HOME OFFICE
1. SAND BOX Corporation has two branches, Do San and Dal Mi, to which merchandise is billed at 20%
above cost. Partial trial balance accounts of the three entities at December 31, 2018 are summarized as
follows:
Home Office
Do San Branch
Dal Mi Branch
Inventory
800,000
180,000
240,000
Do San branch
450,000
Dal Mi branch
420,000
600,000
360,000
250,000
200,000
450,000
300,000
900,000
750,000
Shipments from home office
Purchases
1,600,000
Expenses
900,000
Home Office
Loading- Do San branch
130,000
Loading- Dal Mi branch
120,000
Sales
1,950,000
Shipments to Do San branch
500,000
Shipments to Dal Mi branch
400,000
Additional information:
Physical inventories on hand at December 31, 2018 were as follows:
Home office
P700,000 at cost
Do San branch
210,000 at billed prices
Dal Mi branch
150,000 at billed prices
A) The ending inventory of SAND BOX Corporation must be:
a. P1,100,000
b. P 1,000,000
c. P 1,150,000
d. P 1,220,000
B) The combined net income of home office and branches for 2018 must be:
a. P 250,000
b. P 430,000
c. P 350,000
d. P 600,000
C) Correct net income of branches for 2018 must be:
a. P 350,000
b. P 250,000
c. P 600,000
d. P 430,000 Ho
2. The following information came from the books and records of Mr. Han Corporation and its branch.
The balances are as of December 31, 2019, the fourth year of the corporation's existence.
Home Office Dr. (Cr.)
Sales
Shipments to branch
Branch Dr. (Cr.)
(320,000)
(80,000)
Shipments from home office
120,000
Purchases
50,000
Expenses
80,000
Inventory, January 1, 2019
36,000
Unrealized profit in branch inventory
(50,000)
There are no shipments in transit between the home office and the branch. Both shipments accounts
are properly recorded. The closing inventory at billed prices includes merchandise acquired from the
home office in the amount of P21,000 and P9,000 acquired from vendors for a total of P30,000.
Requited: Determine the following: 1.
2.
3.
4.
5.
6.
Beginning inventory acquired from outsiders. 6,000
Correct cost of beginning inventory.
26,000
Realized profit from inventory shipments. 43,000
Correct net income of branch.
107,000
Correct ending inventory. 23,000
Allowance balance at the end. 7,000
3. SAMSAN TECH COMPANY operates a branch in URDANETA City. At the end of the year, the branch
account in the books of the home office shows a balance of P600,000. The following information was
ascertained:





The branch made a profit of P40, 400 for the month of December but the home office
erroneously recorded it as P44,720.
The branch has not received the cash in the amount of P100,000 sent by the home office on
December 31. This was charged to General Expense account by the home office.
The home office has billed the branch the amount of P150,000 for merchandise, which was in
transit on December 31.
Supplies of P18,000 was returned by the branch to the home office but the home office has not
yet reflected in its records the receipts of the supplies.
A home office accounts receivable for P42,000 was collected by the branch. Said collection was
not reported to the home office by the branch.
What is the unadjusted balance of the Home Office account of URDANETA branch?
A. 427,680
B. 569,680
C. 385,680
D. 469,680
4. The home office transfers inventory to its branch at 20% of billed price. During the year, inventory
costing the home office 320,000 was transferred to the branch. At the year end, the home office
adjusted its deferred gross profit account by 82,800. The branch year-end Statement of Financial
Position shows 19,200 of inventory acquired from the home office.
What is the branch's beginning inventory at its actual cost?
a. 88,000
b. 26,560
c. 33,200
d. 16,000
5. The Yeongshil Corporation is maintaining a branch in Cebu. During the year, the home office shipped
goods to the branch at a cost of 120,000. The branch submitted to the home office the following report
summarizing its operations for the period ended December 31, 2016.
Sales (30% on account), 196,000;
Expenses (50% of which is still unpaid), 50,000;
Purchases, 25,000;
Shipments from Home Office, 150,000;
Inventory beg (30% from outsiders), 30,000;
Inventory end (40% from Home Office), 90,000;
Remittance to Home Office, 60,000.
A) What is the cost of sales in so far as the home office is concerned?
A. 88,000
B. 92,000
C. 83,000
D. 115,000
B) From the Problem above what is the required balance of the allowance overvaluation account on
December 31, 2016?
