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Integrative Course in Advanced Financial Accounting and Reporting (AFAR)
Quiz No. 4
Name:______________________________________
Date________
Course and Year ___________
Instructions: Write the letter of the correct answer. Support your answer with solutions.
Use yellow paper as your answer sheet.
No. 1-2 Use the following information questions 1 & 2:
The trial balances of INTERIM TEMPORARY Co.’s home office and branch are shown below:
INTERIM TEMPORARY Co.
Trial balance
December 31, 2022
Cash
Accounts receivable
Inventory, beg.
Shipments from home office
Purchases
Freight-in
Shipments to branch
Investment in branch
Equipment
Accumulated depreciation - equipment
Furniture
Accumulated depreciation - furniture
Accounts payable
Accrued expenses
Share capital
Share premium
Retained earnings - beg.
Home office
Sales
Depreciation expense
Utilities expense
General overhead expense
Various operating expenses
Totals
Home office
Dr. (Cr.)
4,400,000
720,000
2,600,000
288,000
88,000
(920,000)
3,308,000
2,880,000
(288,000)
360,000
(36,000)
(288,000)
(180,000)
(8,000,000)
(2,000,000)
(824,800)
(3,600,000)
672,000
72,000
28,800
720,000
-
Branch
Dr. (Cr.)
1,668,000
400,000
920,000
160,000
72,000
1,600,000
(160,000)
200,000
(20,000)
(160,000)
(100,000)
(3,308,000)
(2,000,000)
272,000
40,000
16,000
400,000
-
The home office and the branch have ending inventories of ₱1,080,000 and ₱600,000,
respectively.
1. How much is the total assets in the combined statement of financial position?
a. 13,440,000
b. 14,800,000
c. 14,340,000
d. 13,404,000
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2. How much is the total profit in the combined statement of profit or loss?
a. 1,851,200
b. 1,960,200
c. 1,815,200
d. 1,720,200
3. AMNESTY PARDON Co. is currently preparing its combined financial statements. At
December 31, 2022, the home office shows a ₱624,000 balance in its “Investment in
branch” account while the branch showed a ₱280,800 balance in its “Home office”
account. The following information has been gathered:
(a) The home office shipped merchandise worth ₱80,000 to the branch during December
2022 which the latter has received and recorded only in January 2023.
(b) The home office collected ₱40,000 accounts receivable on behalf of the branch. The
branch did not yet receive the credit memo sent by the home office.
(c) The branch returned damaged merchandise worth ₱120,000 to the home office. The
home office did not yet receive the debit memo sent by the branch.
(d) A remittance of cash collections amounting to ₱160,000 was not yet recorded by the
home office.
(e) The home office allocated overhead cost of ₱20,000 to the branch which the latter
has recorded twice.
(f) Freight charge of ₱48,000 paid by the home office for shipments of merchandise to
the branch was recorded by the latter as ₱4,800.
How much is the adjusted balance of the “home office” account?
a. 324,000
b. 344,000
c. 354,000
d. 364,000
4. ABASE HUMILIATE Co. is currently preparing its combined financial statements for the
year ended December 31, 2022. As of this date, the “Investment in branch” account has a
balance of ₱380,000 while the “Home office” account has a balance of ₱528,000. The
following information has been gathered:
(a) The home office allocated unpaid utilities expenses amounting to ₱40,000 to the
branch which the branch did not record in full. Instead, the branch sent a wrong
adjusting memo to the home office reducing the charge by ₱10,000 and setting up a
liability for the remaining amount.
(b) The home office erroneously credited the branch for a return of shipment of
merchandise worth ₱100,000. The branch did not make any return of merchandise.
(c) The branch mistakenly received a copy of the home office correcting entry for item (b)
above dated January 3, 20x2 and entered a credit in favor of the home office on
December 31, 20x1.
(d) The branch mistakenly sent the home office a debit memo amounting to ₱12,000 for
an apparent remittance of collections which did not happen. The home office did not
record the debit memo.
How much is the net adjustment to the “Home office” account? increase (decrease)
a. 100,000
b. 48,000
c. (48,000)
d. (52,000)
5. ABOMINABLE VERY BAD Co. has several branches. On December 31, 2022, the
“Investment in Branch One” maintained by the home office shows a balance of ₱400,000
while the “Home office” account maintained by Branch One shows a balance of ₱568,000.
The following information was determined:
(a) Branch Two acquired equipment for ₱120,000 to be maintained in the books of the
home office. This was recorded by the home office as a transaction with Branch One.
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(b) Branch One acquired equipment for ₱160,000 to be maintained in its books. This was
not recorded by the home office.
(c) Branch Four remitted cash collections of ₱40,000 to the home office which the latter
failed to record.
