Questions 1 & 2 are based on the following information.
On February 14, 2012, Therese Company established a sales agency in Tagbilaran.
Upon establishment of the sales agency, the home office sent samples costing P8,000
and a working fund of P3,000 to be maintained on the imprest basis. During the sixmonth period, the sales agency reported to the home office sales orders. These were
billed at P70,000 of which of P40,000 was collected) the sales agency paid expenses
of P5,800 but was reimbursed by the home office.
On August 15, 2012, the sales agency samples were valued at P2,000. It was
estimated that the gross profit on goods shipped to fill sales order averaged 40% of
cost.
1. The cost of sales of the sales agency for the six-month period is
a. P42,000
c. P48,000
b. P44,000
d. P50,000
2. The net income of the sales agency for the six-month period is
a. P16,200
c. P10,200
b. P14,200
d. P8,200
3. A branch’s ending inventory of merchandise shipped by the home office and
purchased from outside vendors amounts to P 50,000. The post-closing trial
balance in the Unrealized Gross Profit in Branch Inventory account is P 6,000 due
to the home office practice of shipping merchandise at 20% above cost. The
merchandise purchased from outside vendors contained in the ending inventory
of the branch amounts to:
a. P 38,000
c. P 30,000
b. P 18,000
d. P 14,000
Questions 4 and 5 are based on the following information.
The income statement submitted by Loon Branch to the Home Office for the month
of December 31, 2013 follows:
Sales
Cost of Sales:
Inventory, December 31, 2013
Shipments from Home office
Purchased locally by branch
Total
Inventory, December 31, 2013
Gross Margin
Operating Expenses
Net Income for the month
P600,000
P80,000
350,000
30,000
P460,000
(100,000)
360,000
P240,000
(180,000)
P 60,000
The Branch inventories consisted of:
Merchandise purchased from home
Local purchases
Total
12/1/2013
P70,000
P10,000
P80,000
12/31/2013
P84,000
P16,000
P100,000
After effecting the necessary adjustments, the Home Office ascertained the true net
income of the Branch to be P156,000.
4. At what percentage of cost did the home office bill the branch for merchandise
shipped to it?
a. 100%
c. 120%
b. 140%
d. 150%
5. What is the balance of the Allowance for Overvaluation in the branch inventory at
December 31, 2013?
a. P10,000
c. P16,000
b. P24,000
d. P34,000
Questions 6 and 7 are based on the following information.
The following information is extracted from the books and records of Elaine Company
and its branch. The balances are at December 31, 2012 of the company’s operations.
Home Office
Branch
Sales
P260,000
Shipments to branch
P 78,000
Shipments from home office
104,000
Purchases
39,000
Expenses
78,000
Inventory, January 1, 2012
26,000
Allowance for overvaluation of branch
31,200
inventory
However, no shipments in transit between home office and the branch were made.
Both shipments accounts are properly recorded. The ending inventory includes
merchandise acquired from the home office in the amount of P26,000 and P7,800
acquired from outsiders acquired from the home office in the amount of P26,000
and P7,800 acquired from outsiders for a total of P33,800.
6. What is the realized profit in branch inventory?
a. P21,000
c. P22,533
b. P31,200
d. P24,700
7. What is the amount of branch merchandise beginning inventory that was acquired
from the home office?
a. P14,000
c. P15,600
b. P19,000
d. P20,800
Questions 8 and 9 are based on the following information.
Auto Supply Company is engaged in merchandising both at its home office in Cebu
City and its branch in Toledo City. Selected accounts taken from the trial balances of
the home office and the branch as of December 31, 2012 follow:
Debits
Cebu City
Inventory, January 1, 2012
Toledo Branch
Purchases
Freight in from home office
Sundry Expenses
Credits
Home Office
Sales
Sales to branch
Allowance for Overvaluation of
inventory at January 1, 2012.
P 23,000
58,300
190,000
52,000
P155,000
110,000
branch
Toledo
Branch
P 11,550
105,000
5,500
28,000
P 53,300
140,000
1,000
Additional information:
 The Toledo City branch gets all of its merchandise from the home office.
The home office bills the goods at cost plus a 10% mark-up. At December
31, 2012, a shipment with a billed value of P5,000 was still in transit.
