10 Jul 2017

SW
Home Office and Branch Accounting

#1
A home office transfers inventory to its branch at a 20%
markup on cost. During 2008, inventory costing the home
office P80,000 was transferred to the branch. At year-end, the
home office adjusted its Unrealized Intercompany Inventory
Profit account downward by P18,000. The branch year end
balance sheet shows P4,800 of inventory acquired from the
home office.

How much is the beginning inventory of the branch at cost?

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#2
Sulu Inc. established a branch in Jolo to distribute part of the goods purchased by the
home office. The home office prices inventory shipped to the branch at 20% above cost.
The following account balances were taken from the ledger maintained by the home
office and the branch:
SULU INC. JOLO BRANCH
Sales 600,000 210,000
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
The entire branch inventory is acquired from the home office. On the basis of these
account balances, the combined net income of the home office and the branch is?

#3
The following data were taken from the records of Star Corporation of Manila
and its Bulacan Branch for 2008:
Manila Office Bulacan Branch
Sales 530,000 157,500
Inventory 57,500 22,250
Purchases 410,000
Shipment to Branch 105,000
Shipment to Home office 126,000
Inventory 71,250 29,250
Expenses 191,000 50,570
In 2008, Home office billed the branch at 120% of cost which was lower by 5%
than the last years. The combined net income of the home office and the
branch for 2008 was:

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#4
The LL Company established a branch in Makati on June 1, 2008. The
branch is to receive substantially all merchandise from the home office.
During the remainder of 2008, shipments to the branch amounted to
P180,000 which included a 20% mark up on cost. The branch purchased
P45,000 additional merchandise for cash and reported unsold
merchandise of P60,000 at year-end. The branch made sales of 292,500,
paid expenses of P72,000 and remitted to the home office all sales
proceeds. The allowance for overvaluation of branch inventory account
on the home office books showed a balance of P7,500 after adjustment.

Compute the (1) branch inventory on December 31, 2008 at cost, and (2)
the branch net income as far as the home office is concerned:

#5
The following information are extracted from the books and records of PP
Company and its branch. The balances are at December 31, 2009, The third year
of the corporations existence.
Home Office Books Branch Books
Sales 600,000
Expenses 200,000
Shipment from Home office 360,000
Allowance for overvaluation 72,500
The branch acquired all of its merchandise from the home office, The
inventories of the branch at billed prices are as follows:
January 1, 2009 P75,000
December 31, 2009 84,000
The adjusted profit of the branch in so far as the home office is concerned is:

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#6
On September 1, 2014, Ricky Company established two branches: Naga
and Cebu City branches. The home office transferred P80,000 worth of
cash and P 350,000 worth of inventory to its Naga branch and instructed
Naga to transfer 3/4 of the goods and cash received to Cebu City. In
addition, on November 1, 2014, shipments from home office were
received by Naga amounting to P125,000 and the branch paid freight
costs amounting to P6,500. 3/5 of the said shipments were sold to
outsiders. On December 1, 2014, Naga transferred half of the remaining
November shipments from the home office to Cebu City, with Cebu City
branch paying freight costs of P 2,500. Had the merchandise been shipped
from the home office to Cebu City branch, only P 1,900 worth of freight
would have been incurred. How much is the balance of the Cebu City
branch account in the home office books? 346,900

#7
On June 1, 2013, Makati Company established a sales agency in Fairview,
Quezon City. Upon the establishment of the sales agency the Makati office
sent merchandise samples costing P8,000 and a cash working fund of
P3,000 to be maintained on the imprest basis. During the month of June,
the sales agency reported to the home office sales orders. These were
billed at P70,000 of which P40,000 was collected. The sales agency paid
expenses of P2,800 but was reimbursed by the home office.

On June 30, 2013, the sales agency samples were valued at P6,000. It was
estimated that the gross profit on goods shipped to fill agency sales orders
averaged 40% of cost. What is the net income of the sales agency for the
month ended June 30, 2013?

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#8
On December 31, 2013 the Investment in Branch account on the home office books of
the Lady Company shows a balance of P84,000, and the Home Office account on the
books of the branch shows a balance of P97,350. The following data are determined in
accounting for the difference.
1. Merchandise billed at P6,150 was shipped by the home office to the branch on
December 28. The merchandise is in transit and had not been recognized on the books of
the branch.
2. The branch collected a home office accounts receivable of P25,000, but failed to notify
the home office of this collection.
3. The home office recorded incorrectly the branch net income at P11,250. The branch
reported net income of P 12,150.
4. The home office was charged P6,400 when the branch returned merchandise to the
home office on December 31. The merchandise is in transit.

What is the reconciled amounts of the reciprocal accounts on December 31?

#9
A reconciliation of the Investment in Branch account in the home office of Makati
company and the Home Office account carried on the branch books showed the following
discrepancies at December 31, 2013:
a. Collection of branch accounts receivable by the home office, P8,000: The
branch was not notified.
b. Shipment in transit to branch on December 31, 2013, P32,000.
c. Acquisition of furniture by the branch, P12,000. The fixed asset accounts is to
be maintained on the home office books. The home office had not been notified
of such acquisition.
d. Return of excess merchandise by the branch but not received yet by the home
office, P 15,000.
e. Cash remittance by the branch on December 31, 2013 was in transit, P5,000.
f. The balance of the home office account in the books of the branch on
December 31, 2011 is P440,000.
Compute the following balances on December 31, 2013: Unadjusted (Invt. In B) and
adjusted (H.O)

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#10
The following information are extracted from the books and records of PP Company and its
branch. The balances are at December 31, 2013 the fourth year of the company's operations.
Home Office Books Branch Books
Sales P200,000
Shipments to branch P60,000
Shipments from home office 80.000
Purchases 30,000
Expenses 60,000
Inventory, January 1, 2013 20,000
Allowance for overvaluation
of branch inventory 24,000
There are no shipments in transit between the home office and the branch. Both shipments
accounts are properly recorded. The ending inventory at billed price includes merchandise
acquired from the home office in the amount of P20,000 and P6,000 acquired from vendors for
a total of P26,000. How much of the branch beginning inventory was acquired from outsiders?

Answer Key
1. 14,000
2. 170,000
3. 56,255
4. 52,500 and 78,000
5. 109,500
6. 346,900
7. 15,200
8. 103,500
9. 496,000 and 464,000
10. 4,000