Agency Accounting
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 pay its expenses.
The transactions for 2011 are reflected in the branch trial balance that follows:
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………………………………………………. 202 500202 500
December 31 Inventory…………………...
30 000
Compute the (1) Net Profit of the branch, and (2) the branch current Account in the
home office books:
(1) 22 500 (2) 90 00
c. (1) 14 400 (2) 104 000
(1) 21 300 (2) 134 400
d. (1) 14 400 (2) 90 000
(adapted)
2. On December 31, 2012, the following data are in the records of the Cebu city branch of
the Claire Company.
Petty Cash…………………………………………..
Accounts receivable, Dec. 31,2011……….
Merchandise Inventory, Dec. 31,2011…..
Accounts Receivable, Dec. 31, 2012……...
Merchandise Inventory, Dec. 31,2012…..
Sales……………………………………………………
Sales Returns………………………………………
Accounts Receivable Written Off………….
Shipments From Home Office ……………..
Expenses (paid by home office)…………..
P 94 500
85 200
75 500
88 800
81000
272 700
4800
2000
220 600
25 500
If all cash collections in 2012 were remitted to Home Office,the total remittnaces
amounted to:
a.P 262 300
c. P 264 300
b.266 800
d. 267 100
(adapted)
3. A branch store in Caloocan was established by Carlo Company on March 1. Merchandise
was billed to the Branch at 125% at cost. Shipments of merchandise were as follows:
March 5…………………… P 120 000 (at billed price)
March 10………………… 50 000 (at billed price)
March 20………………… 35 000 (at billed price)
On March 22, the branch returned defective merchandise worth P3050. On March 31,
the branch reported net loss of (P 6 200) and merchandise inventory of P85 000. In the
Home Office Books, the cost merchandise sold by branch:
a.P 161 560
c. P 116 950
b.93 560
d. 161 950
(adapted)
4. Leila Co.’s Clark branch submitted the following data for 2011, its first year of operation:
Sales……………………………………..
Shipments from home office….
Operating expenses………………
Home office-current……………..
P 203 500 Cr.
186 120 Dr.
18 755
Dr.
48 125
Cr.
Shipments to the branch are billed at cost. The dec. 31 inventory of the branch was P 24
245. What is the correct balance on Dec. 31 n2011 of the branch account- current as per
home office books?
a.P 46 750
c. P65 505
b.48 125
d. 71 995
(adapted)
5. The following information pertains to shipments of merchandise from home office to
branch during 2011:
Home office’s cost of merchandise…………
Intracompany billing……………………………..
Sales by branch…………………………………….
Unsold merchandise at branch on
December 31 2011……………………..
P 160 000
200 000
250 000
20 000
In the combined income statement of Home office and branch for the year ended
December 31 , 2011. What amount of the above transactions should be included in
sales?
a.P 250 000
c. 200 000
b.230 000
d. 180 000
(AICPA)
6. Barros Corporation’s Shipments to and from it’s Brazil city branch are billed at 120% at
cost. On december 31, Brazil branch reported the following data at billed prices:
inventory, january 1, of P33 600 : shipments received from home office of P 840 000 :
shipments returned of P48 000 : and Inventory December 31, of P36 000. What is the
balance of the allowance for over-valuation of branch inventory on December 31 before
adjustments?
a. P 5600
c. P 6 000
b. 137 600
d. 145 600
(adapted)
7. The Cindy owns the highest crown in Dipolog city and a branch in Dapitan City. During
2011, the home office shipped to the branch supplies costing P 120 000 a billed price at
20% above cost. The Inventories of supplies at the branch were as follows: January 1,
2011 P90 000, December 31, 2011, P108 000. On December 31, 2011, the home office
holds inventories of P160 500 which includes P10 500 held on consignment. Both
locations use the periodic inventory method.
How much is the inventories in a combined balance sheet as of December 31, 2011?
a. P210 000
c. P270 000
b. 240 000
d. 300 000
(PhilCPA)
8. The Aparri Branch of ?Cagayan 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 excepts from the trial balance and data on the home office and Aparri Branch
for the month just ended:
Home Office Books:
Cr.
Allowance for overvaluation of
branch merchandise………………………….. P 740 000
Cr.
Shipment to branch…………………………… 1 700 000
Branch Books:
Dr.
Beginning Inventory…………………………… P 2 880 000
Shipments from home office……………… 2 040 000
Purchases………………………………………….. 820 000
Month-end additional data:
Ending inventory of branch…………………………… P 2 920 000
From home office at BP…………………….. P 2 340 000
From outsiders, at cost……………………… 580 000
For the month just ended:
The total cost of goods sold
Of Aparri Branch at cost
( net of overvaluation)
a. P 2 820 000
b. 2 470 000
c. 2 770 000
d. 2 470 000
The amount of allowance for
overvaluation that was
realized from branch sales
P 400 000
350 000
740 000
390 000
(adapted)
9. Fischer Company op[ened its Tuguegarao Branch on January 1. Merchandise shipments
from home office during the month, billed at 120% at cost, is P125 000. Branch returned
damaged merchandise worth P 15 260. On January 31, the branch reported a net loss of
P2 270 and on inventory of 84 000. What is the net income (loss) of the branch to be
taken up in the books of the Home Office?
a. (P 1 690)
b. 6 500
c. (P2 270)
d. 1 960
(adapted)
10. The Robert Corporation established its Bulacan branch in January 20111. During the
first year of operations home office shipped to its bulacan branch merchandise worth
P130 00 which included a markup of 15% on cost. Sales on account totaled P250 000
while cash sales amounted to P80 000. Bulacan reported operating expenses of P38 000
and ending inventory of P15 000 at billed price. In so far as the home office is concerned
, the real net income of bulacan is:
a. P 82 000
b. 147 000
c. P 177 000
d. 192 000
(adapted)
11. The Clark branch of Freeport corporation submitted the following trial balance as of 30
June 2011:
Debit
Credit
Cash ……………………………………………
P 28 600
Accounts Receivable…………………….
