lOMoARcPSD|8683858 Advanced Accounting Part2 Dayag 2015 Chapter 12 Advanced Financial Accounting and Reporting Part II (Palawan State University) StuDocu is not sponsored or endorsed by any college or university Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) lOMoARcPSD|8683858 Chapter 12 Problem I (a)Working Fund – Agency ……………………………… ……………………….. Cash …………………………………………………………………………. (b)Accounts Receivable …………………………………..................................... Sales-Agency ………………………………………………………………. 5,000 5,000 50,000 50,000 (c)Cash ………………………………………………………..................................... Accounts Receivable …………………………………………………….. 35,000 35,000 (d)Expenses-Agency ……………………………………………………………….. Cash …………………………………………………………………………. 4,500 (e)Expenses-Agency ……………………………………………………………….. Cash …………………………………………………………………………. 2,250 4,500 2,250 (f) Cost of Goods Sold-Agency …………………………………………………… 36,000 Merchandise Inventory - Agency ………………………………………. 36,000 2. Sales……………………………………………………………………………….P 50,000 Less: CGS………………………………………………………………………… 36,000 GP………………………………………………………………………………….P 14,000 Less: Expenses (P4,500 + P2,250)…………………………………………….. 6,750 Net income – agency………………………………………………………….P 7,250 Problem II (a) Branch Books: (a) Cash ………………………………………………………….. Home Office …………………………………………… 42,500 (b) Shipments from Home Office …………………………… Home Office …………………………………………... 50,200 (c) Accounts Receivable ……………………………………. Sales …………………………………………………….. 60,000 (d) Purchases …………………………………………………… Accounts Payable …………………………………… 22,500 (e) Home Office ……………………………………………….. Accounts Receivable ………………………….. 53,400 (f) Accounts Payable ………………………………………... Cash …………………………………………………….. 12,250 (g) Furniture & Fixtures ………………………………………… Cash …………………………………………………….. (h) Expenses …………………………………………………….. Cash …………………………………………………….. 42,500 50,200 60,000 22,500 53,400 12,250 8,000 8,000 18,000 Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) 18,000 lOMoARcPSD|8683858 (b) Home Office Books: (a) Branch ………………………………………………………. Cash ……………………………………………………. 42,500 (b) Branch ……………………………………………………… Shipments to Branch ……………………………….. 50,200 (c) Accounts Receivable …………………………………... Sales …………………………………………………… 105,000 (d) Purchases …………………………………………………. Accounts Payable …………………………………. 122,500 (e) Cash ……………………………………………………….. Accounts Receivable ……………………………… 113,600 (f) Accounts Payable ………………………………………. Cash …………………………………………………… 124,000 42,500 50,200 105,000 122,500 113,600 124,000 (g) Expenses …………………………………………………… Cash …………………………………………………… 26,600 (h) Cash ……………………………………………………….. Branch ………………………………………………... 53,400 (i) Retained Earnings ………………………………………. Cash …………………………………………………... 10,000 26,600 53,400 10,000 BARTON CO. Balance Sheet for Branch December 31, 20x4 Assets Liabilities Cash …………………………… 10,250 Accounts Receivable ……… 300 Merchandise Inv……………... 37,900 Prepaid Expenses …………… Furnitures & Fixtures …. P 8,000 Less accum. Depr …… 650 Total Assets …………………… ………………….P48,450 P 4,250 Accounts Payable ………… P 12,600 Accrued Expenses …………… 23,500 Home Office ………………….. 750 7,350 P48,450 Total Liabilities BARTON CO. Income Statement for Branch For Year Ended December 31, 19X6 Sales …………………………………………………………………………… P66,000 Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) lOMoARcPSD|8683858 Cost of Goods Sold: Purchases …………………………………………………………… Shipments for home office ………………………………………. Merchandise available for sale ………………………………… Less merchandise inv, December 31 ………………………….. Cost of Goods Sold ……………………………………………….. Gross Profit ……………………………………………………………………. Expenses ……………………………………………………………………… Net loss ………………………………………………………………………... BARTON CO. Income Statement for Branch For Year