(d) The home office erroneously charged Branch One for a debit memo of ₱48,000
received from Branch Five.
(e) Branch One reversed a previous debit memo from Branch Six amounting to ₱24,000.
The home office decided that this charge is appropriately Branch Seven’s cost.
How much is adjusted balance of the “Home Office” account?
a. 568,000
b. 588,000
c. 628,000
d. 658,000
6. ASTATIC UNSTABLE Co. is currently preparing its combined financial statements. At
December 31, 2022, the home office shows a ₱728,000 balance in its “Investment in
branch” account. The following information has been gathered during the reconciliation
process:
(a) A credit memo sent by the home office to the branch amounting to ₱48,000 was not
recorded by the branch.
(b) A debit memo sent by the home office to the branch amounting to ₱36,000 was not
recorded by the branch.
(c) A credit memo sent by the branch to the home office amounting to ₱80,000 was
recorded by the home office twice.
(d) A debit memo sent by the branch to the home office amounting to ₱120,000 was
recorded by the home office as ₱12,000.
(e) The branch sent by mistake a credit memo amounting to ₱28,000 to the home office.
The home office did not record it.
How much is the unadjusted balance of the “Home office” account?
a. 450,000
b. 540,000
c. 580,000
c. 620,000
7. ABET ENCOURAGE Co. has several branches. On December 31, 2022, the “Home office”
account maintained by Alpha Branch shows a balance of ₱580,000. The following
information was determined:
(a) The home office charged Alpha Branch for a ₱60,000 shipment which was actually sent
to Beta Branch and retained by the latter. Alpha Branch was not notified of the
intended shipment.
(b) The home office charged Charlie Branch for a ₱64,000 shipment which was actually
sent to Alpha Branch. Alpha Branch retained the shipment.
(c) The home office erroneously recorded a remittance for ₱20,000 from its Delta Branch
as coming from Alpha Branch.
(d) Utilities expense of ₱16,000 that is allocable to Echo Branch was recorded by the home
office in Alpha Branch’s account. Alpha Branch has inappropriately recorded the
related debit memo from the home office.
How much is the unadjusted balance of the “Investment in Alpha Branch” account in the
home office books?
a. 654,000
b. 564,000 c. 556,000
d. 565,000
8. The following information was taken from the books of the home office and its branch.
Shipments to branch are billed at 120% above cost.
Home office
Branch
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Dr. (Cr.)
4,400,000
720,000
1,200,000
Cash
Accounts receivable
Inventory, beg.
Shipments from home office
Purchases
Freight-in
Shipments to branch
Investment in branch
Allowance for markup
Equipment
Accumulated depreciation - equipment
Accounts payable
Share capital
Retained earnings - beg.
Home office
Sales
Operating expenses
Totals
4,800,000
128,000
(1,520,000)
2,400,000
(304,000)
2,880,000
(288,000)
(288,000)
(8,000,000)
(608,000)
(6,400,000)
880,000
-
Inventory, end.
- From outside purchases
- From home office
1,840,000
How much is the combined profit?
a. 4,340,000 b. 3,440,000 c. 4,300,000
Dr. (Cr.)
264,000
400,000
1,824,000
160,000
72,000
1,600,000
(160,000)
(160,000)
(2,400,000)
(2,000,000)
400,000
-
40,000
960,000
d. 3,400,000
Use the following information for questions 9 & 10:
ABC Co. decided to open a branch in Manila. Shipments of merchandise to the branch totaled
₱54,000 which included a 20% mark-up on cost. The branch submitted the following report
summarizing its operations for the period ended December 31, 2022.
Sales on account
Sales on cash basis
Collection of account
Expenses paid
Expenses unpaid
Purchase of merchandise for cash
Inventory on hand, Dec. 31; 80% from home office
Remittance to home office
74,000
22,000
60,000
38,000
12,000
26,000
30,000
55,000
9. How much is the branch’s ending inventory at cost?
a. 26,000
b. 20,000
c. 22,000
d. 23,000
10. How much is the profit (loss) of the branch as far as the home office is concerned?
a. (1,000)
b. (4,000)
c. 1,000
Use the following information for questions 11 & 12:
d. 800
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ABC Co. operates a branch in Davao. There are shipments in transit from home office to the
branch. The home office ships merchandise to the branch at 125% of cost in year 2022. Profit
and loss data for the home office and branch for 2022 follows:
Home Office Branch
Sales
250,000 75,000
Purchase from outsiders
200,000 15,000
Shipments to branch/from home office:
Cost to Home Office
30,000
Billing price to branch
32,500
Expenses
40,000 10,000
Inventories, Jan. 1, 20x1:
Home Office, acquired from outsiders,
80,000
at cost
Branch: Acquired from outsiders at cost
7,500
Acquired from home office at billing price
which averaged 20% above cost
24,000
Inventories, Dec. 31, 2022:
Home Office, acquired from outsiders
55,000
at cost
Branch: Acquired from outsiders at cost
5,500
Acquired from Home Office, in 2022,
at billed price (physical count)
