Shipment to branch at cost 145,000 43,500
Overvaluation in the branch beginning inventory P 9,000
Branch beginning inventory at cost (P9,000 / 30%) P30,000
Branch ending inventory at cost (per No. 39) P40,000

Home Office & Branch Accounting Quiz
September 29, 2021
1. The National Home Company 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.
Compute the net profit of the branch
Debit Credit
Cash......................................................... P 11,900
National Home co. Current........................ P 90,000
Shipments from National Home Co.............120,000
Accounts Receivable................................. 62,500
Expenses.................................................. 8,100
Sales........................................................ 112,500
Total........................................................ P202,500 P202,500
======== ========
December 31 Inventory............................. P 30,000
========
Compute the net profit of the branch

a. P104,400 c. P21,300
b. P22,500 d. P14,400*
September 29, 2021
2. The National Home Company 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.
Debit Credit
Cash......................................................... P 11,900
National Home co. Current........................ P 90,000
Shipments from National Home Co.............120,000
Accounts Receivable................................. 62,500
Expenses.................................................. 8,100
Sales........................................................ 112,500
Total........................................................ P202,500 P202,500
======== ========
December 31 Inventory............................. P 30,000
========
Compute the Branch Current Account in the home office books:
a. P134,400 c. P90,000
b. P104,400* d. P 74,400
3. On December 31, 2024, the following data are in the records of the Cebu City branch of the Claire
Company:
Petty Cash....................................................P 94,500

Accounts Receivable, Dec. 31, 2023............... 85,200
Merchandise Inventory, Dec. 31, 2023............ 75,500
Accounts Receivable, Dec. 31, 2024.............. 88,800
Merchandise Inventory, Dec. 31, 2024............ 81,000
Sales............................................................ 272,700
Sales Returns............................................... 4,800
Accounts Receivable, Written Off................. 2,000
Shipments From Home Office....................... 220,600
Expenses (Paid By Home Office)................ 22,500
If all cash collections in 2024 were remitted to Home Office, the total remittances amounted to:
a. P262,300* c. P264,300
b. P266,800 d. P267,100
September 29, 2021
4. Leila Co.’s Clark branch submitted the following data for 2024, its first year of operation:
Sales....................................... P203,500 Cr.

Shipments from home office.... 186,120 Dr.
Operating expenses................. 18,755 Dr.
Home office - current............. 48,125 Cr.
Shipments to the branch are billed at cost. The December 31 inventory of the branch was P25,245. What
is the correct balance on December 31, 2024 of the Branch Account - current as per home office books?
a. P46,750 c. P65,505
b. P48,125 d. P71,995*
5. Isarog, Inc. opens a sales agency in Legazpi City, and a working fund for P20,000 is established on the
imprest basis. The first payment from the fund is P3,000 for rent. This transaction should be recorded by
the home office as follows:
a. No entry*
b. Dr Rent..................................... 3,000
Cr Cash............................... 3,000
c. Dr Legazpi Agency..................... 3,000

Cr Cash............................... 3,000
d. Dr Legazpi Agency..................... 3,000

Cr Working Fund................. 3,000
6. The interoffice account between the main office of Ben Corporation and its branch in Bulacan was
adjusted to P30,670 as of Dec. 31, 2017. The transactions between the home office and the branch for
2018 include the following:
1. Remittance by branch (P7,200 of which was still in transit as of Dec. 31, 2018) P55,000
2. Shipments to branch (including goods still in transit as of Dec. 31, 2018 of P22,000) P160,000
3. Home office expenses paid by branch, not yet recorded by the home office P5,700
4. Branch receivable collected by the home office, net of P100 discount, not yet recorded by the Branch
P8,900
The unadjusted balance of the home office and the branch accounts as of Dec. 31, 2018 were:
a. P99,070 and P128,270, respectively.
b. P128,270 and P99,070, respectively
c. P99,070 and P128,170, respectively
d. P107,970 and P133,970, respectively *
September 29, 2021
7. Pangasinan Branch of Malate Company, at the end of its first quarter of operations submitted the following
income statement:
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 profit on sales........................................... P 40,000
Expenses........................................................... 35,000
Net income.......................................... .............. P 5,000
========
The branch inventory at September 30 amounted to P50,000 of which P6,600 was locally purchased.
Markup on local purchases, 20% over cost. Branch expenses incurred by Head Office amounted to P1,500
not yet recorded by the branch.
What is the Branch Inventory that should be presented in the combined balance sheet of the home office
and branch?
a. P50,000*
b. P43,400
c. P6,600
d. P0
8. Pangasinan Branch of Malate Company, at the end of its first quarter of operations submitted the
following income statement:
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 profit on sales........................................... P 40,000
Expenses........................................................... 35,000
Net income.......................................... .............. P 5,000
========
The branch inventory at September 30 amounted to P50,000 of which P6,600 was locally purchased.
Markup on local purchases, 20% over cost. Branch expenses incurred by Head Office amounted to P1,500
not yet recorded by the branch.
What is Branch net income?
a. P11,000
b. P9,500
c. P5,000
d. P3,500*
END
Chapter 12
Problem I
(a)Working Fund – Agency ……………………………… ……………………….. 5,000
Cash …………………………………………………………………………. 5,000
(b)Accounts Receivable …………………………………..................................... 50,000
Sales-Agency ………………………………………………………………. 50,000
(c)Cash ………………………………………………………..................................... 35,000