A. 27,000
B. 34,200
C. 27,000
D. 7,200
6. Trial balances for Han Ji Pyeong Corporation and its two branches at December 31, 2018 are as
follows:
Home
Office
Branch
2
Branch 2
Cash
18,000
5,000
15,000
Accounts Receivable
30,000
12,000
26,000
Inventories, January 1, 2018
36,000
7,200
5,400
Other Assets
200,000
42,800
47,600
Branch 1
50,000
Branch 2
68,000
30,000
27,000
40,000
Debits
Shipments from home office
Purchases
120,000
Expenses
78,000
35,000
600,000
132,000 161,000
Accounts payable
40,000
10,000
30,000
Capital stock
200,000
Retained Earnings
41,900
42,000
61,000
80,000
70,000
Credits
Home Office
Shipments to Branch 1
36,000
Shipments to Branch 2
30,000
Loading- branch inventories
2,100
Sales
250,000
600,000
132,000 161,000
Additional Information:
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

Ending inventories are P32,000, P8,400, and P4,800 for the home office, the branch 1, and the
branch 2, respectively. Ending inventories of the branches exclude goods in transit.
Cash in transit from home office to Branch 1 for operating expenses at December 31, 2018 is
P2,000. Cash in transit from Branch 2 to home office amounts to P4,000.
"Loading - branch inventories" represents unrealized profit in beginning Inventories of Branch 1
and Branch 2.
Determine following:
1) The adjusted balance of reciprocal accounts that will appear on their individual financial
statements.
Branch 1= 7,200
Branch 2= 5,900
2) The correct net income of Branch 1 and Branch 2.
Branch 1= 21,000
Branch
2=
7,000
3) The adjusted balance of loading - branch inventories account at December 31, 2018. 3,700
4) The cost of sales that must appear on the published financial statements of Han Ji Pyeong Corp. at
December 31, 2018.
116,000
QUIZZER
Questions 1 through 5 are based on the following:
Comparative trial balances of the home office and the two branches of Norway.
Corporation at December 31, 2018 were as follows:
Home Office
Branch No. 1
Branch No. 2
Cash
5,000
15,000
22,000
Accounts receivable (net)
80,000
30,000
40,000
Inventories
150,000
60,000
48,000
Branch No. 1
170,000
Branch No. 2
165,000
Plant assets (net)
730,000
250,000
200,000
Purchases
900,000
300,0000
240,000
300,000
75,000
50,000
2,500,000
730,000
600,000
Accounts payable
100,000
45,000
30,000
Other liabilities
80,000
15,000
5,000
Shipments from home office
Expenses
Total
Loading in branch inventories
108,000
Capital stock, P10 par
500,000
Retained earnings
262,000
Home office
170,000
165,000
Sales
1,000,000
500,000
400,000
Shipments to branches
450,000
0
0
2,500,000
730,000
600,000
Total
Additional information:
Home office and Branch inventories at December 31, 2018 were:
Home office (at cost)
120,000
Branch No. 1 (at billed price)
72,000
Branch No. 2 (at billed price)
96,000
1. What is the mark-up rate on merchandise transfers to branch?
A. 20 percent of billed price
B. 25 percent of cost.
C. 16-2/3 percent of billed price
D. 25 percent of billed price
2. How much is the beginning inventory of Norway Corporation?
A. P150,000
B. P258,000
C. P240,000
D. P90,000
3. How much is the ending inventory of Branch No. 1 at cost?
A. P72,000
B. P57,600
C. P60,000
D. P54,000
4. How much is the correct net income of Branch No. 2 as far as home office concerned?
A. P190,000
B. P158,000
C. P185,000
D. P94,000
5. How much net income will the home office report in its separate statement?
A. P220,000
B. P595,000
C. P494,000
D. P100,000
Questions 6 and 7 are based on the following:
The Dagupan City branch of Andy Enterprises, Manila was billed merchandise shipments from home
office at cost plus 25% in 2011 and cost plus 20% in 2018. Other pertinent data for 2018:
Dagupan Branch
Home Office
Sales
63,000
212,000
Inventory beginning
8,900 (at billed price)
23,000 (at cost)
Purchases
164,000
Inventory transfers
50,400 (at billed price)
42,000 (at cost)
Inventory end
11,700 (at billed price)
28,500 (at cost)
Expenses
20,300
76,400
6. What will be the combined cost of sales of Dagupan branch and Andy's home office that must be
shown in the combined income statement?
