NEGROS ORIENTAL STATE UNIVERSITY M.

NAPAROTA, CPA
College of Business Administration ACCY 303 (Chapter Exam)
Accountancy Department

Name: ___________________________________ Section: ____________ Score: ___________

Instruction: Encircle the corresponding letter of the correct answer.

1. On January 1, 2022, Paul Company established a branch in a nearby city. At the close of the
calendar year ended December 31, 2019, the investment in branch account on the books of the home
office had a balance of P66,000. The branch books reflected another amount thus the difference in
the reciprocal accounts is due to the following data:

• Cash of P10,000 forwarded to the home office by the branch is in transit and has not been
recorded on the home office books.

• Merchandise costing the home office P8,000 was transferred to the branch at a billing price of
P9,000. The merchandise is in transit and has not been recorded on the branch books.

• Notification sent by the home office to the branch, informing the branch of P5,000 of operating
expenses that the home office paid on behalf of the branch, has not been received by the
branch and thus has not been recorded by the branch. the home office books.

• Cash of P2,000 received by the branch from the home office was erroneously recorded by the
branch as P20,000.

• The branch purchased, for cash P15,000 of equipment for its use; fixed asset accounts of the
branch are maintained at the home office. Notification sent to the home office by the branch,
informing the home office of the branch's action has not been received, by the home office
and thus has not been recorded by the home office.
How much is the unadjusted balance of home office account on branch's books?

A. P87,000
B. P41,000
C. P62,000
D. P45,000

2. Which of the following reconciling transactions will require credit to home office current account in
Branch A's Book for the adjustment?

A. Collection by Branch A of Branch B's account receivable.

B. Credit memo received by Branch A from, Home Office.
C. Payment by Branch A of Home Office 's accounts payable.
D. Reshipment of goods received by Branch A to Branch B.

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 303 (Chapter Exam)
Accountancy Department

For items 3 and 4:

During the first year of operations, the books of Bacolod Branch showed the following balances:

Sales 1,200,000
Shipments from home office 1,120,000
Purchases 120,000
Ending inventory 200,000
Operating expenses 150,000

Shipments to branch were billed at 140% of cost. The ending inventory of the branch included P26,400
from outside purchases.

3. What amount should be reported as ending inventory of the Bacolod branch at cost?

A. 200,000
B. 173,600
C. 150,400
D. 269,440

4. What amount should be reported as true net income of Bacolod branch?

A. 280,400
B. 10,000
C. 254,000
D. 270,400

5. The unadjusted balance in the allowance for overvaluation account at the end of the year
represents

A. The mark-up on the merchandise shipped to the branch during the year.
B. The mark-up on cost of goods sold by the branch for the year.
C. The mark-up on the merchandise available for sale by the branch for the year.
D. The mark-up on the merchandise shipped to the branch during the year less the mark-up on the
merchandise returned by the branch during the year.

6. Which of the following reconciling transactions will require a credit to the home office account in
Branch X's books?

A. Credit memo received by Branch X from the home office.

B. Collection by Branch X of Branch Y's accounts receivable.
C. Reshipment of goods received by Branch X to Branch Y.
D. Payment of Branch X of home office's accounts payable.

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 303 (Chapter Exam)
Accountancy Department

7. Neither Branch A nor the Home Office had any intracompany transactions for the month of October.
However, the balance of the Home Office Current account in the books of Branch A was greater than
the Investment in Branch account in the books of the Home Office. What is the most likely reason for
the discrepancy?

A. The branch reported a net income for the month of October.

B. The home office reported a net loss for the month of October.
C. The branch returned merchandise to the home office.
D. The branch reported a net loss for the month of October.

For items 8 and 9:

On October 1, 2021 the Home Office established a branch and on December 31, 2021, in the books of
the Home Office, the balance of the Investment in Branch account was P132,000. However, there were
some errors in recording the reciprocal accounts. The following were the relevant transactions that
were investigated:

a) The branch purchased for cash P30,000 machine for its use. The policy of the home office was that
the fixed asset accounts were maintained by the home office. Notification was sent to the home office
by the branch, but the home office did not record the transaction.
b) Cash of P4,000 was received by the branch from the home office, and was erroneously recorded
by the branch as P40,000.
c) Notification was sent by the home office to the branch, informing the branch of P10,000 worth of
expenses were paid on behalf of the branch. However, the branch did not receive the said notification
and the branch had not recorded the transaction.
d) Merchandise costing P16,000 was sent by the home office to the branch at a billed price of P18,000.
The merchandise is still in transit.
e) Cash of P20,000 was remitted or forwarded to the home office by the branch. However, the home
office did not record the transaction.