Accounts Receivable …………………………………………………….. 35,000
(d)Expenses-Agency ……………………………………………………………….. 4,500

Cash …………………………………………………………………………. 4,500
(e)Expenses-Agency ……………………………………………………………….. 2,250

Cash …………………………………………………………………………. 2,250
(f)Cost of Goods Sold-Agency …………………………………………………… 36,000

Merchandise Shipments-Agency ………………………………………. 36,000
Problem II
(a) Branch Books:
(a) Cash ………………………………………………………….. 42,500

Home Office …………………………………………… 42,500
(b) Shipments from Home Office …………………………… 50,200

Home Office …………………………………………... 50,200
(c) Accounts Receivable ……………………………………. 60,000

Sales …………………………………………………….. 60,000
(d) Purchases …………………………………………………… 22,500

Accounts Payable …………………………………… 22,500
(e) Home Office ……………………………………………….. 53,400

Accounts Receivable ………………………….. 53,400
(f) Accounts Payable ………………………………………... 12,250

Cash …………………………………………………….. 12,250
(g) Furniture & Fixtures ………………………………………… 8,000

Cash …………………………………………………….. 8,000
(h) Expenses …………………………………………………….. 18,000

Cash …………………………………………………….. 18,000
(b) Home Office Books:
(a) Branch ………………………………………………………. 42,500

Cash ……………………………………………………. 42,500
(b) Branch ……………………………………………………… 50,200

Shipments to Branch ……………………………….. 50,200
(c) Accounts Receivable …………………………………... 105,000

Sales …………………………………………………… 105,000
(d) Purchases …………………………………………………. 122,500

Accounts Payable …………………………………. 122,500
(e) Cash ……………………………………………………….. 113,600

Accounts Receivable ……………………………… 113,600
(f) Accounts Payable ………………………………………. 124,000

Cash …………………………………………………… 124,000
(g) Expenses …………………………………………………… 26,600

Cash …………………………………………………… 26,600
(h) Cash ……………………………………………………….. 53,400

Branch ………………………………………………... 53,400
(i) Retained Earnings ………………………………………. 10,000

Cash …………………………………………………... 10,000
BARTON CO.
Balance Sheet for Branch
December 31, 20x4
Assets Liabilities
Cash …………………………… P 4,250 Accounts Payable ………… P 10,250

Accounts Receivable ……… 12,600 Accrued Expenses …………… 300
Merchandise Inv……………... 23,500 Home Office ………………….. 37,900
Prepaid Expenses …………… 750
Furnitures & Fixtures …. P 8,000
Less accum. Depr …… 650 7,350
Total Assets …………………… P48,450 Total Liabilities ………………….P48,450
BARTON CO.
Income Statement for Branch
For Year Ended December 31, 19X6
Sales …………………………………………………………………………… P66,000

Cost of Goods Sold:
Purchases …………………………………………………………… P22,500
Shipments for home office ………………………………………. 50,200
Merchandise available for sale ………………………………… P72,700
Less merchandise inv, December 31 ………………………….. 23,500
Cost of Goods Sold ……………………………………………….. 49,200
Gross Profit ……………………………………………………………………. P16,800
Expenses ……………………………………………………………………… 18,200
Net loss ………………………………………………………………………... P 1,400
BARTON CO.
For Year Ended December 31, 20x4
Assets Liabilities & Stockholders Equity
Cash …………………………….. P 23,200 Liabilities