Ended December 31, 20x4 Assets P22,500 50,200 P72,700 23,500 49,200 P16,800 18,200 P 1,400 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 For Year Ended December 31, 20x4 Sales ……………………………………………………………………………....... Cost of goods sold: Merchandise inventory, January 1 …………………………………. Purchases ………………………………………………………………... Merchandise available for sale ……………………………………… Less shipments to branch ……………………………………………... Merchandise available for own sale ……………………………….. Less merchandise inventory, December 31 ………………………. Cost of Goods Sold ……………………………………………………. Gross Profit ………………………………………………………………………… Expenses …………………………………………………………………………… Net income from own operations …………………………………………….. Deduct branch net loss …………………………………………………………. Total Income ………………………………………………………………………. P105,000 P 40,120 122,500 P162,620 50,200 P112,420 48,500 63,920 P 41,080 27,630 P 13,450 1,400 P 12,050 BARTON CO. Income Statement for Home Office For Year Ended December 31, 20x4 Sales …………………………………………………………………………………. Cost of goods sold: Merchandise inventory, January 1 ………………………………….. Purchases ………………………………………………………………… Merchandise available for sale ……………………………………… Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) P171,000 P 40,120 145,000 P185,120 lOMoARcPSD|8683858 Less merchandise inventory, December 31 ……………………….. Cost of goods sold ………………………………………………………. Gross profit ………………………………………………………………………….. Expenses …………………………………………………………………………….. Net Income …………………………………………………………………………. 72,000 113,120 P 57,880 45,830 P 12,050 (a) Branch Books: Expenses ………………………………………………………………. Accumulated Depreciation – F&F………………………. Sales …………………………………………………………………… Merchandise Inventory ……………………………………………. Income summary ………………………………………….. 650 650 66,000 23,500 89,500 Income Summary …………………………………………………… Shipments from Home Office …………………………… 50,200 Purchases …………………………………………………… 22,500 Expenses …………………………………………………….. 90,900 18,200 Home Office ………………………………………………………… Income Summary ………………………………………… 1,400 1,400 (b) Home Office Books Expenses ………………………………………………………………. Accumulated Depreciation – F&F………………………. 1,180 1,180 Sales …………………………………………………………………… Merchandise Inventory ……………………………………………. Shipments to Branch ……………………………………………….. Income summary ………………………………………….. 105,000 48,500 50,200 203,700 Income Summary …………………………………………………… Merchandise Inventory …………………………………… Purchases ……………………………………………………. Expenses …………………………………………………….. 190,250 Branch Income ……………………………………………………… Branch ………………………………………………………. 1,400 40,120 122,500 27,630 1,400 Income Summary ………………………………………………….. Branch Income …………………………………………… 1,400 Income Summary ………………………………………………….. Retained Earnings ……………………………………….. 12,050 1,400 12,050 Problem III Journal and Adjusting Entries – Home Office and Branch Home Office Books INTERCOMPANY 1/1 a Branch Current . . . . . . . 1,500 1,500 / Branch Books INTER-OFFICE Transactions Cash . . . . . . . . . . . . . . . . . . . ... Home Office Current. . . . . . Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) 1,500 1,500 lOMoARcPSD|8683858 Cash . . . . . . . . . . . . . . . b c d. Shipment to branch, cost Branch Current . . . . . . 10,20 0 SFF - Branch Store Furniture & Fixt 3,000 10,20 0 Acc. Depreciation – SFF Acc. Deprec. SFF – Br. P3,000 x 10% x 2.5 yrs 750 SFF – Branch . . . . . . . . . . Branch Current . . . . . . 900 Branch Current . . . . . . . 3,000 No entry – eqpt accounts maintained in the HO books 750 No entry – eqpt accounts maintained in the HO books 900 2,600 Accounts Receivable Home Office Current . . . . . . . . Shipments from Home Office 10,200 10,20 0 Home Office Current . . . . . . . . Cash . . . . . . . . . . . . . . . . . .. Accounts Receivable - HO 2,600 900 900 2,600 Home Office Current. . . . . 