HOME OFFICE AND BRANCH
1. Selected information from the trial balances of the home office and the branch of Katherine
Company on December 31, 2021 is provided. The branch acquires merchandise from the home
office and outside suppliers.
Home Office
Branch
Sales
P60,000
P30,000
Shipments to branch
8,000
Allowance for overvaluation of branch inventory
3,600
Shipments from home office
10,000
Purchase (outsiders)
35,000
5,500
Merchandise inventory 12/01/2021
20,000
15,000
Expenses
14,000
6,000
Additional information:
Merchandise inventory, December 31, 2021:
Home office
Branch (P7,500 from home office and P2,500 from outsiders)
P20,000
10,000
Question 1:
The billing rate of home office to branch for merchandise shipments is
a. 120% of cost
b. 125% of cost
c. 130% of cost
d. 135% of cost
Question 2:
How much of the December 1 inventory of the branch represent purchases from outsiders and
goods shipped from home office
a. Home office, P5,000 and Outsiders, P10,000
b. Home office, P15,000 and Outsiders, P00,000
c. Home office, P8,000 and Outsiders, P7,000
d. Home office, P12,000 and Outsiders, P3,000
Question 3:
The net income reported by the branch is
a. P4,500
b. P5,600
c. P3,500
d. P2,500
Question 4: The combined net income for Home office and branch operations is
a. P22,500
b. P24,600
c. P25,100
d. P21,500