A. P22,430
B. P155,815
C. P155,870
D. P22,040
7. What will be the combined net income of Dagupan branch and Andy's home office?
A. P22,430
B. P22,600
C. P22,133
D. P22,040
Question 8 and 9 are based on the following:
The following information came from the books and records of SH Venture Capital Corporation and its
branch. The balances are as of December 31, 2018.
Home Office Dr. (Cr.)
Branch Dr. (Cr.)
Sales
(500,000)
Expenses
150,000
Shipments to branch
(240,000)
Unrealized profit in branch inventory
(74,000)
The branch purchases all of its merchandise from the home office. The home office ships this
merchandise at 125 percent of its cost. The ending inventory of the branch is P60,000 at the billed price.
There are no shipments in transit between the home office and the branch.
8. The beginning inventory of the branch per GAAP must be:
A. P64,000
B. P70,000
C. P60,000
d. 56,000
9. The correct net income of the branch must be:
A. P40,000
B. P102,000
C. P50,000
D. P62,000
10. The home office sells merchandise to its branch at 120% of cost. The branch established several
years ago with policy that all its merchandise would be acquired from the home office. The branch
reported inventory beginning of P3,600 and inventory ending of P6,000. The home office showed in its
trial balance an unrealized profit on inventory account balance of P4,600. The cost of merchandise sold
by the branch that came from the home office is:
A. P21,600
B. P18,000
C. P21,000
D. Cannot be determined
11.
Home Office Control (Branch Books)
Jan. 1, 2018
Balance
60,000
Jan. 3, 2018
Cash remitted to home office
80,000
Jan. 5, 2018
Shipments from home office
120,000
Jan. 28, 2018
Expenses from home office
45,200
Jan. 28, 2018
Cash remitted to home office
30,000
Jan. 28, 2018
Merchandise returned to home office
12,000
Branch control (Home Office Books)
Jan. 1, 2018
Balance
60,000
Jan. 3, 2018
Cash received from branch
80,000
Jan. 4, 2018
Shipments to branch
120,000
Jan. 28, 2018
Expense allocation
52,400
Jan. 28, 2018
Shipments to branch
24,000
Jan. 28, 2018
Collection from branch customer
18,000
Jan. 28, 2018
Supplies purchased for branch and shipped 8,000
directly to branch
Except for the error by the branch in recording its share of allocated expenses, all differences are timing
differences. The adjusted balance of reciprocal accounts is:
A. P103,200
B. P166,400
C. P117,200
D. P124,400
Items 12 through 16 are based on the following:
The preclosing general ledger trial balances at December 31, 2018, for the HJP Company and its Quezon
City branch office are shown below:
Trial Balance
Home Office Dr. (Cr.)
Branch Office Dr. (Cr.)
Cash
360,000
80,000
Accounts Receivable
350,000
120,000
Inventory
700,000
150,000
Plant assets- net
900,000
Branch office
200,000
Accounts Payable
(360,000)
(135,000)
Accrued Expenses
(140,000)
(25,000)
Home Office
(90,000)
Capital Stock
(500,000)
Retained Earnings
(450,000)
Sales
(4,400,000)
(950,000)
Purchases
2,900,000
240,000
Purchases from Home Office
Expenses
450,000
440,000
160,000
Your audit disclosed the following data:
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


On December 23 the branch office manager purchased P40,000 of furniture and fixtures but
failed to notify the home office. The bookkeeper, knowing that all fixed assets are carried on the
home office recorded the proper entry on the branch office records. It is the company's policy
not to take any depreciation on assets acquired in the last half of a year.
On December 27 a branch office customer erroneously paid his account of P20,000 to the home
office. The bookkeeper made the correct entry on the home office books but did not notify the
branch office.
On December 30 the branch office remitted cash of P50,000, which was received by the home
office in January, 2018.
On December 31 the branch office erroneously recorded the December allocated expenses from
the home office as P5,000 instead of P15,000.



On December 31 the home office shipped merchandise billed at P30,000 to the branch office,
which was received in January, 2018.
The entire opening inventory of the branch office had been purchased from the home office.
Home office 2018 shipments to the branch office were purchased by the home office in 2018.
The physical inventories at December 31, 2018, excluding the shipment in transit, are:
Home office - P550,000 (at cost)
Branch office- P200,000 (comprised of P180,000 from home office and P20,000 from outside
vendors.)