21,000
11. How much is the amount of merchandise in transit at billed price?
a. 3,000
b. 3,500
c. 5,000
d. 5,500
12. How much is the combined cost of goods sold?
a. 241,200
b. 240,000
c. 242,400
d. 245,200
Use the following information for questions 13 & 14:
Shipments received from the home office are billed at 120% above cost. During the year, the
branch received shipments billed at ₱480,000 and returned damaged goods with billed price
of ₱72,000. The branch has an ending inventory of ₱120,000, at billed price. The branch
reported loss of ₱40,000 in its individual financial statements.
13. How much is the balance of the “allowance for markup” account before year-end
adjustments?
a. 86,000
b. 72,000
c. 68,000
d. 64,000
14. How much is the true profit of the branch to be taken up in the home office books?
a. 8,000
b. 9,000
c. 12,000
d. 14,000
15. The home office bills shipments of merchandise to its branch at a markup of 20% based
on the billed price. At the beginning of the period, the “Allowance for markup” account
has a credit balance of ₱16,000. During the period, the home office made shipments of
goods worth ₱960,000, at cost. The branch reported an ending inventory of ₱480,000, at
billed price.
How much is the realized markup?
a. 120,000
b. 160,000
c. 180,000
d. 240,000
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Use the following information for questions 16-18:
In 2022, Metallica Co. enters into a construction contract with a customer. The transaction
price in the contract is ₱1,200,000. At contract inception, Metallica Co. estimates a total
contract cost of ₱944,000. The actual costs incurred in 2022 are ₱590,000. The estimated cost
to complete on December 31, 2022 is ₱410,000. Progress billings during the year amount to
₱70,000, ₱60,000 of which is collected.
16. At contract inception, Metallica Co. determines that its performance obligation in the
contract is a single performance obligation that is satisfied over time. Metallica Co. uses
the cost-to-cost method to measure its progress in the contract. How much is the profit
recognized in 20x1?
a. 118,000
b. 120,800
c. 122,000
d. 132,200
17. Metallica Co.’s performance obligation in the contract is satisfied over time. However, the
outcome of the performance obligation cannot be measured reasonably but contract
costs incurred are recoverable. How much is the revenue recognized in 2022?
a. 708,000
b. 590,000
c. 118,000
d. 0
18. Metallica Co.’s performance obligation in the contract is satisfied at a point in time, i.e.,
when the construction is completed and control over the promised good is transferred to
the customer. How much is the revenue recognized in 2022?
a. 708,000
b. 590,000
c. 1,200,000 d.0
19. Aircon, Inc. consigned ten one-horsepower air conditioning units to Argy Trading and paid
₱2,000 for the freight. The consignee is allowed a commission of 5% on sales. Argy Trading
submitted the following report at the end of the period:
Sales (6 units)
72,000
Less: Advances to Aircon, Inc.
10,000
Selling expenses
800
Installation and delivery
1,200
Commission
7,200
19,200
Net remittance
52,800
The selling expenses and the installation and delivery costs are chargeable to Aircon. Aircon
consistently marks-up its inventories at a 12.50% gross profit rate based on sales price. This
does not reflect any freight. How much was Aircon’s profit or loss on the consignment?
a. 52,800 profit
c. 2,200 profit
b. 7,800 loss
d. 1,400 loss
20. On November 30, 2022, Northup Co. consigned 90 freezers to Watson Co. for sale at
₱1,600 each and paid ₱1,200 in transportation costs. A report of sales was received on
December 30, 2022 from Watson reporting the sale of 20 freezers, together with a
remittance that was net of the agreed 15% commission. How much, and what month,
should Northup recognize as sales revenue?
November
December
November
December
a. 0
32,000
c. 144,000
0
b. 0
27,200
d. 142,800
0
Thoughts for the Holydays
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God loves us and wants the very best for our lives. He doesn’t want us to
be trapped in spiritual bondage. He desires for us to share in the freedom
that comes from holiness.
Psalm 139:23-24
Search me, O God, and know my heart! Try me and know my thoughts!
And see if there be any grievous way in me, and lead me in the way
everlasting!
Isaiah 57:15
For thus says the One who is high and lifted up, who inhabits eternity,
whose name is Holy: “I dwell in the high and holy place, and also with
him who is of a contrite and lowly spirit, to revive the spirit of the lowly,
and to revive the heart of the contrite.”