Accounts Receivable ……….. 19,050 Accounts payable ………… P 21,300
Merchandise Inventory……… 48,500 Accrued Expenses …………. 1,350 P22,650
Prepaid Expenses ……………. 2,050 Stockholders Equity
Furniture & Fixtures …. P 20,000 Capital stock, P20 par……… P50,000
Less accum. Depr….. 5,580 14,420 Retained Earnings …………. 72,740 122,470
Branch ………………………… 37,900 Total liabilities and stockholders’
Total Assets …………………... P145,120 equity ………………… P145,120
BARTON CO.
Income Statement for Home Office
Sales ……………………………………………………………………………....... P105,000

Cost of goods sold:
Merchandise inventory, January 1 …………………………………. P 40,120
Purchases ………………………………………………………………... 122,500
Merchandise available for sale ……………………………………… P162,620
Less shipments to branch ……………………………………………... 50,200
Merchandise available for own sale ……………………………….. P112,420
Less merchandise inventory, December 31 ………………………. 48,500
Cost of Goods Sold ……………………………………………………. 63,920
Gross Profit ………………………………………………………………………… P 41,080
Expenses …………………………………………………………………………… 27,630
Net income from own operations …………………………………………….. P 13,450
Deduct branch net loss …………………………………………………………. 1,400
Total Income ………………………………………………………………………. P 12,050
BARTON CO.
Sales …………………………………………………………………………………. P171,000

Cost of goods sold:
Merchandise inventory, January 1 ………………………………….. P 40,120
Purchases ………………………………………………………………… 145,000
Merchandise available for sale ……………………………………… P185,120
Less merchandise inventory, December 31 ……………………….. 72,000
Cost of goods sold ………………………………………………………. 113,120
Gross profit ………………………………………………………………………….. P 57,880
Expenses …………………………………………………………………………….. 45,830
Net Income …………………………………………………………………………. P 12,050
(a) Branch Books:
Expenses ………………………………………………………………. 650

Accumulated Depreciation – F&F………………………. 650
Sales …………………………………………………………………… 66,000

Merchandise Inventory ……………………………………………. 23,500
Income summary ………………………………………….. 89,500
Income Summary …………………………………………………… 90,900

Shipments from Home Office …………………………… 50,200
Purchases …………………………………………………… 22,500
Expenses …………………………………………………….. 18,200
Home Office ………………………………………………………… 1,400

Income Summary ………………………………………… 1,400
(b) Home Office Books
Expenses ………………………………………………………………. 1,180

Accumulated Depreciation – F&F………………………. 1,180
Sales …………………………………………………………………… 105,000

Shipments to Branch ……………………………………………….. 50,200
Income summary ………………………………………….. 203,700
Income Summary …………………………………………………… 190,250
Merchandise Inventory …………………………………… 40,120
Purchases ……………………………………………………. 122,500
Expenses …………………………………………………….. 27,630
Branch Income ……………………………………………………… 1,400

Branch ………………………………………………………. 1,400
Income Summary ………………………………………………….. 1,400

Branch Income …………………………………………… 1,400
Income Summary ………………………………………………….. 12,050

Retained Earnings ……………………………………….. 12,050
Problem III
(a) Branch Books:
Jan. 1 Cash …………………………………………. 1,500
Home Office ……………………… 1,500
1 Shipments from home office ……………. 10,200

Home Office ……………………… 10,200
1 Home Office ……………………………….. 900

Cash ……………………………….. 900
1 Accts. Rec. – Home office ………………. 2,600

Home Office ……………………… 2,600
1-31 Accts. Rec.-Home Office ………………. 6,200

Sales ……………………………….. 6,200
1-31 Cash ……………………………………….. 2,600

Accounts Receivable ………….. 2,600
1-31 Purchases …………………………………. 3,000

Accounts Payable ……………… 3,000
1-31 Accounts Payable ………………………. 1,450

Cash ……………………………….. 1,450
1-31 Expenses ………………………………….. 1,250

Cash ………………………………. 1,250
Jan. 1-31 Cash ………………………………………… 1,600

Accts. Rec.-Home Office ……... 1,600
1-31 Home Office ……………………………… 150

Accts. Rec.-Home Office ……. 150
1-31 Shipments from Home Office ………… 1,250

Home Office ……………………. 1,250
1-31 Home Office ……………………………… 1,000

Cash ……………………………… 1,000
Jan. 1 Branch …………………………………….. 1,500

Cash ……………………………… 1,500
1 Branch …………………………………….. 10,200
Shipments to Branch ………….. 10,200
1 Store Furniture and Fixtures Branch ….. 3,000