173 800
Shipments from Office………………….
462 000
Home Office-current…………………….
324 500
Sales …………………………………………...
369 600
Expenses …………………………………….
29 7000
Total……………………………………………
P694 100
694 100
Clark reported an ending inventory of P138 600. Shipments are billed at a markup of
40% on cost. What is the real net income of Clark Branch?
a. P 70 600
b. 92 400
c. P 100 000
d. 108 900
(adapted)
12. The Quezon City sales Company established a branch in Dumaguete City early last year.
It shipped merchandise and billed the branch for P 300 000 prior to its opening . For the
year, it made additional shipments at billed price of P120 000. Within the year, the
branch shipped back P7 500 inventory and got the credit memo for 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 P 72 500. The total cost of goods available for sale by the branch at cost
(net of overvaluation and returns) amounted to:
a. P416 250
b. 422 500
c. P435 200
d. 485 000
(adapted)
13. The home office of Glendate Company, which uses the perpetual inventory system, bills
shipments of merchandise to the Montrose Branch at markup of 25% on the billed price.
On august 31, 2011, the credit balance of the home office’s allowance for overvaluation
of inventories-montrose Branch ledger account wa P60 000. On September 17, 2011,
the home office shipped merchandise to the branch at a billed price of P400 000. The
branch reported on ending inventory at billed price of P160 000 on September 30, 2011.
Compute the realized gross profit?
a. P20 000
b. 28 000
c. P120 000
d. 160 000
(adapted)
14. Tillman textile Company has a single branch in Bulacan. On March 1, 2011 the home
office accounting records included an allowance for overvaluation of inventories –
bulacan branch ledger account with a credit balance of P32 000. During March,
merchandise costing P36 000 was shipped to the Bulacan Branch and billed at a price
representing a 40% markup on the billed price. On March 31,2011 the branch prepared
on income statement indicating a net loss of P11 500 for march and ending inventories
at billed price of P25 000. What is the amount of adjustments for allowance for
overvaluation of inventories to reflect the true branch net income?
a. P39 257 debit
b. P46 000 credit
c. P39 333 debit
d. P46 000 debit
(adapted)
15. Charity Inc. established its first branch on May 1, 2011. During the first month of
operation , the home office shipped the merchandise to the branch worth P138 000
which included a mark up of 15% on cost. Sales for cash were P80 000 while sales on
account were P250 000. At month’s end, the branch reported operating expenses of P38
000 and a closing inventory of P23 000 at billed price. As far as the home office is
concerned, the true branch net income for May 2016 is:
a. P82 000
b. 147 000
c. P177 000
d. 192 000
(adapted)
16. Jaimee Marketing Co. opened a branch in San Fernando City at the beginning of 2011.
The branch extends credit, makes collection, pays expenses from cash receipts , and
acquires goods exclusively from the home office to the branch , at a billing price of 125%
of cost, amounted to P104 000 of which P12 500 remained in the branch’s year-end
inventory. Other branch transactions in 2011 were as follows: sales, all on credit, P117
439: expenses, of which P1 500 are unpaid at year-end, P20 000: collections on account,
after deducting discounts of P1 480, P84 000; and total remittances to the home office,
P62 500. As far as the home office is concerned, the operation of the branch in 2011
resulted in a:
a. P4 450 net income
b. 9 550 net loss
c.P18 300 net income
d. 22 750 net income
(adapted)
17. The account balances shown below were taken from the trial balances submitted to
Bon-Apetil Corporation by its Alabang branch:
2011
2012
Petty Cash Fund……………………………………….. P1 500
P1 500
Accounts Receivable………………………………... 43 800
49 140
Inventory …………………………………………………. -------37 170
Sales ………………………………………………………… 173 180
195 120
Shipments from home(140% at cost)……….. 107 450
136 080
Expenses ………………………………………………….. 51 260
57 930
Accounts written off………………………………… 1 220
1 920
All branch collections are remitted to the home office. All branch expenses are paid out
of the petty cash fund. When the petty cash fund is replenished, the branch debits
appropriate expense accounts and credits Home Office Current. The petty cash is
counted every December 31, and its composition was as follows:
12/31/11
Currency and Coins……………………………………. P580
Expense Vouchers …………………………………….. 920
12/31/12
P860
640
The branch inventory on December 31, 2012 was P41 370. The correct branch net
income for 2012 was:
a.P3 390
b. 3670
c. P 41 070
d. 41 390
(adapted)
18. The Gift Co. has a branch in Dipolog City . During 2011, the home office shipped to the
branch merchandise billed of P150 000 including a markup of 20% on cost. The branch
report opening and closing inventories of P90 000 and 120 000, respectively. While the
home office has a closing a inventories of P210 000 which inludes merchandise which
are held on consignment valued of P10 000. Both location use the periodic inventory
system. What closing inventory would be reported in the combined statement of
income for the year 2011?
a. P296 000
b. 300 000
c. P320 00
d. 330 000
(adapted)
19. Hope Corporation started operating a branch on May 1,2011 with a shipment of
merchandise billed at P250 000. Additional shipments during the month were billed at
P125 000. The branch returned damaged merchandise worth P10 000. Inter-office
shipments are billed uniformly at 125% at cost. On May 31 ,2011, the branch reported a
net loss of P52 500 and on inventory at P150 000. What is the branch net income (loss)
reflected in the combined income statement for May 2011
a. P(9 500)
b. 43 000
c. (52 500)
d. 95 000
(adapted)
20. Espana branch was billed by home office for merchandise at 140% at cost. At the end of
the first month, espana branch submitted among other things, the following data:
Merchandise from home office (at billed price)….