2,600 . 1/1 – 1/31 Transaction with Outsiders Accounts Receivable . . . 34,60 0 34,60 0 Sales.. . . . . . . . . . . . . . . Cash. . . . . . . . . . . . . . . ... Accounts Receivable 40,00 0 Purchases . . . . . . . . . . . . Accounts Payable . . 31,60 0 Accounts Payable . . . . . 36,20 0 Cash. . . . . . . . . . . . . 1/1 – 1/31 6,200 Sales.. . . . . . . . . . . . . . . 6,200 2,600 40,00 0 Cash . . . . . . . . . . . . . . . . . . . ... Accounts Receivable . . . . . 3,000 31,60 0 Purchases. . . . . . . . . . . . . . . ... Accounts Payable. . . . . . . . Accounts Payable . .. . . . . . . . 1,450 36.20 0 .. Accrued expenses . . . . . Expenses. . . . . . . . . . . . . . Cash. . . . . . . . . . . . . .. Accounts Receivable . . . 250 3,000 Cash. . . . . . . . . . . . . . . Expenses . .. . . . . . . . . . . . . . .. Cash. . . . . . . . . . . . . . .. . . .. 8,950 2,600 1,450 1,250 1,250 9,200 Intercompany / INTER-OFFICE Transactions Allowance for D/A. . . . . 150 Branch Current . . . . . . 150 Shipment to branch ,cost Branch Current . . . . . . 1,250 Cash. . . . . . . . . . . . . . . . . 1,000 1,250 Cash . . . . . . . . . . . . . . . . . . . ... Accts. Rec. – HO……………. 1,600 Home Office Current . . . . . . . . Accts. Rec. – HO……………. 150 Home Office Current . . . . . . . . Shipments from Home Office 1,250 Home Office Current . . . . . . . . 1,000 Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) 1,600 150 1,250 lOMoARcPSD|8683858 Branch Current . . . . . . 1,000 1,000 Cash. . . . . . . . . . . . . . . . . . . Adjusting Entries a. b. Shipment to branch, cost Branch Current . . . . . . 600 Branch Current . . . . . . .. 475 600 475 Expenses. . . . . . . . . . . c. 600 Expenses. . . . . . . . . . . . . . . .... Home Office Current . . . . . . 475 600 475 Branch Current.. . . . . . 35 Expenses. . . . . . . . . . . . . . . 35 .. .... Acc. Deprec. SFF – 35 Home Office Current . . . . . 35 Br. . P3,000/10 years x 1/12 = P25 (depreciation for one month; Asset life, 10 years); P900 / 7.5 years, remaining life = P120 x 1/12= P10) Expenses. . . . . . . . . . . . 100 .. Acc. Deprec. – SFF [(P15,000 – P3,000)/10 x 1/12] d. e. Home Office Current . . . . . . . . Shipments from Home Office Included in closing entries Expenses. . . . . . . . . . . . .. Accrued expenses. . . 100 750 Expenses. . . . . . . . . . . . . . 750 350 Accrued expenses. . . 350 Closing Entries Sales. . . . . . .. . . . . . . . ... Merch. inventory, ending Shipments to branch 34,60 0 44,50 0 12,05 0 Merch. Inv. , beg……. Sales. . . . . . .. . . . . . . . . . . Merch. inventory, ending (P9,800 + P600) 46,00 0 31,60 0 Purchases. . . . . . . . . . Expenses (9,200 – 250 - 475 + 100 + 750)….. Income Summary…… Income Summary. . . . . . . 10,400 560 Merch. Inv. , beg……. 0 Purchases. . . . . . . . . . Branch Income Summary Branch Current………. 560 Income Summary……….. Branch Income Sum 560 9,325 Shipments from HO 4,225 (P10,200 + P1,250 +P600) Expenses (1,250 + 475 + 35 + 350)……………. 560 Income Summary……….. Retained Earnings….. 6,200 Home Office Current . . . . . . . . Income Summary . . . . . . . . 560 3.665 3,665 Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) 3,000 12,050 2,110 560 560 lOMoARcPSD|8683858 EAGLE CO. Balance Sheet for Branch January 31, 20x4 Assets Liabilities Cash …………............................ Accounts Receivable ………….. Accts. Rec.-home office ………. Merchandise Inventory ………… Merchandise in Transit …………. Total assets ………………… P15,950 P 1,100 3,600 850 9,800 600 P15,950 Accounts Payable ………………. P 1,550 Accrued expenses ………………. 