Freight on this shipment was P250 and is to be treated as part of the
inventory.
 Inventories on December 31, 2012, excluding the shipment in transit,
follow:
Home office, at cost………………………………….………..
P30,000
Branch, at billed price (excluding freight of P520…… 10,000
8. What is the net income of the home office from own operations?
a. P30,470
c. P21,000
b. P20,000
d. P30,470
9. What is the net income of the branch in so far as the home office is concerned?
a. P870
c. P1,500
b. P10,470
d. P12,000
10. Durable Textile Company has a single branch in Bohol. On March 1, 2012, the
home office accounting records included an Allowance for Overvaluation of
Inventories – Bohol Branch ledger account with a credit balance of P32,000.
During March, merchandise costing P36,000 was shipped to the Bohol Branch and
billed at a price representing a 40% markup on the billed price. On March 31,
2012, the branch prepared an income statement indicating a net loss of P11,500
for March and ending inventories at billed prices of P25,000. What is the amount
of adjustment for allowance for Overvaluation of Inventories to reflect the true
branch net income?
a. P39,257 debit
b. P46,000 credit
c. P39,333 debit
d. P46,000 debit
Questions 11 and 12 are based on the following information.
Yul Trading Corp. operates a branch in Talisay City. At the close of business on
December 31, 2012, Talisay 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:
1. An office equipment costing the home office P3,5000 was picked up by the
branch as P350.
2. Insurance premium of P675 charged by the home office was taken up twice by
the branch.
3. Freight charges on merchandise made by the home office for P1,125 were
recorded in the branch book as P1,215.
4. Home office credit memo representing a discount on merchandise for P800
was not recorded by the branch.
5. The branch failed to take up a P700 debt memo from the home office
representing the share of the branch in the advertising.
6. The home office inadvertently recorded a remittance for P3,000 from the Cebu
branch as a remittance from its Talisay branch.
11.What is the balance of the Home Office account before adjustment as of December
31, 2012?
a. P225,000
c. P228,485
b. 225,770
d.
226,485
12.What is the adjusted balance of the Home Office account as of December 31,
2012?
a. P225,000
c. P225,770
b. 226,485
d. 228,770
Questions 13 and 14 are based on the following information.
PTT Corporation retails merchandise through its home office store and through a
branch store in a distant city. Separate ledgers are maintained by the home office
and the branch. The branch store purchases merchandise from the home office (at
120% of home office cost), as well as from outside supplies. Selected information
from the December 31, 2012 trial balances of the home office and branch is as
follows:
Home Office
Branch
Sales
P120,000
P50,000
Shipments to branch
16,000
---Purchases
70,000
11,000
Inventory, January 1, 2012
40,000
30,000
Shipments from home office
----19,200
Expenses
28,000
2,000
Unrealized profit in branch inventory
7,200
-----
Additional information:
 The entire difference between the shipment accounts is due to the practice of
billing the branch at cost plus 20%.
 The December 31, 2012 inventories are P40,000 and P20,000 for the home
office and the branch, respectively. (The branch purchased 16% of its ending
inventory from outside supplies.)
 Branch beginning and ending inventories include merchandise acquired from
home office is inventoried at 120% of home office cost.
13.What is the realized profit in branch inventory?
a.
P4,000
c. P2,800
b.
7,200
d. 4,400
14.What is the net income of the branch as far the home office is concern?
a. P50,200
c. P10,600
b. 15,000
d. 12,200
Questions 15 and 16 are based on the following information.
Kulas Corporation has one branch operation located 500 miles away from the home
office. The branch office sales merchandise which is shipped to it from the home
office. The merchandise is transferred at cost but the branch pays reasonable freight
charges. The branch office makes sales and incurs and pays operating expenses. At
the end of the current accounting period the true adjusted balance for the home office
account on the branch’s books and the branch office account on the home office’s
books is P500,000.
The following items may or may not be reconciling items. The current year is 2012.
1) The home office has shipped merchandise to the branch office which cost
P10,000 and which incurs P500 freight charges paid by the home office but
charged to the branch. This merchandise is received by the branch on
January 5, 2012.