Merchandise purchase locally by Branch…………...
P98 000
40 000
Inventory ,December 31 of which P7 000 are
Of local purchase ……………………………………………
Net sales for month …………………………………………..
28 000
180 000
The branch inventory at cost and the gross profit of the branch as far as the home office
is concerned are:
Gross Profit
Ending Inventory
a. P22 000
P 92 000
b. 92 000
22 000
c. 70 000
22 000
d. 90 000
20 000
(adapted)
21. The Manila branch of the Great Company is billed for merchandise by the home ofiice at
20% above cost. The branch in turn prices merchandise for sales purpose at 25% above
billed price. On February 16 all of the branch merchandise is destroyed by fire. No
insurance was maintained. Branch account show the following infprmation:
Merchandise Inventory, January 1
(at billed price)……………………………… P26 400
Shipmetns from home office (Jan.1-Feb.16)..
20 000
Sales ………………………………………………………… 15 000
Sales return………………………………………………. 2 000
Sales Allowances……………………………………….. 1 000
What was the cost of the merchandise destroyed by fire?
a. P36 000
b. 30 667
c. P 36 800
d. 30 000
(adapted)
22. The home office bills its aklan branch at 125% at cost. During the year 2011, goods
costing P300 000were shipped to the branch. The account “allowance for overvaluation
of branch inventory”., after adjustment, shows a balance of P14 000 at the end of the
year:
Compute the amount of ending inventory at:
Cost
Billed Price
a. P56 000
P56 000
b. 300 000
375 000
c. 56 000
70 000
d. 70 000
56 000
(PhilCPA)
23. Lacoste Philippines has two merchandise outlets, its main store in manila and its Cebu
city branch. For control purposes, all purchases are made by the main store, and
shipment to the Cebu city branch are at cost plus 10%. On January 1,2011, the
inventories of the main store and Cebu city branch were P13 600 and P3 960,
respectively. During 2011, the main store purchased merchandise costing P40,000 and
shipped 40% of these to the Cebu city branch.
At December 31,2011, the following journal entry was made to prepare the Cebu city
branch books for the next accounting period:
Sales ……………………………………………………….. P32,000
Inventory ………………………………………………... 4,840
Inventory ……………………………………..
Shipments from main store …………..
Expenses ………………………………………
Main store ……………………………………
3,960
17,600
10,480
4,800
(1) What was the actual branch income of 2011 on a cost basis, assuming the use of the
provisions of the PAS, and (2) if the main store has P11,200 worth of inventory on
hand at the end of 2011, the total inventory that should appear on the combined
balance sheet at December 31, 2011.
a. (1) P4,800; (2) P15,600
b. (1) 6,320; (2) 15,160
c. (1) P6,320 (2) P15,600
d. (1) 6,480 (2) 16,040
(PhilCPA)
24. The Best Co. bills merchandise shipments in its Cavite City branch of 125% of cost. The
branch, in turn, sells the merchandise it receives from the home office at 25% above the
billing price. On August 1, 2011, all the branch’s merchandise stock was destroyed by
fire. The branch records that were recovered showed the following:
Inventory, January 1,2011 (at billed price)…………. P165,000
Shipments received from home office.
January to July (at billed price)………………... 110,000
Purchases, at cost, from outside sources,
All re-sold at a 20% markup……………………
7,500
Sales ………………………………………………………………... 169,000
Sales return and allowances ……………………………..
3,750
The Best Co. will file on insurance claim. How much is the estimated cost of the
merchandise destroyed by the fire?
a. P120,000
c. P140,000
b. 130,000
d. 150,000
(adapted)
25. On August 31,2012, a fire destroyed totally the rented “bodega” or stock room of
Isabela Company. The following are some of the data of the company:
Merchandise Inventory, Dec.31,2011 …………………….P110,000
For the period Jan.1-Aug.31,2012:
Purchases …………………………………………………. 560,500
Freight in ………………………………………………….. 5,600
Purchases returns ……………………………………. 10,200
Sales …………………………………………………………. 695,000
Sales return and allowances ……………………….
7,500
Using a 20% gross profit rate, the cost of the merchandise last in the fire was:
a. P90,700
b. 115,900
c. P88,400
d. 63,200
(PhilCPA)
26. Lobster Trading bills its Iloilo City branch for shipments of goods at 25% above cost. At
the close of business on October,31,2011, a fire gutted the branch warehouseand
destroyed 60% of the merchandise stock stored therin. Thereafter, the following data
were gathered:
January 1 inventory , at billed price …………………………..
Shipments from home office to Oct. 31 ………………………
Not sales to October 31 ……………………………………………..
P50,000
130,000
225,000
If undamaged merchandise recovered are marked to sell for P30,000. The estimated
cost of the merchandise destroyed by the fire was:
a. P14,400
b. 21,600
c. P24,000
d. 27,500
(adapted)
27. Trial balances for the home office and the branch of the Tony Co. show the following
accounts before adjustment, on December 31,2011. The home office policy of billing the
branch for merchandise is 20% above cost.
Home
Office
Unrealized intercompany
inventory profit …………………….
P10,800
Branch
Shipments to branch ………………………..
Purchase (outsiders) ……………………….