Store Furniture and Fixtures …... 3,000
1 Accumulated Depr. Store F&F ……….. 750

Accumulated Depr. Store Furniture
And Fixtures, Branch ………….. 750
Calculation of depreciation: 2.5years at P300, (10% of
P3,000), or P750
1 Store Furniture and Fixtures Branch ….. 900

Branch …………………………… 900
1 Branch …………………………………… 2,600

Accounts Receivable …......... 2,600
1-31 Accounts Receivable ………………… 34,600

Sales ………................................ 34,600
1-31 Cash ………………………………………. 40,000

Accounts Receivable ………… 40,000
1-31 Purchases ………………………………….31,600

Accounts Receivable …………. 31,600
1-31 Accounts Payable ……………………… 36,200

Cash ……………………………... 36,200
1-31 Accrued Expenses Payable …………. 250

Expenses …………………………………. 8,950
Cash …………………………….. 9,200
1-31 Allowance for Doubtful Accounts ….. 150

Branch ………………………….. 150
1-31 Branch ……………………………………. 1,250

Shipments to Branch ………… 1,250
1-31 Cash ……………………………………… 1,000

Branch …………………………. 1,000
EAGLE CO.
Balance Sheet
January 31, 20x4
Assets Liabilities
Cash …………............................ P 1,100 Accounts Payable ………………. P 2,400

Accounts Receivable ………….. 3,600 Accrued expenses ………………. 400
Accts. Rec.-home office ………. 850 Home Office ……………………… 14,050
Merchandise Inventory ………… 9,800
Merchandise in Transit …………. 600
Total assets ………………… P37,200 Total Liabilities ……………………. P37,200
EAGLE CO.
For Month Ended January 31, 20x4
Sales …………………………………………………………………………………………. P 6,200

Cost of Goods Sold:
Purchases …………………………………………………… P 3,000
Shipments from home office ……………………………. 11,450
Shipments from home office in transit ………….......... 600
Merchandise Available for Sale ……………………….. P15,050
Less merchandise inv. Dec 31, 19X9 ……................P9,800
Merchandise in transit ………………………….. 600 10,400
Cost of Goods Sold ……………………………………………………………. 4,650
Gross Profit ………………………………………………………………………………… P 1,550
Expenses …………………………………………………………………………………… 2,110
Net Loss ………………………………………………………………………………….. .. P 560
EAGLE CO.
Balance Sheet for Home Office
January 31, 20x4
Assets
Cash …………………………………………………………………… P 9,100
Accounts Receivable ……………………………………………… P34,000
Less allowance for doubtful accounts ……………….. 1,050 32,950
Store furniture and fixtures ………………………………………… P12,000
Less accumulated depreciation ………………………. 3,950 8,050
Store furniture and fixtures-branch ……………………………… P 3,900
Less accumulated depreciation ……………………… 785 3,315
Branch office ………………………………………………………... 14,050
Total Assets …………………………………………………………… P111,765
Liabilities
Accounts Payable …………………………………………….. P29,150

Accrued Expenses …………………………………………….. 750
Total Liabilities ………………………………………………….. P29,900
Stockholders Equity
Capital Stock …………………………………………………… P50,000

Retained earnings …………………………………………….. 31,865
Total stockholder’s equity …………………………………… 81,865
Total liabilities and stockholders equity …………………… P111,765
AGLE CO.
Sales ……………………………………………………………………………… P 34,600

Cost of goods sold:
Merchandise inventory, January 1 …………………….. P46,000
Purchases …………………………………………………… 31,600
Merchandise available for sale ………………………… 77,600
Less shipments to branch ………………………………… 12,050
Merchandise available for own sales …………………. P65,550
Less merchandise inventory, January 31 ……………… 44,500
Cost of goods sold …………………………………………………………… 21,050
Gross Profit ………………………………………………………………………… P 13,650
Expenses …………………………………………………………………………… 9,325
Net income from own operations ……………………………………………. P 4,225
Deduct branch net loss ………………………………………………………… 560
Total Income …………………………………………………………………… P 3,665
EAGLE CO.
Assets Liabiities and Stockholders Equity
Liabilities
Cash …………………………….. ………. P 10,200 Accounts Payable …… P30,700
Accounts receivable ……….. P38,450 Accrued Expenses …… 1,100 P 31,800
Less allow for doubt-
Ful accounts ……….. 1,050 37,400
Merchandise Inventory ……………….. 54,900 Stockholders Equity
Store furn. & fixtures ………… P15,900 Capital Stocks …………P50,000
Less accum depr 4,735 11,165 Retained earnings …… 31,865 81,865
Total assets ……………………………… P113,665 Total liab. And stockholders equity . P113,665
EAGLE CO.
Combined Income Statement for Home Office and Branch
Sales ………………………………………………………………………………….. P 40,800

