lOMoARcPSD|12207270

lOMoARcPSD|12207270

HOME OFFICE AND BRANCH ACCOUNTING

PROBLEMS:
1. Cebu branch submitted the following data to its home office in Manila for 2016, its first year of operation:
Sales P 2,300,000

Shipments from home office 1,850,000

Operating expenses 235,000

Home Office 480,000

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

What is the balance of the Investment in Branch account on December 15, 2016 on the home office
books? a. P 950,500
b. P 470,500
c. P 950,000
d. P 480,000

2. The home office in Quezon City ships and bill 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 2016 are reflected in the branch trial balance that follows:
Cash P 20,000

Accounts Receivable 80,000

Home Office P 180,000

Shipments from Home Office 250,000

Sales 225,500

Expenses 55,500

Total P 405,500 P 405,500

December 31, inventory P 65,000
No. 2 – Continued

Assuming all the transactions are properly recorded, what is the balance of the Investment in Branch account in
the home office books?
a. P 180,000
b. P 195,000
c. P 165,000
d. P 175,000

3. The following data pertains to the shipments of merchandise from Home Office to Branch during 2016:
Home office’s cost of merchandise P 350,000`
Inter-office billings 420,000
Sales by branch to outsiders 520,000
Merchandise inventory on December 31, 2016 50,000
In the combined statement of comprehensive income of the Home Office and the Branch for the year
ended December 31,2016, what amount of the above transactions should be included as sales? a. P
570,000
b. P 520,000
c. P 470,000
d. P 350,000

4. Nike Corporation operates a number of branches in the provinces. On December 31, 2016, its Davao
branch showed a Home Office account balance of P 54,700 and the home office books showed an
Investment in Davao Branch account balance of P 51,100. The following information they help in
reconciling both accounts:
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1. A P 24,000 shipment, charged by Home Office to Davao Branch, was actually sent to and retained by Cebu
Branch.
2. A P 30,000 shipment, intended and charged to Aklan Branch was shipped to Davao Branch and retained by
the latter.
3. A P 4,000 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 p 7,200 and fails to notify the branch.
5. Home Office was charged for P 2,400 for merchandise returned by Davao Branch on December 30. The
merchandise is in transit.

Home Office erroneously recorded Davao Branch’s net income for 2016 at P 32,550.

What is the adjusted balances of the Home Office and Davao Branch reciprocal accounts on December 31,
2016? a. P 40,300
b. P 54,700
c. P 47,500
5. The branch manager of Tower Cosmetics in Cebu submitted a report as of May 31, 2016 containing
the followinginformation:
Petty Cash Fund P 1,500
Sales 198,720
Sales Returns 3,600
Accounts Wriiten Off 1,920
Shipments from Home Office 136,080
Accounts Receivable – May 31, 2015 43,800
Accounts Receivable – May 31, 2016 49,140
Inventory – May 31, 2015 37,170
Inventory – May 31, 2016 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. P 187,860
b. P 189,780
c. P 195,120
d. P 198,720

6. On December 31, the Investment in Branch account in the home office books shows a balance of P
50,000. The following facts are ascertained:
1. Merchandise billed at P 12,500 is in transit on December 31 from the home office to the branch.
2. The branch collected a home office accounts receivable for P 3,500. The branch did not notify the
home office of such collection.
3. On December 30, the home office sent cash of P 7,500 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 P 2,400 instead of P 2,040.
5. The branch returned supplies of P 1,500 to the home office but the home office ha snot yet recorded
the receipt of the supplies.

Assume all the other transactions have been properly recorded.

What is the unadjusted balance of the Home Office account on the branch books on December
31? a. P 64, 140
b. P 39, 140
c. P 14, 000
d. P 13, 000
7. A reconciliiation of the Dagupan Branch account of Mandaluyong Company and the Home Office account
carriedin the branch’s books shown the following discrepancies at December 31,2016.
1. A credit for merchandise allowance for P 300 was taken by the branch as P 360.
2. A charge by the branch of P 550 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 Invesrment in Dagupan Branch account in the home office books had a debit balance of P 43,000 at
December 31,2016. The reciprocal accounts were in agreement at the beginning of the year.
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The unadjusted balance of the Home Office account in the branch’s books at December 31,2016
was: a. P 43, 500
b. P 42, 950
c. P 41, 990
d. P 41, 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 a 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 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, 2016 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 adjusting memo, reducing the
charge by P100 and set up a liability for the next 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 change 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, 2014 correcting
item (f) and entered a credit in favor of the Home Office as of June 30, 2016.
At June 30, 2016, the unadjusted balance of the Investment in Branch account on the Home Office books
showed P175,520. At the beginning of the year, the interoffice accounts were in balance.

What is the unadjusted balance of the Home Office account on the branch books on June 30,

2016? a. P184,279.50

b. P160,725.50
c. P18,729.00
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, 2016 the inventories of the Home Office in Manila and the Cebu City branch
are P13,600 and P3,960 respectively. During 2016, the Home Office purchased merchandise costing
P40,000 and shipped 40% of it to the Cebu City branch. At December 31, 2016, 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
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Shipments from main store 17,600

Expenses 10,480
Home Office 4,800
What was the actual branch income for 2016 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