Shipments from home office ……………
Merchandise inventory, Dec. 1,2011 ...
24,000
P7,500
28,800
45,000
What part of the branch inventory as of December 1,2011 represent purchases from
outsiders and what part represents goods acquired from the home office?
Outsiders
a. P12,000
b. 16,500
c. 15,000
d. 9,000
Home Office
P33,000
28,500
30,000
36,000
(PhilCPA)
28. Masaya Commercial Corp. maintains a branch in Iloilo city. Selected account balances
taken from the books of masaya and its Iloilo branch as of December 31, 2011 are as
follows;
Home Office
Branch
Merchandise Inventory,Jan.1, 2011……..
P12,000
P8,000
Purchases ………………………………………….
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
December 31,2011 ………………….
14,000
10,350
P4,350 of the branch’s sending inventory come from purchases/suppliers other than the
home office.
(1) As far as the home office is concerned, the cost of sales of the branch: (2) the
branch’s net income must be understated by;
a. (1) P102,850; (2) P18,550
b. (1) 102,850; (2) 18,250
c. (1) P97,120; (2) P18,550
d. (1) 121,400; (2) 18,000
(PhilCPA)
29. Selected balances from the Legaspi company’s Branch A and Branch B are as follows;
Branch A
Branch B
Inventory, Jan. 1,2011 ……………………….
P21,000
P19,000
Imprest branch fund …………………………
2,000
1,500
Inventory, Dec.31,2011 ……………………..
19,000
12,000
A/Receivable, Jan.1 ,2011…………………..
55,000
43,500
Merchandise from home office ………….
61,000
47,000
A/Receivable, Dec.31,2011 ……………….
Cash collections ……………………………….
Sales ………………………………………………..
Cash expenses …………………………………
70,000
85,000
100,000
21,000
53,500
70,000
80,000
14,300
All sales, collections, and expenses are handled at the branch. All cash received from
sales and collections are sent directly to the home office. Expenses are paid by the
branch from the imprest fund and immediately reimbursed by the home office and
credited to the home office account. All expenses paid by the branch are recorded in the
books of the branch.
Compute the balance of the home office account on January 1,2011.
Branch A books
Branch B books
a. P78,000
P67,000
b. 75,000
64,000
c. 64,000
78,000
d. 78,000
64,000
(PhilCPA)
30. 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
260,000
Gross profit on sales ………………………………..
P40,000
Expenses …………………………………………………
35,000
Net income ………………………………………………
P5,000
Shipments to the branch were billed at 140% at cost. The branch inventory at
September 30 amounted to P50,000 at which P6,600 was locally purchased. Markup on
local purchases, 20% over cost. Branch expenses incurred by head office amounted to
P2,500 not yet recorded by the branch.
Compute the (1) branch ending inventory that should be presented in the combined
income statement, and (2) true branch net income.
a. (1) P37,600; (2) P70,100
b. (1) 37,600; (2) 2,500
c. (1) P50,000; (2) P70,100
d. (1) 50,000; (2) 2,500
(PhilCPA)
31. The income statement submitted by the Pampanga branch to the home office for the
month of December,2011 is shown below. After effecting the necessary adjustments the
true net income of the branch was ascertained to be P156,000
Sales …………………………………………………………..
P600,000
Cost of sales:
Inventory ,December 1 …………………….
P80,000
Shipments from home office …………….
350,000
Local purchases ………………………………30,000
Total available for sale …………………….
P460,000
Inventory , December 31 ………………....
100,000
360,000
Gross Margin …………………………………………….
P240,000
Operating expenses ………………………………….
180,000
Net income for December,2011 ………………….
P60, 000
The branch inventories were :
Merchandise from home office …..
Local purchases ………………………..
Total …………………………………………
12/01/2011
P70,000
10,000
P80,000
12/31/2011
P84,000
16,000
P100,000
(1) The billing price based on cost imposed by the home office to the branch, and (2) the
balance of allowance for overvaluation of branch December 31,2011 after
adjustment.
a. (1) 140%; (20) P10,000
b. (1) 140%; (2) 24,000
c. (1) 40%; (2) P24,000
d. (1) 40%; (2) 16,000
(PhilcPA)
32. The following information are extracted from the books and records of Rona
Company and its branch. The balances are at December 31,2011 of the company’s
operations.
Home office
Sales ……………………………………………
Shipments to branch …………………… P78,000
Shipments from home office ………...
Purchases ……………………………………
Expenses …………………………………......
Inventory, January 1,2011 ……………
Allowance for overvaluation of
branch inventory ………………. 31,200
`
Branch
P260,000
104,000
39,000
78,000
26,000
however, no shipments in transit between the home office and the branch were made.
Both shipments accounts are properly recorded. The ending inventory includes
merchandise acquired from the home office in the amount of P26,000 and P7,800
acquired from outsiders for a total of P33,800.
Compute the (1) realized inventory profit of home office from sales made by the branch,
and (2) the amount of branch merchandise beginning inventory that was acquired from
the home office ?
a. (1) P24,700; (2) P15,600
b. (1) 31,200; (2) 20,800
c. (1) P22,533; (2) P15,600
d. (1) 24,700; (2) 20,800
(adapted)
33. Best buy ventures operates a branch in Cebu City. Selected accounts taken from the
May 31,2012 statements of Best Buy and its branch follow:
Home office
Branch
Sales ……………………………………………….P380,000
P353,000
Shipments to branch ……………………….
150,000
-------Shipments to branch-loading …………..
39,500
-------Inventory ,June 1,2011 ……………………
24,000
16,000
Purchases ……………………………………… 300,000
60,000
Shipments from home office …………...