Cost of goods sold:
Merchandise Inventory, January 1 ………………. P46,000
Purchases ……………………………………………... 34,600
Merchandise available for sale …………………... P80,600
Less merchandise inventory, Jan 31 ……………... 54,900
Cost of goods sold …………………………………............................... 25,700
Gross profit …………………………………………………………………………... P 15,100
Expenses ……………………………………………………………………………… 11,435
Net Income ………………………………………………………………………….. P 3,665
(a) Branch Books
Jan. 31 Shipments from Office-in Transit ……………… 600

Home Office ……………………………. 600
31 Expenses …………………………………………. 475

Home Office ……………………………. 475
31 Expenses ………………………………………… 35
Home Office ………………………….. 35
1/120 x P3,000, or P25 (depreciation for one month;
Asset life, 10 years); 1/90 x P900, or P10 (depreciation
For one month; asset life, 7.5 years)
31 Merchandise Inventory ……………………… 9,800

Merchandise in Transit ……………………….. 600
Income Summary …………………… 10,400
31 Expenses ……………………………………….. 350

Accrued Expenses …………………. 350
31 Sales ……………………………………………. 6,200

Income Summary ………………….. 6,200
31 Income Summary ……………………………. 17,160

Shipments from Home Office ……. 11,450
Ship. From Home Office – in Trans . 600
Purchases …………………………… 3,000
Expenses …………………………….. 2,110
31 Home Office ………………………………….. 560

Income Summary …………………... 560
31 Branch …………………………………………. 600

Shipments to Branch ………………. 600
31 Branch …………………………………………. 475

Expenses ……………………………... 475
31 Branch …………………………………………. 35
Accumulated Depreciation, Store
Furniture and Fixtures Branch …….. 35
31 Expenses ………………………………………. 100

Accumulated Depreciation store
Furniture and Fixtures branch ……. 100
1/120 x P12,000, or P100 (depreciation for one
Month; asset life, 10 years)
31 Income Summary …………………………… 46,000

Merchandise Inventory …………… 46,000
31 Merchandise Inventory …………………….. 44,500

Income Summary ………………….. 44,500
31 Expenses ………………………………………. 750

Accrued Expenses …………………. 750
31 Sales …………………………………………… 40,925

Purchases …………………………… 31,600
Expenses …………………………….. 9,325
31 Branch Income ………………………………. 560
Branch ……………………………….. 560
31 Income Summary ……………………………. 560

Branch Income ……………………... 560
31 Income Summary ……………………………. 3,665

Retained Earnings ………………….. 3,665
Problem IV
1.
Socrates Company
Home Office and Plato Branch
Reconciliation of Reciprocal Ledger Accounts
June 30, 20x4
Investment in
Plato Branch Home Office
Ledger Ledger
Account Account
(Debit) (Credit)
Balances prior to adjustment P85,000 P33,500
Add: Merchandise shipped to branch 24,000
Less: Acquisition of office equipment by branch
(carried in accounting records of home office) (14,500)
Collection of branch trade accounts receivable (9,000)
Payment of cash by branch (22,000) _______
Adjusted balances P48,500 P48,500
2. (a) Accounting records of home office:

Office Equipment: Plato Branch 14,500
Investment in Plato Branch 14,500
To record acquisition of office equipment by branch.
Cash in Transit 22,000

Investment in Plato Branch 22,000
To record cash in transit from branch.
(b) Accounting records of branch:

Home Office 9,000
Trade Accounts Receivable 9,000
To record collection by home office of branch accounts
receivable.
Inventories in Transit 24,000

