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HOBA practice exam test bank
Accountancy (Polytechnic University of the Philippines)
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1. When an equipment is purchased by the branch and carries in the home office books, which of
the following occurs?
A. A debit to Equipment account
B. A credit to Cash
C. A credit to Home Office account
D. None of the above
Answer: B
2. Statement 1: The “shipments to branch” account is added to the home office’s purchases account
in determining home office’s cost of goods sold.
Statement 2: The “shipments from branch” account is added to the branch’s purchases account in
determining branch’s cost of goods sold.
a. S1 – True; S2 – True
b. S1 – True; S2 – False
c.
S1 – False; S2 – False
d. S1 – False; S2 – True
Answer: D
3. Remittances from a branch to its home office are recognized by the branch as:
A.
B.
C.
D.
Income
Yes
No
Yes
No
As increase in Home Office Account
Yes
No
No
Yes
Answer: B
4. Statement 1: When a home office pays the expenses of a branch and notifies the branch of the
expenditure, home office account would decrease.
Statement 2: When a home office incurs expenses and allocated to the branch, investment in
branch account would decrease.
a. S1 – True; S2 – True
b. S1 – True; S2 – False
c.
S1 – False; S2 – False
d. S1 – False; S2 – True
Answer: C
5. The home office ships merchandise to its branch above cost. What journal entry should the
home office make to record the transfer of merchandise?
A. Investment in Branch
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Shipment to Branch
B. Shipment to Branch
Investment in Branch
C. Investment in Branch
Shipment to Branch
Allowance for overvaluation of inventory
D. Shipment from home office
Home office
Answer: C
1. The branch purchased an equipment for ₱200,000 with a useful life of 5 years. Who will
recognize depreciation expense assuming that all assets are kept on the home office books?
What is the appropriate entry?
A. Home Office
B. Branch
C. Branch
D. Home Office
Depreciation expense
Investment in Branch
Depreciation expense
Accumulated depreciation
Depreciation expense
Home Office
Depreciation expense
Accumulated depreciation
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
Answer: C
2. St. John Company’s branch in San Fernando began operations on January 1, 2019. During the
first year of operations, the home office shipped merchandise to the San Fernando branch that
cost P250,000. Freight-in of P1,500 on the shipments from the home office was paid by the
branch. The home office should make an adjusting entry for freight-in as follows:
A. A year-end adjusting entry debiting the branch account for ₱1,500.
B. A year-end adjusting entry debiting the home office account for ₱1,500.
C. A year-end adjusting entry crediting the branch account for ₱1,500.
D. No year-end adjusting entry for the freight charge.
Answer: D
3. Coronation Corporation established its Pampanga branch in 20x9. Merchandise costing
P120,000 is shipped to this branch. During the initial year, the home office acquires an equipment
for P80,000 to be carried in the branch books, and the branch maintains physical possession and
use. The equipment has a useful life of 4 years. The branch sells 60 percent of the inventory for
P100,800 on account and subsequently collected half of the amount. The branch remits 80
percent in cash to the Home Office. What is the correct Home Office account balance on the
records of the branch?
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a. P79,680
b. P139,680
c.
P200,000
d. P159,680
Answer: D
Solution:
Shipment of merchandise to home office
Equipment carried by the branch
Cash remittance to home office (100,800*1/2*80%)
Home office account balance
P 120,000
80,000
(40,320)
P 159,680
4. On January 01, 2020 Kindness Company, Inc. establishes a branch in Bulacan. During the year,
Kindness, Inc. transfers cash and merchandise to the branch worth P15,000 and P45,000,
respectably. Freight was paid by the home office worth P1,500 included in the cost of
merchandise. The home office also incurred P5,700 expenses of which 30 percent was allocated
to the branch. On December 31, 2020, the branch incurred a loss of P4,000. What is the balance
of the branch account as per home office books?
A.
B.
C.
D.
P56,210
P54,500
P57,710
P56,000
Answer: A
Solution:
Cash shipped to the branch
Merchandise shipped to the branch
(excluding freight)
Expenses allocated to the branch
Loss incurred by the branch
Investment in Branch Account Balance
P15,000
43,500
1,710
(4,000)
P56,210
5. Your examination of the accounts revealed the following information:
1. On December 28, the branch remitted P12,500 in cash to the home office that was not
received until January 4.
2. Merchandise that was billed to the branch at P7,500 was in transit at December 31.
3. The branch failed to take up a P1,200 credit memo from the home office representing the cash
collections.