-----187,500
Inventory ,May 31,2012 ………………… 28,000
20,700
The branch ending inventory included items costing P8,700 that were acquired from
outside suppliers. The realized markup on branch merchandise that wold be recognized
by the home office is:
a. P36, 000
b. 36,700
c. P37,100
d. 37,500
(adapted)
34. The Bicol Corporation operates a branch in Naga City. The information from the December
31,2011 trial balance are as follows:
Home office
Naga Branch
Sales ……………………………………………….P840,000
P420,000
Shipments to branch ……………………….
280,000
Purchases ……………………………………….490,000
Shipments from home office …………....
350,000
Inventory ,January 1,2011 ……………….
140,000
56,000
Inventory at December 31, Home office P42,000; Branch P84,000
Compute the realized inventory profit of home office from sales made by the branch
(the overvaluation of cost of goods sold)?
a. P56,000
b. 120,400
c. P64,400
d. 80,000
(adapted)
35. The Dumaguete City branch of Siliman Enterprises, Negros, was billed for merchandise
shipments from home office at cost plus 25% in 2011 and cost plus 20% in 2012. Other
pertinent data for 2012 show:
Sales …………………………………………………………..
Inventory, beginning
at cost ………………………………………………..
at billed price ……………………………………..
Purchases …………………………………………………..
Inventory transfers
To Dumaguete, at cost ……………………....
From Negros, at billed price ……………….
Inventory, end
at cost ………………………………………………..
at billed price ……………………………………..
Expenses …………………………………………………….
Dumaguete
Branch
P63,000
Home
Office
P212,000
23,000
8,900
164,000
42,000
50,400
28,500
11,700
20,300
76,400
Compute the (1) not income (loss) of Dumaguete City per branch books and (2) The combined
net income (loss) of Siliman Enterprise.
b.(1)
a. (1) P(4,900); (2) P18,740 c. (1) P3,330;(2) P22,430
(4,900); (2) 22,430 d. (1) 8,230; (2) 25,270
36. The Quezon City branch of Asser Enterprise,Manila, was billed for merchandise shipments
from home office at cost plus 25% in 2011 and cost plus 20% in 2012.
Other pertinent data for 2012 show:
Quezon City
Home
Branch
Office
Sales …………………………………………………………..
Inventory, beginning
at cost ………………………………………………..
at billed price ……………………………………..
Purchases …………………………………………………..
Inventory transfers
To Quezon City, at cost ……………………....
From Manila , at billed price ……………….
Inventory, end
at cost ………………………………………………..
P63,000
P212,000
23,000
8,900
164,000
42,000
50,400
28,500
at billed price ……………………………………..
Expenses …………………………………………………….
11,700
20,300
76,400
Compute the (1) realized inventory profit from branch sales for overvaluation of cost of goods
sold, and (2) The ending inventory that should be presented in the combined income
statement.
a. (1) P8,230; (2) P40, 200 c. (1) P7,933; (2) P38,250
b.(1) 8,230; (2) 38,250d. (1)9,520; (2) 37,860
37. Selected accounts from the December 31, 2011 trial balances of Betty Star Co. and its
branch follow:
5-Star
Branch
Inventory, Jan 1 …………………………………………….
Branch Current ……………………………………………..
Purchases ……………………………………………………..
Shipments from home office ………………………..
Freight in ……………………………………………………...
Expenses ……………………………………………………….
Home Office Current ……………………………………..
Sales ………………………………………………………………
Shipments to branch ……………………………………..
Branch merchandise markup …………………………
P46,000
116,600
380,000
104,000
(310,000)
(200,000)
(22,000)
P23,100
209,000
10,450
58,100
(106,600)
(280,000)
As of December 31, 2011, 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
year-end were: at home office, P64,000 at cost; at branch, P33,000 at billing price.
Compute the (1) branch net income in so far at home office is concerned , and (2) the combine
net income for 2011.
a. (1) P40,900; (2) 84,900
c. (1) P32,000; (2)76,000
b. (1) 32,100; (2) 76,100
d. (1) 33,000; (2) 77,000
38.The Kester Store operates a branch in Cebu. Operating data for the home office and the
branch for 2011 are as follows:
Sales …………………………………………………...............
Shipment to branch ………………………………………..
Purchases from outsiders ……………………………….
Home Office
P365,000
90,000
220,000
Branch
P174,500
35,000
Advertising expenses ………………………………………
Salaries and commission expense …………………..
Rent expense …………………………………………………..
Miscellaneous expense …………………………………..
Shipment from home office …………………………….
Inventories, Jan 1:
Home office ………………………………………….
Branch:
Acquired from outsiders ……………..
Acquired from office at billed price
which is 20% above cost ……….
Inventories, Dec. 31:
Home Office ………………………………………..
Branch:
Acquired from outsiders ……………..
Acquired from home office
At 2011 billed price …………………
13,700
35,000
10,000
3,300
2,500
9,500
2,000
500
112,500
85,000
9,500
42,000
65,000
6,500
30,000
Compute the combined net income of Kester Store:
a. P111,000
c. P250,000
b. 63,000
d. 174,000
39. The Iloilo Co. operates a branch in Davao. There are shipments in transit from home office
to the branch. The home office ship merchandise to branch at 125% at cost in year 2011. Profit
and loss data for the home office and branch for 2011 follows:
Sales …………………………………………………...............
Purchases from outsiders ……………………………….
Shipments to branch:
Cost to Home Office …………………………..
Billing price to branch …………………………………….
Expenses ………………………………………………………..