2) The branch has transmitted P17,000 in cash back to the home office as a
partial payment on such purchased merchandise. This cash is received by
the home office on January 6, 2012.
3) The branch office returns some defective merchandise to the home office.
The cost of the returned merchandise is P750. The branch office pays P25
of freight costs which will be charged back to the home office.
4) On December 1, 2012, the home office sends a check for P25,000 to
replenish the branch’s charged back to the home office.
5) The branch pays an advertising expense of P800 that should have been
paid by the home office since it applied to advertising fees incurred by the
home office of its own benefit.
6) The home office allocated P12,000 of general and administrative expenses
to the branch. The branch had not entered the allocation as of the end of
the year.
7) The home office pays insurance premiums on the branch store. The amount
paid by the home office is P1,000 but the branch erroneously records it as
P776.00
15.What is the unadjusted balance of the Home Office account?
a. P481,425
c. P500,000
b. 452,276
d. 518,575
16.What is the unadjusted balance of the Branch account?
a. P433,701
c. P518,575
b. 500,000
d. 452,276
Questions 17 through 20 are based on the following information.
Selected information from the trial balances for the home office and the branch of
Lalay Company at December 31, 2012 is provided. The branch acquires merchandise
from the home office and outside suppliers.
Home Office
Branch
Sales
P60,000
P30,000
Shipments to branch
8,000
Allowance for overvaluation of branch inventory 3,600
Shipments from home office
10,000
Purchase (outsiders)
35,000
5,500
Merchandise inventory 12.01.12
20,000
15,000
Expenses
14,000
6,000
Additional information:
Merchandise inventory, December 31, 2012:
Home office
P20,000
Branch (P7,500 from home office and P2,500 from outsiders)
10,000
17.The billing rate of home office to branch for merchandise shipments is
a. 120% of cost
c. 130% of cost
b. 125% of cost
d. 135% of cost
18.How much of the December 1 inventory of the branch represent purchases from
outsiders and goods shipped from home office?
a. Home office, P5,000 and Outsiders, P10,000
b. Home office, P8,000 and Outsiders, P7,000
c. Home office, P15,000 and Outsiders, P00,000
d. Home office, P12,000 and Outsiders, P3,000
19.The net income reported by the branch is
a. P4,500
c. P3,500
b. P5,600
d. P2,500
20.The combined net income for Home office and branch operations is
a. P22,500
c. P25,100
b. P24,600
d. P21,500
21.Clang-clang Corporation’s home office ships merchandise to its Toledo branch at
a billing price of 125% of cost. During 2012 the home office makes the following
entry:
Toledo Branch
75,000
Shipments to Toledo branch
75,000
At year-end 2012, P12,000 of this merchandise remains at Toledo branch
inventory.
The entry to adjust the branch income in the books of the home office will include
a. Debit to Allowance for overvaluation of branch inventory, P12,600
b. Credit to Toledo branch account, P2,400
c. Debit to Shipments to Toledo branch, P12,600
d. Credit to Toledo branch inventory, P2,400
22.May Corporation operate two stores: The Head Office store and Rose branch. On
December 31, 2012, the Rose Branch account in the home office books has a
balance of P340,000. Both stores use a standard 120% markup on cost. However,
May’s home office ships merchandise to the branches at cost. Rose’s ending
inventory includes P20,000 of merchandise received from home office
Rose branch remitted P15,000 to home office on December 30, 2012. The Home
office will not receive the remittance until January 4, 2013. The Home office
allocated P5,000 general expenses to each of the branches but Rose branch have
not yet recorded the expenses at year-end)
Rose branch paid P2,000 for advertising “after Christmas” sales that were to be
allocated equally between the two stores. The Home office has not recorded its
share in the expenses.
is
The unadjusted balance of the Home office account in the books of Rose branch
a. P324,000
b. P319,000
c. P323,000
d. P318,000
Questions 23 & 24 are based on the following information.
On December 31, 2012, the home office account on the branch books shows a
balance of P9,735. The following reconciling data are determined in accounting for
the difference.
a. Merchandise billed at P615 shipped by the home office to the branch on
December 28 is still in transit.
b. The branch collected a home office accounts receivable of P2,500, but failed
to notify the home office of this collection.
c. The home office recorded the branch net income for November at P1,125. This
was in error, as the branch reported net income was P1,215.
d. The home office was charged P640 when the branch returned merchandise to
the home office on December 31. The merchandise is in transit.