350 Home Office ……………………… 14,050 Total Liabilities ……………………. EAGLE CO. Income Statement for Branch For Month Ended January 31, 20x4 Sales …………………………………………………………………………………………. P 6,200 Cost of Goods Sold: Merchandise inventory, beginning………………………………..P 0 Add: Purchases ………………………………………………………. 3,000 Shipments from home office (P11,450 +P600, in-transit) 12,050 Merchandise Available for Sale ……………………….. P 15,050 Less: Merchandise inv. Dec 31, 19x4 (P9,800 + P600)…. 10,400 Cost of Goods Sold ……………………………………………………………. 4,650 Gross Profit ………………………………………………………………………………… P 1,550 Expenses …………………………………………………………………………………… 2,110 Net Loss, from own operations………………………………………………………… P 560 EAGLE CO. Balance Sheet for Home Office January 31, 20x4 Assets Cash …………………………………………………………………… Accounts Receivable ……………………………………………… P34,000 Less allowance for doubtful accounts ……………….. 1,050 Merchandise Inventory ……………………………………………. Store furniture and fixtures ………………………………………… P12,000 Less accumulated depreciation ………………………. 3,950 Store furniture and fixtures-branch ……………………………… P 3,900 Less accumulated depreciation ……………………… 785 Branch office ………………………………………………………... Total Assets …………………………………………………………… P 9,100 32,950 44,500 8,050 3,315 14,050 P111,765 Liabilities Accounts Payable …………………………………………….. P29,150 Accrued Expenses …………………………………………….. 750 Total Liabilities ………………………………………………….. Stockholders’ Equity Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) P29,900 lOMoARcPSD|8683858 Capital Stock ……………………………………………………P50,000 Retained earnings …………………………………………….. 31,865 Total stockholder’s equity …………………………………… Total liabilities and stockholders’ equity …………………… 81,865 P111,765 EAGLE CO. Income Statement for Home Office For Month Ended January 31, 20x4 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. Income Statement for Home Office For Month Ended January 31, 20x4 Assets Liabilities’ 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 doubtFul 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 For Month Ended January 31, 20x4 Sales ………………………………………………………………………………….. 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 …………………………………............................... Gross profit …………………………………………………………………………... Expenses ……………………………………………………………………………… Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) P 40,800 25,700 P 15,100 11,435 lOMoARcPSD|8683858 Net Income ………………………………………………………………………….. EAGLE CO. Combined Balance Sheet January 31, 20x4 Assets Cash …………………………………………………………………… Accounts Receivable ……………………………………………… P38,450 Less: Allowance for doubtful accounts ………………………… 1,050 Merchandise Inventory ……………………………………………. Store furniture and fixtures ………………………………………… P15,900 Less: Accumulated depreciation ……………………………….. 4,735 Total Assets …………………………………………………………… Liabilities Accounts Payable …………………………………………….. P30,700 Accrued Expenses …………………………………………….. 1,100 Total Liabilities ………………………………………………….. Stockholders’ Equity Capital Stock …………………………………………………… Retained earnings …………………………………………….. Total stockholder’s equity …………………………………… Total liabilities and stockholders’ equity …………………… P 3,665 P 10,200 37,400 54,900 _ 11,165 P113,665 P 31,800 P50,000 31,865 81,865 P113,665 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 To record acquisition of office equipment by branch. Cash in Transit Investment in Plato Branch To record cash in transit from branch. Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) 14,500 22,000 22,000 lOMoARcPSD|8683858 (b) Accounting records of branch: Home Office 9,000 Trade Accounts Receivable To record collection by home office of branch accounts receivable. Inventories in Transit Home Office To record shipment of merchandise in transit from home office. Problem V ((a) Balances before Adjustments ……………………………………….. Adjustments: Additions: Merchandise in transit to branch …………………. Collection of Home office receivable by Branch Understatement of branch net income for Nov.. Deductions: Merchandise return to home office in transit ……………. Corrected Balances ……………………………………………… 24,000 24,000 BRANCH ACCOUNT P 8,400 HOME OFFICE ACCOUNT… P 9,735 615 2,500 90 P10,990 P10,350 640 P10,350 P10,350 (b) Branch Books: Shipments from Home Office-in Transit ……………………. Home Office …………………………………………... Home Office Books: Branch …………………………………………………………… Accounts Receivable ……………………………….. 9,000 615 615 2,500 2,500 Branch …………………………………………………………… Retained Earnings ……………………………………. 90 90 Merchandise Returns from Branch – in Transit ……………. Branch ………………………………………………….. 640 640 Problem VI 1. Branch Account Balances before adjustments Adjustments: Additions: Advertising charged to branch but not yet recorded on branch books Merchandise in transit to branch but not yet shown on branch books Collection of home office account by branch not yet recorded by home office P 77,150 Home office Account P 56,450 600 4,400 ____750 Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) _______ lOMoARcPSD|8683858 P77,900 Deductions: Overstatement of branch profit for 20x0 on home office books Cash in transit to home office but not yet shown on home office books Overstatement of charge for merchandise from home office on branch books (home office shipped 200 units @ P37.85, or P7,570, and 200 units @ P44,95, or P8,990, a total of P16,560; branch erroneously recorded shipment at P16,650, an overstatement of P90 Corrected balances 540 16,000 _______ P 61360 2. Home office books: Jan. 31 Retained Earnings Wilshire Branch 31 31 Cash in Transit Wilshire Branch 31 ___90 P 61,360 540 540 16,000 16,000 Wilshire Branch Accounts Receivable 750 750 Branch Books: Jan. 31 Advertising Expense Home Office 31 P61,450 600 600 Shipments from Home Office – In Transit Home Office 4,400 4,400 Home Office Shipments from Home Office 90 90 Problem VII 1. Branch Account Balances before adjustments Adjustments: Additions: Corrected branch income for January (P1,440 – P215) Understatement of branch paid by home office for December Expenses of branch paid by home office P 59,365 Home Office Account P 57,525 1,225 310 _______ P 60,900 Deductions: Collection by home office of branch receivable Correction of branch income for January Merchandise transferred to Brentwood branch but Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) ____215 P 57,740 65 215 lOMoARcPSD|8683858 incorrectly charged by Beverly Hills branch Merchandise returns to home office in transit Uncollectible accounts of branch Corrected Balances 1,400 840 __1,200 P 57,460 _______ P 57,460 2. (a) Entries to bring branch books up to date: Correction in Income of Prior Periods Home Office 215 Home Office Income Summary 215 215 215 Home Office Accounts Receivable 65 65 (b) Entries to bring home office books up to date: Beverly Hills Branch Beverly Hills Branch Income Beverly Hills Branch Retained Earnings 1,225 1,225 310 310 Shipments to Beverly Hills Branch Beverly Hills Branch 1,400 Brentwood Branch Shipments to Brentwood Branch 1,400 1,400 Merchandise Returns from Branch – In Transit – Beverly Hills Branch Beverly Hills Branch 1,400 840 Allowance for Doubtful Accounts – Beverly Hills Branch 1,200 Beverly Hills Branch Problem VIII 1. Home Office (b) Mdse. allowance by home (a) Charge for office furniture office 350.00 by home office (f) Truck repairs charged by (d) Charge for labor by home home office 293.00 office (e) Charge for freight by home office (h) Proceeds from sale of truck 643.00 Net credit