The home office consistently bills shipments to the branch office at 20% above cost. The sales
account is credited for the invoice price.
12. How much is the correct ending inventory of HJP Company?
A P750,000
B. P720,000
C. P745,000
D. P738,000
13. How much is the adjusted balance of reciprocal account before net income branch?
A. P110,000
B. P190,000
C. P80,000
D. P130,000
14. How much is the correct net income of the branch?
A. P220,000
B. P210,000
C. P234,000
D. P224,000
15. How much is the correct cost of sales of the HJP Company?
A. P3,665,000
B. P3,595,000
C. P3,290,000
D. P3,220,000
16. How much is the correct sales of HJP Company?
A. P5,350,000
B. P4,900,000
C. P4,870,000
D. P4,975,000
1. In the separate statement of financial position of the home office, the investment in branch
account shall be presented as
a. Liability
b. Equity
c. Asset
d. Income
2. In the separate statement of financial position of the branch, the home office account shall be
presented as
a. Liability
b. Equity
c. Asset
d. Income
3. In the combined statement of financial position prepared by the company, the inventory of the
branch shall be measured and presented at
a. Lower of cost or net realizable value
b. Cost
c. Billed price
d. Fair value
4. The main difference between the net income reported in the separate income statement of the
branch and the net income reported by the home office for the branch's operation is the
a. Overstatement of beginning and ending inventory reported by the branch
b. Overstatement of total goods available for sale reported by the branch
c. Overstatement of cost of goods sold reported by the branch
d. Overstatement of shipment from home office reported by the branch
5. If the home office receives debit memo from the branch, the home office shall record it in its
separate statement of financial position by
a.
b.
c.
d.
Increasing the investment in branch account
Decreasing the investment in branch account
Debiting the investment in branch account
Disclosure
6. If the branch receives credit memo from the home office, the branch shall record it in its
separate statement of financial position by
a. Increasing the home office account
b. Crediting the home office account
c. Debiting the home office account
d. Disclosure
7. Which of the following transactions will increase the home office account in the branch's
separate statement of financial position?
a. Net loss of the branch
b. Collection by the home office of branch's receivable
c. Debit memo received from the home office
d. Payment by the branch of home office's liability
8. Which of the following transactions will decrease the investment in branch account in the home
office's separate statement of financial position?
a. Net income of the branch
b. Payment of branch's liability by the home office
c. Credit memo received from the branch
d. Return by branch to home office of merchandise shipped
1. At the end of the year the Investment in Bacolod account of the home office is P300,500.
However there are transactions discovered to have errors.
 Bacolod branch bought equipment on June 1, 2020 costing P63,800 for the home office's
use and the policy is to record the asset in Bacolod's books. During that time the home office
recorded the equipment and credited its reciprocal account of its Bacolod branch.
 The policy of the company regarding the equipment's depreciation is that it has a life of 8 yrs
with no salvage value and the straight-line method should be used. No entry has been made
by the home office and branch.
 The home office ships merchandise to Bacolod amounting to P96,700. Bacolod recorded the
transaction as P97,600.
 Bacolod pays the home office's creditors in the amount of P32,400 and sends a debit memo
to the home office. Upon receipt of the debit memo, the home office debited its reciprocal
account in the amount of P23,400 twice.
1. What is the unadjusted balance of the home office current account in the books of
Bacolod at the end of the year?
a. 379,600
b. 252,000
c. 286,000
d. 315,800
2. What is the net adjustment of the investment in Bacolod account at the end of the year?
a. 20,052 debit
b. 20,052 credit
c. 19,387.5 debit
d. 19,387.5 credit
3. What is the net adjustment of the home office current account in the books of Bacolod
branch at the end of the year?
a. 4,887.5 debit
b. 4,887.5 credit
c. 5,552 debit
d. 5,552 credit
2. SVT Company established a branch in Ayala by sending merchandise voting P924,500 and
effecting a fund transfer of P400,000 cash on January 1, 2020.
The branch purchased computer equipment costing P420,000 on April 1. As per agreement, the
home office will maintain all the property, plant and equipment records.
Ayala branch collected P56,000 worth of Ortigas branch's receivable on August 4. Cash
remittance to the home was P250,000 on September 28.
On November 21, Ayala branch returned defective merchandise worth P125,000 to the home
office.
At the end of the year, the company's controller found out that the branch accountant had
failed to record all the transactions initiated by the home office from the second half of the
year. Because of this, there is a significant discrepancy between the balances of the reciprocal
accounts.