23.The unadjusted balance of Branch account is
a. P9,735
c. P10,990
b. P10,350
d. P8,400
24.The adjusting entry to correct branch net income for November is
a. Debit, Branch profit and loss P90 and Credit, Branch account P90
b. Debit, Home office account P90 and Credit, Branch profit and loss P90
c. Debit, Branch account P90 and Credit, Branch profit and loss P90
d. Debit, Branch profit and loss P90 and Credit, Home office account P90
25.VERDI, Inc. has several branches. Goods costing P10,000 were transferred by
the head office to Cebu Branch with the latter paying P600 for freight cost.
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. Considered as savings.
c. Charged to Davao Branch.
b. Charged to Cebu Branch.
d. Charged to the Head Office.
26. During the year 2012 goods billed at P840,000 were shipped to the branch at
125% of cost. The account Allowance in Branch Inventory has a balance of
P242,000 before adjustment. The beginning inventory of the branch from home
office at cost is P370,000; the beginning inventory of the branch from outsider is
P35,000; purchases from outsider is P220,000. Determine the “cost of goods
available for sale” of the branch per branch record.
a. P1, 297, 000
c. P1, 465, 000
b. P1, 539, 000
d. P1, 757, 000
Use the following information for the next two items:
Trial balance for the home office and the branch of Terry Company show the following
accounts before adjustments on December 31, 2012. The home office policy of billing
the branch for merchandise is 20% above cost.
Home Office
Branch
Allowance for overvaluation
60,000
Shipments to branch
240,000
Purchases (outsiders)
75,000
Shipments from home office
270,000
Merchandise Inventory, 12/01/12
100,000
The branch Merchandise Inventory on December 31, 2012 of P 50,000 includes
purchases from outsiders of P 20,000.
27. The working paper entry to eliminate profit in the beginning inventory includes
debit to
a. Allowance for overvaluation, P 48,000
b. Allowance for overvaluation, P 46,500
c. Allowance for overvaluation, P 48,500
d. Allowance for overvaluation, P 12,000
28. The entry on the books of the home office to recognize mark-up includes credit
to
a. Branch income summary, P 52,000
b. Branch income summary, P 52,400
c. Branch income summary, P 52,500
d. Branch income summary, P 5,000
29. The Home office in Mandaluyong shipped merchandise costing P 80,000 to Makati
branch and paid for the freight charges of P 600. The home office bills the branch
at 125% of cost. Makati branch was subsequently instructed to transfer one-half
of the merchandise to Bulacan branch wherein Bulacan paid for P 200 freight. If
shipment was made directly from Mandaluyong to Bulacan, the freight cost would
have been P 400. By how much will the Makati branch charge the Home Office
account?
a. P50,300
c. P51,300
b. P0
d. P56,000
30. 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) P26,400
Shipments from home office ( Jan.1 – Feb.16)
20,000
Sales
15,000
Sales Returns
2,000
Sales Allowances
1,000
What was the cost of the merchandise destroyed by fire?
a. P36,000
b. P30,667
c. P36,800
d. P30,000
31. Fischer Company opened its Tuguegarao Branch on January 1. Merchandise
shipments from home office during the month, billed at 120% of cost, is P125,000.
Branch returned damaged merchandise worth P15,620. On January 31, the
branch reported a net loss of P2,270 and an inventory of P84,000. What is the net
income(loss) of the branch to be taken up in the books of the Home Office?
a. (1690)
b. 6,500
c. (2,270)
d. 1,960
32. Barros Corporation’s shipments to and from its Brazil City Branch are billed at
120% of cost. On December 31, Brazil branch 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 21, of
P36,000. What is the balance of the allowance for over – valuation of branch
inventory on December 31 before adjustments?
a. P5,600
c. P6,000
b. P137,000
d. P145,000
33. The Robert Corporation established its Bulacan branch in January 2016. During
its first year of operations, home office shipped to its Bulacan branch merchandise
worth P130,000 which included of 15% markup on cost. Sales on account totaled
P250,000 while cash sales amounted to P80,000. Bulacan reported operating
expenses of P38,000 and ending inventory of P15,000, at billed price. In so far as
the home office is concerned, the real net income of Bulacan is
a. P82,000
b. P47,000
c. P177,000
d. P192,000
34. The Quezon City sales company established a branch in Dumaguete City early
last year. It shipped merchandise and billed the branch for P300,000 prior to its
opening. For the year, it made additional shipments at billed price of P120,000.