Inventories, Jan 1, 2011:
Home Office, acquired from outsiders,
at cost …………………………..
80,000
Branch: Acquired from outsiders at cost
Acquired from Home Office at billing price,
which average 20% above cost ……..
Inventories, Dec. 31, 2011:
Home Office, acquired from outsiders,
at cost …………………………..
55,000
Branch: Acquired from outsiders at cost
Acquired from Home Office, at 2011
Home Office
P250,000
200,000
Branch
P75,000
15,000
30,000
40,000
32,500
10,000
7,500
24,000
5,500
billed price [physical count] …………
21,000
Compute the (1) amount of merchandise in transit, and (2) combined cost of goods sold.
a. (1) P5,000; (2) P241,200
c. (1) P3,500; (2) 242,400
b. (1) 5000; (2) 240,000d. (1) 3,500; (2) 245,200
40. Betzier Company branch in Malate began operations on January 1, 2011. During the first
year of operations, the home office shipped merchandiser to the Malate branch that cost
P250,000 at a billed price of P300,000. One-fourth of the remained unsold at the end of 2011.
The home office records the shipments to the branch at the P300,000 billed price at the time
shipments are made.
Freight-in of P2,000 on the shipments from the home office was paid by the branch. The
home office should make an adjusting entry for freight-in as follows:
a. A year-end adjusting entry debiting the branch account for P500.
b. A year-end adjusting entry debiting the branch account for P2,000.
c. A year-end adjusting entry crediting the branch account for P500.
d. No year-end adjusting entry for freight charge.
41. Tagum Supply Company is engaged in merchandising both at its Home Office in Manila and
at its Branch in Davao City, Selected accounts taken from the trial balances of the Home Office
and the branch as of December 31,2011 follow:
Debits
Manila
Davao Branch
Inventory, January 1, 2011 ……………………………….
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 ………………………………………………………
Sales ………………………………………………………………….
Sales to branch ………………………………………………….
Allowance for Overvaluation of Branch inventory
At January 1, 2011 ……………………………………..
P
155,000
110,000
P53,300
140,000
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 31,2011, a shipment with a billed
value of P5,000 was still. Freight on this shipment was P250 and is to be treated as part of
the inventory.
- Inventories on December 31,2011, excluding the shipment in transit, follow:
Home office, at cost …………………………………........
P30,000
Branch, at billed price (excluding freight of P520)
10,400
Compute the (1) net income of the home office own operations, and (2) the net income of the
branch in so far as home office is concerned.
a. (1) P30,470; (2) P870
c. (1) P20,000; (2) P870
b. (1) 20,000; (2) 10,470d. (1) 30,470; (2) 10,470
42. The Brazil Corporation operates a branch in Mactan, Cebu. Trial balance at the Home Office
and Mactan Branch at December 31, 2011 is reprocuded below:
Brazil Corporation
Home Office and Branch
Trial Balances
December 31, 2011
Cash ………………………………………………..
Accounts receivable ……………………….
Inventory, January 1 ……………………….
Branch current ……………………………….
Allowance for over-valuation in
Branch merchandise …………….
Fixed assets (net) …………………………..
Accounts payable …………………………..
Home Office, current ……………………..
Capital stock …………………………………..
Retained earnings ………………………….
Sales ………………………………………………
Purchases ………………………………………
Shipments from Home Office ………..
Shipments to Branch ……………………..
Operating expenses ……………………….
P243,800P243,800P46,800P46,800
Home Office
Dr.
Cr.
P 12,000
P28,000
16,000
8,000
Mactan Branch
Dr.
Cr.
P3,400
P 7,000
5,000
2,800
89,800
2,000
1,400
8,000
100,000
5,000
110,000
80,000
37,400
2,000
26,400
24,000
10,000
3,000
Home Office inventory at December 31, 2011 was P20,000; while the composition of the Branch
inventory was:
From
Outside
Home Office
Purchases
Total
January 1, 2011 ……………………
P4,400
P600
P5,000
December 31, 2011 ……………..
3,960
540
4,500
Shipments to branch are billesd at 10% mark-up.
The combined net income of the Home Office and Branch for the year ended December 31,
2011:
a. P55,940
c. P53,140
b. 53,500
d.48,000
43. Swift Corporations, operates a number of branches in Metro Manila. On June 30, 2011, its
Sn. Lorenzo branch showed a Home Office Account balance of P27,350 and the Home Office
books showed a Sn. Lorenzo branch account balance of P25,550. The following information may
help in reconciling both accounts:
1. A P12,000 shipment, charged by Home Office to Sn. Lorenzo branch, was actually sent
to and retained by Sto. Tomas branch.
2. A P15,000 shipment, intended and charged to Sn. Jose branch was shipped to Sn.
Lorenzo branch and retained by the latter.
3. A P2,000 emergency cash transfer from Sto. Tomas branch was not taken up in the
Home Office books.
4. Home Office collects a Sn. Lorenzo branch accounts receivable at P3,600 and fails to
notify the branch.
5. Home office was charged for P1,200 for merchandise returned by Sn. Lorenzo branch
on June 28. The merchandise is in transit.
Home office erroneously recorded Sn. Lorenzo’s net income for May, 2011 at P16,275. The
branch reported a net income of P12,675.
What is the reconciled amount of the Home Office and Sn. Lorenzo branch reciprocal accounts?
a. P21,750
b. 23,750
c. P27,350
d. 20,150
44. On December 31, 2011, the investment in Branch account on the home office’s books has a
balance of 102,000. In analyzing the activity in each of these accounts for December, you find
the following differences:
1. A P12,000 branch remittance to the home office initiated on December 27, 2011, was
recorded on the home office books on January 3, 2012.