Home Office 24,000
To record shipment of merchandise in transit from
home office.
Problem V
((a) BRANCH HOME OFFICE
ACCOUNT ACCOUNT…
Balances before Adjustments ……………………………………….. P 8,400 P 9,735
Adjustments:
Additions:
Merchandise in transit to branch …………………. 615
Collection of Home office receivable by Branch 2,500
Understatement of branch net income for Nov.. 90
P10,990 P10,350
Deductions:
Merchandise return to home office in transit ……………. 640
Corrected Balances ……………………………………………… P10,350 P10,350
(b) Branch Books:

Shipments from Home Office-in Transit ……………………. 615
Home Office …………………………………………... 615
Home Office Books:

Branch …………………………………………………………… 2,500
Accounts Receivable ……………………………….. 2,500
Branch …………………………………………………………… 90
Retained Earnings ……………………………………. 90
Merchandise Returns from Branch – in Transit ……………. 640

Branch ………………………………………………….. 640
Multiple Choice Problem

1. d
Branch A Branch B
Assets:
Inventory, January 1 P 21,000 P 19,000
Imprest branch fund 2,000 1,500
Accounts receivable, January 1 55,000 43,500
Total Assets P 78,000 P 64,000
Less: Liabilities -0- -0-
Home Office Current Account P 78,000 P 64,000
2. b
Branch A Branch B
Assets:
Inventory, December 31 P 19,000 P 12,000
Imprest branch fund 2,000 1,500
Accounts receivable, December 31 70,000 53,500
Less: Liabilities -0- -0-
3. d – incidentally, the entry in the books of the branch would be as follows:

Profit and loss summary ………………………………………………………… xxx
Home Office Current……………………………………………………. Xxx
4. c
January January 1,
1,20x4 20x5
Assets:
Inventory P 37,000 P 41,000
Petty cash fund 3,000 3,000
Accounts receivable 43,000 49,000
Less: Liabilities _____-0- _____-0-
5. a – refer to No. 4 for computations

6. a
Sales P 74,000
Less: Cost of goods sold:
SFHO…………………………………………………………… P67,680
Less: Inventory, ending……………………………………… 9,180 58,500
Gross profit…………………………………………………………… P 15,500
Less: Expenses – 6,820
Net Loss……………………………………………………………….. P 8,680
7. a
January 1,
20x6
Assets:
Cash P 4,200
Inventory 9,180
Total Assets P 26,180
Less: Liabilities _____-0-
Home Office Current Account P 26,180
8. a – nominal accounts have zero beginning balance.

9. d
Branch H. Office
Current Current
Unadjusted balance, 6/30/20x4 P 225,770 P 226,485*
Add (Deduct): Adjustments
1 Erroneous recording of branch equipment 3150
2. Insurance premium recorded twice ( 675)
3. Erroneous recording of freight ( 90)
4. Discount on merchandise ( 800)
5. Failure by the branch to record share in advertising 700
6. error by the home office to record remittance of Cebu 3,000 ________
Adjusted balance, 6/30/20x4 P 228,770 P 228,770
* The P226,485 is compute simply by working back with P228,770 adjusted balance as the starting point.
P2-07
10. c
(Branch Current- (Home Office Current –
Dr. balance) Cr. balance)
Unadjusted balance P518,575 P452,276
Add (deduct) adjustments:
In transit 10,500
Remittance ( 17,000)
Returns ( 775)
Cash in transit 25,000
Expenses - HO ( 800)
Expenses – branch 12,000
Error ________ _____224
Adjusted balance P 500,000 P 500,000
11. d
Excess freight ( 750)
Cash in transit ( 11,000)
Returns ( 4,000)
Expenses – branch ________ 5,000
12. c – refer to No. 11 for computations