Within the year the branch shipped back P7500 inventory and got the credit memo
for said returns. On the last working day of the year, an inventory count was
made. Ending inventory of P185,000 was established, consisting of purchases
from third parties at P20,000, with the balance coming from the home office
shipments at billed price. The home office billed the branch 20% above cost. The
total purchases from outside suppliers amounted to P72,500. The total cost of
goods available for sale by the branch at cost (net of over valuation and returns)
amounted to
a. P416,250
b. P422,500
c. P435,200
d. P485,000
35.The home office of Glendale Company, which uses the perpetual inventory
system, bills shipment of merchandise to the Montrose Branch at a markup of
25% on the billed price. On August 21, 2016, the credit balance of the home
office’s Allowance for Overvaluation of Inventories – Montrose Branch ledger
account was P60,000. On September 17, 2016, 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, 2016. Compute
the realized gross profit.
a. P20,000
b. P28,000
c. P120,000
d. P160,000
36.Tillman Textile Company has a single branch in Bulacan. On March 1, 2016, the
home office accounting records included an Allowance of Overvaluation of
Inventories – Bulacan Branch ledger account with a credit balance of P32,000.
During March, merchandise costing P36,000 was shipped to the Bulacan branch
and billed at a price representing 40% markup on the billed price. On March 31,
2016, the branch prepared an income statement indicating a net loss of P11,500
for March and ending inventories at billed prices of P25,000. What is the amount
of adjustment for Allowance for Overvaluation of inventories to reflect the true
branch net income?
a. P39,257 debit
b. P46,000 credit
c. P39,333 debit
d. P46,000 debit
37. Charity Inc. established its first branch on May 1, 2016. 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 an operating
expense 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 2016 is
a. P82,000
b. 147,000
c. P177,000
d. P192,000
38. The Gift Co. has a branch in Bacolod City. During 2016, the home office shipped
to the branch merchandise billed at P150,000 including a markup of 20% on cost.
The branch reports opening and closing inventories of P90,000 and P120,000
respectively, while the home office has a closing inventories of P210,000 which
includes merchandise which are held on consignment valued at P10,000. Both
location used the periodic inventory system. What closing inventory would be
reported in the combined statement of income for the year 2016?
a. P296,000
b. P3000,000
c. P320,000
d. P330,000
39. Hope Co. started operating a branch on May 1, 2016 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 re billed uniformly at 120% of cost on May 31,2016, 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
2016?
a. P(9,500)
b. P43,000
c. P(52,500)
d. P95,000
40. Lobster Trading bills its Iloilo City Branch for shipments of goods at 25% above
cost. At the close of business on October 21, 2016, a fire gutted the branch
warehouse and destroyed 60% of the merchandise stock stored therein.
Thereafter, the following data were gathered:
January 1 Inventory, at billed price
- P50,000
Shipments from Home Office to Oct. 31
- P 130,000
Not sales to Oct.31
- P225,000
If undamaged merchandise recovered are marked to sell for P30,000, the
estimated cost of merchandise destroyed by the fire is
a. P14,400
b. P21,600
c. P24,000
d. P27,500
41. The Bicol Corporation operates a branch in Naga City. The information from the
December 31, 2016 trial balance as follows:
Sales
Shipments to branch
Purchases
Shipments from Home Office
Inventory, Jan. 1, 2016
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
b. P120,000
c. P64,400
d. P80,000
42. Jaimee Marketing Co. opened a branch in San Fernando City at the beginning of
2016. The Branch extends credit, makes collections, pays expenses from cash
receipts, and acquires goods exclusively from the home office. During 2016, goods
shipped by the home office to the branch, at a billing price of 125% of cost,
amounted to P104,000, of which P12,500 remained in the branch’s year end
inventory. Other branch transactions in 2016 were as follows: sales, all on credit,
P117,430: expenses, of which P1,500 are unpaid at year – end, P20,000;
collections on account, after deducting discounts of P1,480, P84,000; and, total
remittances to the home office, P62,500. As far as the home office is concerned,
the operations of the branch in 2016.
