Home office and Branch
Use Selected balances from the Cebu Company’s Branch A and B are as
follows:
Inventory, Jan. 1, 20x4……………………………………………..
Imprest Branch Fund……………………………………………….
Inventory, Dec. 31, 20x4…………………………………………..
A/Receivable, Jan. 1, 20x4……………………………………….
Merchandise from Home Office………………………………...
A/Receivable, Dec. 31, 20x4…………………………………….
Cash Collections……………………………………………………
Sales…………………………………………………………………..
Cash Expenses………………………………………………………
Branch A
P21,000
2,000
19,000
55,000
61,000
70,000
85,000
100,000
21,000
Branch B
P19,000
1,500
12,000
43,500
47,000
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, 20x4 in the:
1. Books of Branch A: ___________
2. Books of Branch B: ___________
Use the following information for questions 3 to 6::
Manila Corporation has operated a branch in Cebu for one year. Shipments are
billed to the branch at cost. The branch carries its own accounts receivable,
makes its own collections, and pays its own expenses. The transactions for the
year are given effect to in the trial balance below:
Accounts
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home Office Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases from outsiders . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shipments from Home Office . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of equipment. . . . . . . . . . . . . . . . . . . .. . . . . .
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debit
P 5,040
Credit
P 21,000
25,000
56,216
15,360
7,500
684
________
P109,800
8,800
_80,000
P109,800
The branch reported an inventory on December 31, 20x5:
Outsiders, P3,391; Home office, P7,625
3. The net profit of the Cebu Branch for 20x5 was:
4. On January 1, 20x6, the Branch current account in the Home Office books should
have a balance of:
5.
On January 1, 20x6, the Shipments to Branch account in the Home Office
books should have an opening balance of:
Use the following information for questions 6 and 7.
6.
7.
8.
9.
Pasig Garment Company operates a branch in Cabanatuan City. At the end of
the year, the Branch account in the books of the home office at Manila shows a
balance of P150,000. The following information is ascertained:
a.
The home office has billed the branch the amount of P37,500 for the
merchandise, which was in transit on December 31.
b.
A home office accounts receivable for P10,500 was collected by the
branch. Said collection was not reported to the home office by the branch.
c.
Supplies of P4,500 were returned by the branch to the home office but the
home office has not yet reflected in its records the receipt of the supplies.
d.
The branch made a profit of P10,100 for the month of December but the
home office erroneously recorded it as P11,180.
e.
The branch has not received the cash in the amount of P25,000 sent by
the home office on December 31. This was charged to the General Expense
account.
All transactions are presumed to have been properly recorded.
What is the balance of the Home office account on the books of the branch as
of December 31, before adjustments?
What is the adjusted balance of the Home office account on the books of the
branch as of December 31?
For 20x4 a branch reported P18,000 of profit. In the combining worksheet at yearend, the Home Office Capital account had a balance of P60,000 in the balance
sheet. The basic elimination entry would include which of the following individual
postings?
a. A debit to the Home Office Capital account forP18,000.
b. A credit to the Home Office Capital account for P42,000.
c. A debit to the Home Office Capital account for P42,000.
d. A debit to the Home office Capital account for P60,000.
e. None of the above.
For 2004 a branch reported P18,000 of profit. In the combining worksheet at yearend, the Home Office Capital account had a balance of P60,000 in the balance
sheet. The basic elimination entry would include which of the following individual
postings?
a. A debit to the Branch Income account for P18,000.
b. A credit to the Branch Income account for P18,000.
c. A debit to the Branch Income account for P42,000.
d. A debit to the Branch Income account for P60,000.
e. None of the above.
Items 10 to 12 are based on the following information:
On July 1, 20x5, the Ambo Company of DJ Builders Company of Cagayan Valley
established an organization in Sampaloc, Manila to act as sales agency. The
following assets are sent to the agency on July 1:
A working fund to be operated under the imprest fund……………
Samples from the merchandise stock………………………………….
P 1,000
5,000
Advertising materials and literature……………………………………..
1,250
During July the agency submits sales on account of P17,600 that are approved
by the home office; cost of merchandise shipped in filling orders is P10,500. Home
office disbursements chargeable to the agency are as follows:
Furniture and fixtures for agency………………………………………....
Salaries and commissions…………………………………………………..
Rent……………………………………………………………………………..
Total…………………………………………………………………………….
P 2,400
1,750
__ 800
P 4,950
On July 31 the agency working fund was replenished. Paid expense vouchers
submitted by the agency are as follows:
Advertising expense……………………………………………………………..
Miscellaneous expense…………………………………………………………
P 325
600
The following information is used in adjusting the agency accounts on July 31:
 Agency samples will be useful until December 31; at that time it is
believed they will have a salvage value of 40% of cost.
 Approximately 2/5 of the advertising materials and literature remain on
hand. Furniture and fixtures are to be depreciated on a 5-year basis.
 The agency manager is to receive a bonus of 5% of all sales above
P10,000 a month, the bonus to be paid by the home office at quarterly
intervals.
10. Determine the gross profit for the month ended July 31, 20x5.
11. Determine the amount of expenses for the month ended July 31, 20x5.
12. Determine the net income for the month ended July 31, 20x5.