For the purpose of reconciling the reciprocal accounts, the controller instructed the accounting
staff of the home office to send a copy of the Investment in Ayala general ledger to the branch.
Investment in Ayala
1/1
Merchandise to branch
924,500
4/2
Equipment acquisition
240,000
1/1
Fund transfer
400,000
9/30
Remittance
225,000
7/2
Merchandise to branch
135,000
11/22 Return of goods from branch
8/31 Fund transfer
95,000
10/5 Expense paid for branch
29,000
3.








1.
a.
b.
c.
d.
What is the unadjusted balance of the Home Office account?
598,500
585,500
723,500
335,500
2.
a.
b.
c.
d.
What is the adjusted balance of the reciprocal accounts?
844,500
574,500
901,000
596,500
12,500
The formation is given regarding JWW Company:
The reciprocal account in the separate income statement of the home office amount to
P225,000.
During the year 2020 (current year), the home office bills merchandise to the beach at 215% of
cost.
The beginning inventory of the branch is P249,375.
During the 2020, the branch purchased from vendors merchandise amounting to P150,000.
The ending inventory of branch as shown in the combined financial statements is P267,125.
The allowance for overvaluation before adjustment is P320,000.
The beginning inventory of the branch from the home office at cost is P153,125
The unrealized profit at the end of the year must be decreased by P55,000.
1. What is the cost of goods sold in the combined financial statements at the end of 2020?
a. 351,000
b. 354,900
c. 296,000
d. 306,190
2. What is the total goods available for sale recorded in the branch's books at the end of 2020?
a. 883,125
b. 563,125
c. 624,375
d. 821,875
4. Home office bills its branch for merchandise shipments at 30% above cost.
The following are some of the account balances on the books of home office and its branch as of
December 31, 2022:
Inventory, January 1
Home Office Books
Branch Books
35,000
101,500
Shipments from Home Office
263,900
Purchases
1,575,000
350,000
Shipments to Branch
253,750
Branch Inventory Allowance
91,875
Sales
2,100,000
1,260,000
Operating Expenses
507,500
192,500
Per physical count the ending inventory of the branch is P73,500 including goods from outside
purchases of P48,475: the ending inventory of the home office is P210,000.
1. What is the amount of the unrealized profit in the separate books of the home office on
January 1, 2023?
a. 21,000
b. 15,750
c. 19,250
d. 52,500
2. What is the branch beginning inventory in 2022 that came from outside purchases?
a. 48,475
b. 19,250
c. 33,250
d. 0
3. What is the Cost of goods available for sale of the branch?
a. 679,875
b. 781,375
c. 705,250
d. 715,400
4. What is the total ending inventory to be shown on the combined financial statements? S.
What is the combined net income for the year?
a. 280,000
b. 277,725
c. 283,500
d. 328,475
5. What is the combined net income for the year?
a. 957,950
b. 942,725
c. 876,750
d. 919,275
5. The home office in Queen City ship and bills merchandise to its provincial branch at cost. The branch
carries its own accounts receivable and makes its own collections. The branch also pays its expenses.
The branch transactions for 2020 are reflected in the following information:
Cash
20,000
Accounts Receivable
80,000
Home Office
180,000
Shipments from Home Office
250,000
Sales
225,500
Expenses
55,500
December 31, 2020 inventory
65,000
What is the balance of the Investment in Branch account in the home office book?
a.
b.
c.
d.
180,000
195,000
165,000
175,000
6. On June 1, 2020, the CARATLAND Main Office established a sales agency in Ortigas. The main office
sent samples of its merchandise amounting to P8,400 and a working fund amounting to P72,000 to be
maintained on the imprest basis. The sample sent were intended to last until January 1, 2021. The
agency transmitted to the home office sale of goods costing P291,600 but the home office was not able
to fill up 35% of the said transmitted sales orders.
Collections from customers amounted to P82,175, net of 5% sales discount. Payments made by the
agency during June, July and August were annual rent P70,200, advertising expense P4,650 and utilities
P6,300. The agency also purchased an equipment on July 1, 2020 worth P11,000 which will be
depreciated at 15% per annum. The gross profit rate on sales agency order is 20% of gross sales.
What is the income of the agency for the three months ended August 31, 2020?
a.
b.
c.
d.
18,610
14,825
14,147.5
10,685