14. No answer available – P495,750
15. d - No entry should be made in the books of the home office, since the freight should be
chargeable to the branch and the payment of the freight was made by the branch.
16. b
Remittance (40,000)
Returns (15,000)
Error by the branch 300
Expenses – branch ________ 28,000
17. c
(Branch Current- Dr. (Home Office Current –
balance) Cr. balance)
In transit 37,500
HO A/R collected by br. 10,500
Supplies returned ( 4,500)
Error in recording Br. NI ( 1,080)
Cash sent to branch
to General Expense by HO 25,000 25,000
18. d – refer to No. 17 for computation.
19. a
In transit 5,800
HO A/R collected by br. 500
Cash in transit 2,000 2,000
Error in recording Br. NI ( 3,600) _______
Adjusted balance P38,900 P38,900
21. a
Collection of branch A/R ( 800)
In transit 3,200
Purchase of furniture ( 1,200)
Return of excess merchandise ( 1,500)
Remittance ( 500) _______
Adjusted balance P46,400 P46,400
22. b – refer to No. 21 for computations
23. (C)
Sales (P350,000 + P100,000)………………………………………………………….P 450,000
Less: Cost of goods sold:
Purchases (P400,000 + P50,000)……………………………. P 450,000
Less: Inventory, ending……………………………………… 90,000 360,000
Gross profit…………………………………………………………… P 90,000
Less: Expenses –
Salaries and commission…………………………………….. P 70,000
Rent……………………………………………………………… 20,000
Advertising supplies (P10,000 – P6,000)…………………… 4,000
Other expenses………………………………………………. 5,000 99,000
Net Loss……………………………………………………………….. P( 9,000)
24. a
In adopting the imprest system for the agency working fund, the home office writes a check to the
agency for the amount of the fund. Establishment of the fund is recorded on the home office
books by a debit to the Agency working fund and credit cash. The agency will request fund
replenishment whenever the fund runs low and at the end of each fiscal period. Such a request is
normally accomplished by an itemized and authenticated statement of disbursements and the
paid vouchers. Upon sending the agency a check in replenishment of the fund, the home office
debits expense or other accounts for which disbursements from the fund were reported and
credits cash.
25. d
Normally, transactions of the agency are recorded in the books of the home office separately
identified with the appropriate agency.
Theories
1. True 6. False 11. False 16. b 21. a 26. c 31. b
2. True 7. False 12. False 17. c 22. b 27. b 32. b
3. False 8. False 13. True 18. d 23. b 28. d 33. c
4. False 9. True 14. True 19. a 24. b 29. d 34. c
5. True 10, True 15. True 20. c 25. a 30. c 35. c
36. d

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Accounting for Special Transactions C. N.

Gross Profit Recognition under Installment Sales Method

Installment Sales of Merchandise – Pro-Forma Entries

Cost of installment sales xx

2. Year-end adjusting/closing entries

Recognition of gross profit

To close the balance of Realized Gross Profit

Gross Profit Rate (GPR) Calculations

GPR = (Gross profit/ Installment sales)

GPR = (DGP, beg. / Installment contract receivable, beg.)

GPR = ( DGP, end. / Installment contract receivable, end.)

Realized Gross Profit (RGP) Calculations

RGP = (DGP, beg – DGP, end)

Defaults and Repossessions

3. Trade-in value allowed to customer is compared with actual value.

Cost Recovery Method

Cos of IS(60% *200k) 120k

DGP 2018(60k*40%) 24k

NRV of Repossessed Merchandise

Installment Contract Receivable, 2016 Installment Contract Receivable, 2017

Complete the following table

Deferred gross profit

2. Determine the cash collections in 2018 on accounts receivable of each year.

LONG TERM CONSTRUCTION CONTRACT

Total estimate gross profit 3,000

20x4: Costs incurred. Percent completed.

2015 Corts incurred

Year Ended December 31

Estimated costs to complete.

Installment sales ........................................................................ P1,000,000

2024 2023 2022

Installment Accounts Receivable:

The installment accounts receivable balance at December 31, 2021 is:

The repossession resulted in the following loss/gain:

The gain (loss) on repossession amounted to:

Debiting Cash and Crediting Realized Gross Profit

Installment Accounts Receivable

Installment Sales P400,000

Gross margin on cost .............................................................. 66-2/3%

What was the total amount of sales on installment basis?

On January 1, 2012, a customer defaulted and Charlie Company repossessed merchandise

How much was the gain or loss on repossession?

2021 2022 2023

(P25,600); P320,000 current liability

2021 2022 2023

2021 2022 2023

How much is the estimated remaining cost in 2021?

13. Grand Construction, Inc. has consistently used the percentage-of-completion

Cost incurred P 930,000

How much loss should Grand have recognized in 2023?

14. Robin Construction Company has consistently used the percentage-of-completion

Cumulative contract costs Estimated costs at

15. Denzel Construction Company uses the percentage-of-completion method of accounting.

16. When using the installment sales method

28. The percentage-of-completion method of inventory valuation of long-term construction

recognizes income upon completion of work.

be included in the calculation of the income recognized in the second year

An agency is an organization in which:

7. End of the year adjustments:

d. To close the Agency Income Summary to General Income

Agency Accounting Records Separate from the Home Office

This home office current account is credited: