On December 2, 2021, the Home office of Kathy Office Supply Company recorded a shipment of merchandise to its Davao branch as follows: Davao Branch – 170,300 Shipments to Branch --------------------------130,000 Unrealized Profit in Branch inventory------- 35,750 Cash (for freight charges) ------------------------4,550 The Davao branch sells 60% of the merchandise to outside entities during the rest of December 2021, The books of the home office and Kathy office supply are closed on December 31 of each year. On January 5, 2022, the Davao branch transfers 30% of the original shipment to the Baguio branch, and the Davao branch pays Php2,275 as the shipment. Requirements: 1. What amount should the 40% of the merchandise remaining unsold be included in (1) the inventory of the Davao branch at December 31, 2021. 2. What amount should the 40% of the merchandise remaining unsold at December 31, 2021 be included in the published balance sheet of Kathy Office Supply at December 31, 2021 shows inventory at. 3. Give the entry when Davao recorded the shipment from Home Offfice. 4. How much it the true branch net income in 2021? 5. What is the amount the mark up cost in from Home office to Davao Branch? 6. What is the entry on the home office books in respect to January 5, 2022 transfer, assuming that the transfer cost of the merchandise to Baguio branch would have been 2,500. a. Home office ------------- 53,365 Cash -----------------------------------2,500 Inventory ---------------------------50,865 b. Shipments ------------------49,275 Freight-in ----------------2,500 Home office current -------------47,225 c. Branch Current- Baguio -52,225 Excess Freight ---------------1,140 Branch current -Davao ---------53,365 d. Branch Current- Baguio -52,225 Excess Freight ---------------2,500 Branch current -Davao ---------54,725 The income statement submitted by the Tarlac Branch to the Home Office for the month of December 31, 2021 follows: Sales 1,200,000 Cost of sales: Inventory, 12/1/21 120,000 Shipment from Home office 750,000 Purchases locally by branch 60,000 Total 930,000 Inventory, 12/31/21 274,000 656,000 Gross margin 544,000 Opex 250,000 Net income for the month 294,000 The branch inventories consisted of: 12/1/2021 12/31/2021 Merchandise from home office 90,000 210,000 Local purchases 30,000 64,000 120,000 274,000 Total After effecting the necessary adjustments, the Home Office ascertained the true branch net income of the branch to be Php420,000. 7. 8. At what percentage of cost did the Home office bill the branch for merchandise shipped to it? What is the balance of the Allowance for Overvaluation in the branch inventory at Dec 31, 2021. The following is the income statement of Cagayan Branch in PH Company, for the six months period ending June 30, 2021: Sales 1,400,000 Cost of sales: Shipment from home office 900,000 Purchases 210,000 Total 1,110,000 Inv, 6/30/21 From HO From Purchases 160,000 60,000 220,000 890,000 Gross margin 510,000 Expenses 225,000 Net income for the month 285,000 The home office ships merchandise to, and bills the branch at 125% of costs. The rent of the Branch office for six months at a monthly rate of Php2,500 was paid by Home Office. 9. The home office net profit from its Branch Office for the 6 months ending June 30, 2021 is? 10. What is the balance of allowance on overvaluation at 6/31/21? Selected balances from the Iligan Company’s Branch A and B are as follows: Branch A Inventory, 1/1/21 Branch B 84,000 85,500 Imprest Branch Fund 5,000 5,000 Inventory, 12/31/21 76,000 54,000 A/R, 1/1/21 220,000 195,750 Merchandise from Home Office 244,000 211,500 A/R, 12/31/21 280,000 240,750 Sales 400,000 360,000 84,000 64,350 Cash Expenses Compute the balance of the Home office account in the books of Branch on January 1, 2021 11. Branch A 12. Branch B Compute the balance of the Home office account in the books of Branch on December 31, 2021 13. Branch A 14. Branch B 15. The entry in Branch B records in order to update the reciprocal Home Office Account on December 31, 2021, assuming net income of the branch is being reported to the Home office. A Dr. Home Office Current / Cr. Profit and Loss B. Dr Profit and Loss / Cr. - Branch Current C. Dr – Branch Current / Cr. – Profit and Loss D. Dr. Profit and Loss / Cr Home Office 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, 2021 were seen; a. A charge for labor by the Home office, Php75,000 was recorded twice by the branch. b. A charge for Php98,500 was made by the Home office for freight on merchandise but the amount was recorded by Branch as Php89,500. c. A charge for 98,000 (furniture and fixture) on the Home office books was taken up by the Branch as 89,000 d. A credit by the Home Office for Php35,000 (merchandise allowances) was taken up by the Branch as Php40,000 e. The Home Office charged the branch Php 42,500 for interest on open account which the Branch failed to take up in full. f. The Home office received Php 50,000, 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 Php37,000 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, 2021, correcting item (f) and entered a credit in favor of the Home office as of June 30, 2021 16. At June 30, 2021, the unadjusted balance of the branch current account on the Home office books showed 1,755,520. The beginning of the fiscal year, the interoffice accounts were in balance amounted to: Marikina Company operates a branch in Cebu. At the end of the year the branch account in the books of the home office shows a balance of Php250,000. The following information are ascertained; 1. The home office has billed the branch the amount of Php42,500 for the merchandise, which was in-transit on Dec. 31. 2. A home office accounts receivable for Php12,500 was collected by the branch. Said collection was not reported to the home office by the branch. 3. Supplies of Php6,000 was returned by the branch to the home office but the home office has not yet reflected in its records the receipt of the supplies. 4. The branch has not received the cash in the amount of Php45,000 sent by home office on Dec. 31. This was charged to General expense account. 5. The branch made profit of Php12,150 for the month of December by the home office erroneously recorded it as Php15,250. All transaction are presumed to have been properly recorded. 17. What is the balance of the Home office account the books of the branch as of Dec 31, before adjustments 18. Using the same information, what is the adjusted balance of the reciprocal accounts? The following information came from the books and records of Silverstar Corporation and its branch. The balances are as of December 31, 2021; Home Office Dr. (Cr.) Sales Branch Dr. (Cr.) (1,600,000) Shipment to Branch (960,000) Shipment from Home Office 1,272,000 Purchases 720,000 Expenses 480,000 Inventory, 1/1/21 Unrealized Profit in branch inventory 2,880,000 (442,000) The closing inventory at billed prices includes merchandise acquired from the home office in the amount of Php189,000 and Php 216,000 acquired from vendors for a total of Php405,000. 19. How much is the beginning inventory of the branch was acquired from “outsiders” 20. How much is the correct net income of the branch? 21. What is the markup on cost?