Total 1,556.5 0 1,229.5 0 Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) 840 1,200 780.00 866.00 78.50 475.00 2,199.5 0 _______ 2,199.5 0 lOMoARcPSD|8683858 (a) Purchase of office furniture for branch (c) Branch charge for interest (d) Branch charge for labor (e) Branch charge for freight Branch (b) Mdse. allowance for 870.00 branch 325.00 (g) Proceeds from sale of truck 433.00 _785.0 0 2,413.0 0 _______ Net Debit Total 2,413.0 0 Balance in branch account per home office book, September 30, 20x2 Deduct net debit total per home office books for transactions that involve discrepancies Add net credit total per branch books for transaction that involve discrepancies Balance in home office account per branch books, September 30, 20x2 300.00 475.00 ______ 775.00 1,638,00 0 _2,413.0 0 P 131,690.00 1,638.00 P 130,052.00 __1,556.50 P 131,608.50 2. Balance in home office account per branch books, September 30, 20x2 Add: P 131,608.50 (a) Failure by branch to take up full furniture charges (b) Recognition by branch of excess merchandise allowance (c) Failure by branch to recognize charge by home office for interest (e) Failure by branch to recognize full freight charges (f) Truck repairs charge to home office account in error P 90.00 Deduct: (d) Recognition by branch of excess labor charges (h) Credit entry to home office made in error on sale of truck Corrected interoffice balance, September 30, 20x2 433.00 50.00 325 706.50 293.00 __475.00 ___1,464.50 P 133,073.00 ___908.00 P 132,265.00 3. Balance in branch account per home office books, September 30, 20x2 Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) P lOMoARcPSD|8683858 131,690.00 Add credit to branch account made in error for proceeds from sale of truck Corrected interoffice balance, September 30, 20x2 _____475.00 P 132,265.00 4. Office Furniture Merchandise allowances Home office interest charges payable Interest expense Freight In Repairs on truck Labor Trucks Home Office 90.00 50.00 250.00 75.00 706.50 293.00 433.00 475.00 556.50 Multiple Choice Problem 1. d Branch A Assets: Inventory, January 1 Imprest branch fund Accounts receivable, January 1 Total Assets Less: Liabilities Home Office Current Account P 21,000 2,000 55,000 P 78,000 -0P 78,000 Branch B P 19,000 1,500 43,500 P 64,000 -0P 64,000 2. b Branch A Assets: Inventory, December 31 Imprest branch fund Accounts receivable, December 31 Total Assets Less: Liabilities Home Office Current Account P 19,000 2,000 70,000 P 91,000 -0P 91,000 Branch B P 12,000 1,500 53,500 P 67,000 -0P 67,000 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 1,20x4 Assets: Inventory Petty cash fund Accounts receivable Total Assets Less: Liabilities Home Office Current Account P 37,000 3,000 43,000 P 83,000 _____-0P 83,000 5. a – refer to No. 4 for computations 6. a Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) January 1, 20x5 P 41,000 3,000 49,000 P 93,000 _____-0P 93,000 lOMoARcPSD|8683858 Sales Less: Cost of goods sold: SFHO…………………………………………………………… Less: Inventory, ending……………………………………… Gross profit…………………………………………………………… Less: Expenses – Net Loss……………………………………………………………….. P 74,000 P67,680 9,180 58,500 P 15,500 6,820 P 8,680 7. a January 1, 20x6 Assets: Cash Inventory Accounts receivable Total Assets Less: Liabilities Home Office Current Account P 4,200 9,180 12,800 P 26,180 _____-0P 26,180 8. a – nominal accounts have zero beginning balance. 9. d Branch Current Unadjusted balance, 6/30/20x4 Add (Deduct): Adjustments 1 Erroneous recording of branch equipment 2. Insurance premium recorded twice P 225,770 H. Office Current P 226,485* ( 3150 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 3,000 ________ Cebu 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. 