Home Office, Branch, Agency Accounting 1. Barros Corporation’s shipments to and from its Brazil City branch are billed at 120% of cost. On December 31, Brazil reported the following data, at billed prices: inventory, January 1, of P33,600; shipments received from home office of P840,000; 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 before adjustments? a. P 5,600 c. P6,000 b. 137,600 d. 145,600 2. The Cindy owns the Highest Crown in Dipolog City and a branch in Dapitan City. During 20x6, the home office shipped to the branch supplies costing P120,000 at a billed price of 20% above cost. The inventories of supplies at the branch were as follows: January 1,20x6, P90,000; December 31,20x6, P108,000. On December 31,20x6, 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 31,20x6? a. P210,000 c. P270,000 b. 240,000 d. P300,000 3. The home office of Glendale Company, which uses the perpetual inventory system, bills shipments of merchandise to the Montrose Branch at a mark-up of 25% on the billed price. On August 31,20x6, the credit balance of the home office’s Allowance for Overvaluation of Inventories- Montrose Branch Ledger account was P60,000. On September 17,20x6, the home office shipped merchandise to the branch, at a billed price of P400,000. The branch reported an ending inventory, at billed price, of P160,000 on September 30,20x6. Compute the realized gross profit? a. P20,000 c. P120,000 b. 28,000 d. P160,000 4. Charity,Inc. established its first branch on May 1, 20x6. During the first month of operation, the home office shipped merchandise to the branch worth P138,000 which included a markup 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, 20x6 is: a. P82,000 c. P177,000 b. 147,000 d. 192,000 5. Hope Corporation started operating a branch on May 1, 20x6 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% of cost. On May 31,20x6, the branch reported a net loss of P52,500 and an inventory of P150,000. What is the branch net income (loss) reflected in the combined income statement for May, 20x6? a. P (9,500) c. P(52,500) b. 43,000 d. 95,000 6. The home office bills its Aklan branch at 125% of cost. During the year 20x6, goods costing P300,000 were 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 : a. b. Cost P56,000 300,000 Billed Price P56,000 375,000 c. d. Cost P56,000 P70,000 Billed Price P70,000 P56,000 7. The Manila branch of the Great Company is billed for merchandise by the home office at 20% above cost. The branch in turn prices merchandise for sales purposes at 25% above billed price. On February 16, all of the branch merchandise is destroyed by fire. No insurance was maintained. Branch accounts show the following information: Merchandise Inventory, January 1 (at billed price) Shipments from Home office ( January 1- February 16) Sales Sales Return Sales allowances P26,400 20,000 15,000 2,000 1,000 What was the cost of the merchandise destroyed by fire? a. b. P36,000 30,667 c. d. P36,800 30,000 8. The Bicol Corporation operates a branch in Naga City. The information from December 31,20x6 trial balance are as follows: Sales Shipments to branch Purchases Shipments from Home Office Inventory, January 1, 20x6 Home Office P840,000 280,000 490,000 140,000 Naga branch P420,000 350,000 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 c. P64,400 b. 120,400 d. 80,000 9. 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 costs. 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 head office had shipped the goods directly to Davao branch, the freight charge would have been P700. The P100 difference in freight cost would be disposed of as follows: a. b. c. d. Considered as savings Charged to Cebu branch Charged to Davao branch Charged to the Head office 10. Lakers Trading Co. operates a branch in Dagupan City. At close of business on December 31,20x6, 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 purposes of reconciling the interoffice accounts, the following facts were ascertained: • An office equipment costing the home office P3,500 was picked up by the branch as P350. • Insurance premiums of P675 charged by the home office was taken up twice by the branch. • Freight charge on merchandise made by the home office for P1,125 was recorded in the branch books as P1,215. • Home office credit memo representing a discount on merchandise for P800 was not recorded by the branch. • The branch failed to take up a P700 debit memo from the home office representing the share of the branch in advertising. • 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 31,20x6: a. b. c. d. Unadjusted Balance of the Home Office Account P226,485 228,485 225,770 226,485 Adjusted balance of the reciprocal account P225,770 228,770 226,485 228,770