2. A home office inventory shipment to the branch on December 28, 2011, was recorded
by the branch on January 4, 2012; the billing of P24,000 was cost.
3. The Home office incurred P14,400 of advertising expenses and allocated P6,000 of this
amount to the branch on December 15, 2011. The branch has not recorded this
transaction.
4. A branch customer erroneously remitted P3,600 to the home office. The Home office
recorded this cash collection on December 23, 2011. Meanwhile, back at the branch, no
entry has been made yet.
5. Inventory costing P51,600 was sent to the branch by the home office on December 10,
2011. The billing was at cost, but the branch recorded the transaction at P40,800.
Compute the balances as of December 31, 2011
Unadjusted Balance
Of the Home office Account
a.
P 76,800
b.
52,800
c.
151,200
d.
52,800
Adjusted
Balance of the Reciprocal Account
P114,000
93,600
139,200
90,000
45. Lakers Trading Co. operates a branch in Dagupan City. At close of business on December 31,
2011, Dagupan Branch account in the home office books showed a debit balance of
P225,770.The interoffice accounts were in agreement at the beginning of the year. For the
purposes of reconciling the interoffice accounts, the following facts were ascertained:
1. An office equipment costing the home office P3,500 was picked up by the branch as
P350.
2. Insurance premium of P675 charged by the home office was taken up twice by the
branch.
3. Freight charge on merchandise made by the home office for P1,125 was recorded in the
branch books as P1,215.
4. Home office credit memo representing a discount on merchandise for P800 was not
recorded by the branch.
5. The branch failed to take up a P700 debit memo from the home office representing the
share of the branch in advertising.
6. The Home office inadvertently recorded a remittance for P3,000 from its Cebu branch
as a remittance from its Dagupan branch.
Compute the balance as of December 31, 2011.
Unadjusted Balance
Of the Home office Account
a.
P 226,485
b.
228,485
c.
225,770
d.
226,485
Adjusted
Balance of the Reciprocal Account
P225,770
228,770
226,485
228,770
46. The following were found in your examination of the interplant accounts between the
Home office and the Bacolod Branch.
1. Transfer of fixed assets from Home office amounting to P53, 960 was not recorded by
the branch. Fixed assets used in the branch are required to be maintained in the books of
the branch.
2. P10,000 covering marketing expense of another branch was charged by Home office to
Bacolod.
3. Bacolod recorded a debit note on inventory transfers from Home office of P75,000
twice.
4. Home office recorded cash transfer of P65,700 from Bacolod Branch as coming from
Tacloban Branch.
5. Bacolod reversed a previous debit memo from Samar branch amounting to P10,500.
Home office decided that this charge is appropriately Tacloban’s cost.
6. Bacolod recorded a debit memo from Home Office of P4,650 as P4,560.
The net adjustments debit (Credit) to the Bacolod Branch Current account and the Home Office
Current are:
Bacolod Branch Current
Account
a.
P (75,700)
b.
75,700
c.
(55,700)
d.
(65,700)
Home Office Current
Account
P20,950
(20,950)
75,000
(74,000)
47. After examining on a comparative basis the interoffice 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, 2011 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 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 (1) and entered a credit in favor of the Home Office as of June 30, 2011.
At June 30,2011, the unadjusted balance of the Branch current account on the Home Office
books showed P175,520. At the beginning of the year, the interoffice accounts were in balance.
Compute the (1) unadjusted balance of the Home Office current account on the Branch books,
and (2) The adjusted balance of the reciprocal account on June 30, 2011.
a. (1) P184,279.50; (2) P186,000
B. (1) P184,279.50; (2) 180,520
c. (1) P180,520; (2) 184,279.50
d. (1) 180,520; (2) 180,020,00
48. Video and Company has several branches located in the cities in the south namely, Dipolo,
Dumaguete, Cebu, Bacolod, and Cagayan de Oro. It authorizes transfers of cash and inventories
among branches. The head office ships goods P100,000 cost to Dipolog branch oaying freight
charges for P6,000. The Home office authorizes the transfer of goods from Dipolog Branch to
Cebu Branch where the latter is charged for the cost of the goods, P100,000 and freight charges
of P2,000 for the transfer, if the shipment had been made by the head office to the Cebu
Branch, the freight charges would have been P9,000. The transfer resulted to difference in
freight charge which should be disposed of as follows:
a. P1000 charge to Cebu branch by Dipolog branch.
b. P1000 charge to Cebu branch by Head Office.
c. P1000 to be equally charged among Head Office, Dipolog branch, and Cebu
branch.
d. P1000 savings.
49. Aca, Inc. has several branches. Goods costing P10,000 were transferred by the head office
to Cebu Branch with the latter paying P600 for freight cost. Subsequently, the head office
authorized Cebu Branch to transfer the goods to Davao Branch for which the latter was billed
for the P10,000 cost of the goods and freight charge of P200 for the transfer. If the headoffice
had shipped the goods directly to Davao Branch, the freight charge would have been P700. The
P100 difference in freight cost would be disposed as follows:
a. Considered as savings
b Charged to Cebu Branch
c. Charged to Davao Branch
d. Charged to the Head Office
50. On December 3, 2011 the home office of Kathy Office Supply Company recorded a shipmet
of merchandise to its Davao Branch as follows:
Davao Branch ………………………………………………….. 30,000
Shipment to Branch ……………………………..
Unrealized profit in Branch inventory ….
Cash (for freight charges) …………………….
25,000
4,000
1,000
The Davao branch sells 40% of the merchandise to outside entities during the rest of December
2011. The books of the home office and Kathy Office Supply are closed on December 31 of each
year.