10. c Unadjusted balance Add (deduct) adjustments: In transit Remittance Returns Cash in transit Expenses - HO Expenses – branch Error Adjusted balance Home Office Books (Branch CurrentDr. balance) P518,575 Branch Books (Home Office Current – Cr. balance) P452,276 10,500 ( 17,000) ( 775) 25,000 ( 800) 12,000 _____224 P 500,000 ________ P 500,000 11. d Home Office Books (Branch CurrentDr. balance) Branch Books (Home Office Current – Cr. balance) Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) lOMoARcPSD|8683858 Unadjusted balance Add (deduct) adjustments: Excess freight Cash in transit Returns Expenses – branch Adjusted balance P515,000 P495,750 ( 750) ( 11,000) ( 4,000) ________ 5,000 P 500,000 P 500,000 12. 13. 14. 15. c – refer to No. 11 for computations a – refer to No. 11 for computations d – refer to No. 11 for computations 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. a Home Office Books Branch Books (Home Office Current – (Branch CurrentDr. balance) Cr. balance) Unadjusted balance P85,000 P33,500 Add (deduct) adjustments: Collection of branch receiv ( 9,000) Shipments in transit 24,000 Purchase by branch of office equipment ( 14,500) Remittance ( 22,000) _________ Adjusted balance P 48,500 P 48,500 17. b Unadjusted balance Add (deduct) adjustments: Remittance Returns Error by the branch Expenses – branch Adjusted balance Home Office Books (Branch CurrentDr. balance) P590,000 Branch Books (Home Office Current – Cr. balance) P506,700 (40,000) (15,000) ________ 300 28,000 P 535,000 P 535,000 Home Office Books (Branch CurrentDr. balance) P150,000 Branch Books (Home Office Current – Cr. balance) P117,420 18. c Unadjusted balance Add (deduct) adjustments: In transit HO A/R collected by br. Supplies returned Error in recording Br. NI Cash sent to branch to General Expense by HO Adjusted balance 37,500 10,500 ( 4,500) ( 1,080) 25,000 P 179,920 Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) 25,000 P 179,920 lOMoARcPSD|8683858 19. d – refer to No. 18 for computation. 20. a Unadjusted balance Add (deduct) adjustments: In transit HO A/R collected by br. Cash in transit Error in recording Br. NI Adjusted balance Home Office Books (Branch Current- Dr. balance) P40,000 Branch Books (Home Office Current – Cr. balance) P31,100 5,800 500 2,000 ( 3,600) P38,900 2,000 _______ P38,900 Home Office Books (Branch Current- Dr. balance) P49,600 Branch Books (Home Office Current – Cr. balance) P44,00 21. a – refer to No. 20 for computations 22. a Unadjusted balance Add (deduct) adjustments: Collection of branch A/R In transit Purchase of furniture Return of excess merchandise Remittance Adjusted balance ( ( 1,200) ( 1,500) ( 500) P46,400 800) 3,200 _______ P46,400 23. b – refer to No. 22 for computations 24. (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) 25. 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. Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) lOMoARcPSD|8683858 26. d Normally, transactions of the agency are recorded in the books of the home office separately identified with the appropriate agency. Theories 1. decentralized 2. Home Office Current 3. Branch Income 4. Home Office 5. intracompany 6. True 7. True 8. False 9. False 10 , True 11 . 12 . 13 . 14 . 15 . 16 . 17 . 18 . 19 . 20 . False False False True True False True False True True 21 . 22 . 23 . 24 . 25 . 26 . 27 . 28 . 29 . 30 . False True True True False C A A D A 31 . 32 . 33 . 34 . 35 . 36 . 37 . 38 . 39 . 40 . E B c d A C A B B B Downloaded by Tuppa & Toph (tuppa.and.toph@gmail.com) 41 . 42 . 43 . 44 . 45 . 46 . 47 . 48 . 49 . 50 . 51 . 52 . A C B D D C B B C C C D