4. The branch returned damaged merchandise worth P3,000 but the home office recorded it as
P13,000
5. The unadjusted balances in the home office and branch books are P23,140 and P14,340,
respectively.
What is the adjusted balance of the reciprocal accounts on December 31, 2020?
A. P21,840
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B. P20,640
C. P10,640
D. P8,140
Answer: B
Solution:
Unadjusted balances, Dec. 31
Remittance in transit
Shipment in transit
Cash collections of home office
Error
Adjusted balances, Dec. 31
(Branch Books)
Home Office
P14,340
(Home Office Books)
Investment in Branch
P23,140
(12,500)
7,500
(1,200)
10,000
P20,640
P20,640
6. Penafrancia Company, Inc. has been operating a branch in Manila for a 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. On December 31, 2018, the branch books shows the
following balances:
Cash
Home office
Shipments from Home Office
Accounts receivable
Sales
Expenses
P 50,500
115,000
85,600
36,300
66,800
19,100
The branch inventory on December 31,2018 is P34,240.
Compute the net profit (loss) of the branch and the Branch-current account in the home office books.
Net Profit
Investment In Branch
A.
15,440 profit
115,000
B.
3,660 profit
111,340
C.
3,660 loss
111,340
D.
3,660 loss
111,660
Answer: C
Solution:
Sales
Less: Cost of goods sold
Shipments from home office
Less: Inventory, December 31
Gross Profit
Expenses
Net Loss
Solution:
Investment in Branch
Less: Net Loss
Investment in Branch, Dec. 31
P 66,800
85,600
(34,240)
(51,360)
15,440
(19,100)
(P3,660)
P 115,000
(3,660)
P111,340
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7. The home office ships merchandise to the branch at 25 percent above cost. How should a
shipment costing P120,000 be recorded by the branch?
a. Investment in Branch
Allowance for overvaluation of Br. Inv.
Shipments to Branch
b. Shipments from Home Office
Home Office
c. Shipments from Home Office
Home Office
d. Investment in Branch
Allow. for overvaluation of Br. Inv.
Shipments to Branch
120,000
30,000
150,000
150,000
150,000
120,000
120,000
150,000
30,000
120,000
Answer: B
Solution:
Billed price
120,000 + 30,000 = 150,000
8. The home office bills its Manila branch at 40% above cost. During the year 2020, goods costing
150,000 were shipped to the branch. The account “allowance for overvaluation of branch
inventory”, after adjustment, shows a balance of P25,000 at the end of the year. Compute the
amount of ending inventory at:
Cost
87,500
150,000
62,500
62,500
A
B
C
D
Billed Price
62,500
210,000
62,500
87,500
Answer: D
Solution:
Allowance for overvaluation after adjustment
Divided by: Mark up on cost
Cost
Add allowance for overvaluation
Billed Price
P25,000
40%
62,500
25,000
87,500
9. Matthew Corporation has a branch in Cavite. During 2021, the home office shipped to the branch
supplies costing P156,000 at a billed price of 30% above cost. The inventories of supplies at the
branch were as follows: January 1, 2021 P110,000; December 31, 2021 128,000. On December
31, 2021, the home office holds inventories of P112,800 which includes P11,500 held on
consignment and which excludes P5,000 inventories out on consignment.
How much is the inventories in a combined balanced sheet as of December 31, 2021?
a.
b.
c.
d.
P226,300
P292,800
P237,800
P227,800
Answer: B
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Solution:
Inventories:
Branch (156,000x100/130)
Home Office (112,800-11,500+5,000)
Combined Inventories
120,000
106,300
226,300
10. Refer to no. 9, if the sales of the branch were P165,600 and it incurred 43,000 expenses. As far
as the home office is concerned, what is the net income (loss) of the branch for December 2021?
a.
b.
c.
d.
P5,400
P115,400
(P30,600)
(P5,400)
Answer: C
Solution:
Sales
Less: Cost of goods sold
Inventory, January 1
Shipments from home office
Goods available for sale
Less: Inventory, December 31
Gross Profit
Expenses
Net Loss
P 165,600
110,000
120,000
230,000
(112,800)
(117,200)
48,400
(43,000)
(P5,400)
1. The collection of a P5,000 branch receivable by the home office should be
recorded by the branch with the following entry:
A. No entry is necessary, since the branch was not involved in the
transaction.
B. Cash
5,000
Home Office
5,000
C. Home Office
5,000
Accounts Receivable
5,000
D. Cash
5,000
Accounts Receivable
5,000
Answer: C
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