8. What is the adjusted balance of the reciprocal accounts?

A. 82,000
B. 182,000
C. 122,000
D. 142,000

9. What is the unadjusted balance of the home office account in the branch books?

A. 174,000
B. 82,000
C. 124,000
D. 90,000

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 303 (Chapter Exam)
Accountancy Department

For items 10 to 12:

Bacolod Company decided to open a branch in Silay. Shipments of merchandise to the branch
totaled P1,080,000 which included a 20% markup on cost. All accounting records are kept at the home
office. The branch submitted the following report summarizing the operations for the year ended
December 31, 2021:

Sales on account 2,400,000

Sales on cash basis 1,000,000
Collections of accounts receivable 1,600,000
Expenses paid 560,000
Expenses unpaid 240,000
Purchases from outside suppliers for cash 1,000,000
Inventory on hand, December 31, 80% from home office 600,000
Remittance to home office 1,100,000

10. What amount should Bacolod Company report as Silay branch inventory on December 31,
2021 at cost?

A. 520,000
B. 400,000
C. 500,000
D. 200,000

11. What amount should Bacolod Company report as Silay branch net income for 2021?

A. 1,460,000
B. 1,220,000
C. 220,000
D. 1,380,000

12. What is the total goods available for sale reported by the Silay branch?

A. 1,080,000
B. 1,900,000
C. 1,000,000
D. 2,080,000

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 303 (Chapter Exam)
Accountancy Department

For items 13 and 14:

Selected items from the records of the ALBAY Home Office and its OAS Branch Office for 2022 follow:

ALBAY Ho OAS Branch

Inventory, January 1 P 12,000 P?
Purchases 150,000 30,000
Shipment from Home Office 93,750
Shipment to Branch Office 75,000
Allowance for overvaluation of BI 19,750
Operating expenses 20,000 15,000
Inventory, December 31 14,000 10,875
Sales 200,000 150,000

There are no shipments in transit at December 31. Forty percent (40%) of the branch inventory at year-
end is acquired from other vendors. The beginning inventory in the branch from the Home Office at
actual cost is P5,000 and the beginning inventory in the branch from other vendors was P2,000.

13. The amount of inter-office inventory profit realized from branch sales to outsiders in 2022 is

A. P17,430 C. P18.205
B. P18,445 D. P18,545

14. The combined net income to be reported for 2022 will be

A. P193,750 C. P139,750
B. P319,750 D. P139,570

15. On December 31, the Investment in Branch account on the home office books of the Unlimited
Company shows a balance of P168,000. The following are some of the transactions between the home
office and the branch:

a. Merchandise billed at P12,300 was shipped by the home office to the branch on December 28. The
merchandise is in transit and has not been recognized on the books of the branch.
b. The branch collected a home office accounts receivable of P50,000 but failed to notify the home
office of this collection.
c. The home office was charged P12,800 when the branch returned merchandise to the home office
on December 31. The merchandise is in transit.
d. The home office recorded incorrectly the branch net income for November at P22,500. The branch
reported net income of P25,200.

The unadjusted balance of the Home Office account was:

A. P180,300 C. P220,200
B. P168,000 D. P195,600

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 NEGROS ORIENTAL STATE UNIVERSITY M. NAPAROTA, CPA
College of Business Administration ACCY 303 (Chapter Exam)
Accountancy Department

For items 16 to 19:

Perfect Corporation has two branches to which merchandise is transferred at cost plus 20%, plus freight
charges. Freight charges are paid at shipping point and are inventoriable. On November 30, 2021,
Perfect shipped merchandise that cost P5,500 to its Angeles City Branch, and the P200 shipping
charges were paid by Perfect. On December 15, 2021, the Cabanatuan City branch encountered an
inventory shortage, and the Angeles City branch shipped the merchandise to the Cabanatuan City
branch at a freight cost of P160 paid by the Angeles City branch. Shipping charges from the HO to the
Cabanatuan City branch would have been P175.

16. Perfect will record the P5,500 shipment to the Angeles City branch, together with the P200 shipping
charge in a journal entry that includes the following:
A. Shipments from home office, P5,600
B. Shipment to Angeles City branch, P5,700
C. Unrealized profit- branch inventory, P1,100
D. Investment in Angeles branch, P5,700

17. Angeles City branch should record the transfer of merchandise to the Cabanatuan City branch by
either a debit or credit entry that includes the following:
A. Shipment from home office, P5,500
B. Cabanatuan City branch, P6,975
C. Home office, P6,960
D. Inventory, P5,660

18. If the merchandise is unsold at year-end, the Cabanatuan City branch will report the merchandise
at
A. P6,000 C. P6,760
B. P6,975 D. P6,775

19. If the merchandise is unsold at year-end, Perfect Corporation will include it as an asset in the Annual
Report to Stockholders in the amount of
A. P5,500 C. P5,675
B. P5,660 D. P5,875

20. If at the end of an accounting period the balance of the Investment in Branch ledger account in
the accounting records of the home office is P20, 000 and the balance of the Home Office account
in the accounting records of the branch (after the branch recorded closing entries) is P25.500, the most
likely explanation for the discrepancy of P5,500 is a:

a. Remittance of cash to the branch not recorded by the home office.

b. Net income of branch not recorded by the home office.
c. Net loss of branch not recorded by the home office.
d. Collection by the home office of a branch note receivable not recorded by the branch.

- END OF EXAMINATION -
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