On January 5, 2012 the Davao branch transfer half of the original shipment to the Baguio
branch, and the Davao branch pays P500 as the shipment.
The entity on the books of the Davao Branch to record receipt of the shipment from the Home
office on December 3, 2011 would be:
a. Shipment from Home Office ……………
Freight-out ………………………………………
Home Office ………………………….
29,000
1,000
b. Shipments from Home Office ………….
Accounts receivable ………………………..
Freight-in …………………………………………
Home office ………………………….
25,000
4,000
1,000
c. Shipment from Home Office ……………
Home Office ………………………….
30,000
d. Shipment from Home Office ……………
Freight-in …………………………………………
Home Office ………………………….
30,000
30,000
30,000
29,000
1,000
30,000
51. Using the same information in No. 50 at what amounts should the 60% of the merchandise
remaining unsold at December 31, 2011 be included in (1) the inventory of the Davao Branch at
December 31, 2011, and (2) the published balance sheet of Kathy Office Supply Company at
December 31, 2011 shows inventory at:
a. (1) P15,600; (2) P18,000
b. (1) 17,400; (2) 15,000
c. (1) 18,000; (2) 15,600
d. (1) 18,400; (2) 16,000
52. Using the same information in No. 50, what is the entry on the books of Baguio Branch for
the January 5, 2012 transfer, assuming that the freight cost of the merchandise from the home
office to Baguio branch would have been P600.
a. Shipments …………………………………………
Inventory ……………………………….
b. Shipments …………………………………………
Freight-in ………………………………………….
Home office ………………………….
15,500
15,500
14,500
600
15,100
c. Shipments …………………………………………
Freight-in ………………………………………….
Home office ………………………….
15,000
600
d.Shipments …………………………………………
Freight-in ………………………………………….
Home office ………………………….
14,500
1,100
15,600
15,600
53. Using the same information in Nos. 50, 51, and 52, what is the entryo the bools of Davao
Branch in respect to January 5, 2012 transfer:
a. Home Office ……………………………………….
Inventory ………………………………
15,500
b. Home Office ……………………………………….
Shipments Inventory …………………
Cash (for freight charges) ………….
15,100
c. Home Office ……………………………………….
Cash (for freight charges) ……..
Inventory ………………………………
d. Home Office ……………………………………….
Cash (for freight charges) ……..
Freight-in ……………………………..
Inventory ………………………………
15,500
15,500
100
15,500
500
15,000
15,600
500
600
14,500
54. Using the same information in Nos. 50, 51, and 52, what entry on the home office books in
respect to January 5, 2012 transfer:
a. Home Office ……………………………………….
15,500
Cash ……………………………………..
Inventory ……………………………..
b. Shipments …………………………………………
Freight-in ………………………………………….
Home office Current ……………..
500
15,000
14,500
600
15,100
c. Branch Current- Baguio …………………….
Excess freight ……………………………………
Branch Current- Davao ……….
15,100
400
d. Branch Current- Baguio …………………….
Excess freight ……………………………………
Branch Current- Davao ……….
15,100
600
15,500
15,700
55. Lipton Company had an agency in Antipolo. For the period just ended, the agency
transactions showed the following:
Receipt from sales ……………………………………………….
P350,000
Disbursements:
Purchases ………………………………………
400,000
Salaries and commissions ……………..
70,000
Rent ……………………………………………..
20,000
Advertising supplies ……………………..
10,000
Other Expenses ………………...............
5,000
The agency had P100,000 receivables and P150,000 payables as the end of the period. Also,
they were inventories on hand of P90,000 and unused advertising supplies of P6,000. The
agency was set up as an experiment for one period and would be closed if losses were incurred.
The agency should:
a. Review again because it was a break even operations.
b. Close with the period’s operations loss of P155,000.
c. Close with the period’s operations loss of P9,000.
d. Continued with the period’s profit of P25,000.
56. The JK Company, Inc. opened an agency in Makati in 2011. The following is a summary of
the transactions of the agency:
Sales orders sent to home office ………………….
Sales orders filled by home in 2011 ……………..
Freight on shipment to agency …………………….
Collections, net of 2% discount …………………….
Selling expenses paid from the agency
working fund ………………………………………..
P66,000
55,800
1,320
47,628
3,384
Administrative expenses charged to agency …
Sample shipped to agency:
Cost ……………………………………………………..
Inventory, December 31, 2011 ……….......
5% of gross sales
3,600
1,320
The company maintains its gross margin on agency gross sales at 30% excluding the freight cost
on shipments to agency.
The agency’s cost of sales including freight and agency’s net income would amount to:
a.
b.
c.
d.
Cost of Sales
P 39,000
47,520
40,380
40,380
Net Income
P5,994
7,668
5,994
7,320
57. Happy, Inc. opens a sales agency in Davao 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. Rent ……………………………………..
Cash ………………………….
c. Davao Agency ………………………
Cash ………………………..
d. Davao Agency ………………………
Working Fund ………….
3,000
3,000
3,000
3,000
3,000
3,000
58. Sad Co. has a sales agency in Cebu. Agency reveneus and expenses are recorded in separate
agency accounts, with the operating results of both the agency and the home office generated
at each month-end. For the month of October, 2011, the home office paid P10,000 for
advertising costs on behalf of the agency and recorded this as follows:
a. Cebu agency ………………………….
Cash ………………………….
b. Advertising expense …………....
Cash ……………………….
c. Accounts receivable-Cebu Agency
Cash ………………………
d. Advertising expense-Cebu agency
Cash ………………………
P10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000