a. P4,450 net income
b. P9,550 net loss
c. P18,300 net income
d. P22,750 net income
43. Leila Co. ‘s Clark branch submitted the following data for 2016, its first year of
operation:
Sales
Shipments from Home Office
Operating Expenses
Home Office – current
-
P203,500 Cr.
186,120 Dr.
18, 755 Dr.
48,125 Cr.
Shipments to the branch are billed at cost. The December 31 inventory of the
branch was P25,245. What is the correct balance on December 31, 2016 of the
Branch Account – current as per home office books?
a. P46,750
b. P48,125
c. P65,505
d. P71,995
44. The Aparri Branch of Cagayan Products, Inc. buys merchandise from third parties
and receives merchandise from the home office for which it is billed at 20% above
cot. Below are excerpts from the trial balances and data on the home office and Aparri
branch for the month just ended:
Home Office Books:
Cr.
Allowance for overvaluation of branch
Merchandise …………………………………………………………
Dr.
Shipment to Branch …………………………………………….
P 740,000
1,700,000
Branch Books:
Dr.
Beginning Inventory ……………………………………………
Shipments from home office ………………………………
Purchases …………………………………………………………….
P2,880,000
2, 040,000
820,000
Month – end additional data:
Ending inventory of branch ……………………………………………
From home office at BP ……………………………………….
From outsiders, at cost ………………………………………..
P2,920,000
2,340,000
580,000
For the month just ended:
a.
b.
c.
d.
The total cost of goods sold
of Aparri Branch at cost
(net of overvaluation)
P2,820,000
2,470,000
2,770,000
2,470,000
The amount of allowance
for overvaluation that was
realized from branch sales
P400,000
350,000
740,000
390,000
45. The Clark branch of Freeport Corporation submitted the following trial balance as
of 30 June 2016:
Debit
Cash …………………………………………………….
Accounts Receivable ………………………….. P173,800
Shipments from Home Office ……………..
462,000
Home office – Current………………………….
Sales …………………………………………………….
Expenses ……………………………………………..
29,700
Total ……………………………………………………. P694,100
Credit
P 28,600
324,000
369,600
P694,100
Clark reported an ending inventory of P138,000. Shipments are billed at a mark
– up of 40% on cost. What is the real net income of Clark branch?
a.
b.
c.
d.
P70,600
P92,400
P100,000
P108,900
46. The account balances shown below were taken from the trial balances submitted
to Bon – Apetit Corporation by its Alabang branch:
Petty cash fund
Accounts Receivable
Inventory
Sales
Shipments from home(140% of cost)
Expenses
Accounts written off
2015
P1,500
43,800
173,180
107,450
51,260
1,120
2016
P1,500
49,140
37,170
195,120
136,080
57,930
1,920
All branch collections are remitted to the home office. All branch expenses are paid
out of the petty cash fund. When the petty cash fund is replenished, the branch debits
appropriate expense accounts and credits Home Office Current. The petty cash is
counted every December 31, and its composition was as follows:
Currency and coins
Expense vouchers
12/31/15
P580
920
12/31/16
P860
640
The branch inventory on December 31, 2016 was P41,370. The correct branch net
income for 2016 was:
a. P3,390
b. P3,670
c. P41,070
d. P41,350
47. 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 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 (Jan.1 – Feb. 16)
Sales
Sales returns
Sales Allowances
What
a.
b.
c.
was the cost of the merchandise destroyed by fire?
P36,000
P30,667
P36,800
P26,400
20,000
15,000
2,000
1,000
d. 30,000
48. The Best Co. bills merchandise shipments in its Cavite City branch at 125% of
cost. The branch, in turn, sells the merchandise it receives from the home office at
25% above the selling price. On August 1, 2016, all the branch’s merchandise stock
was destroyed by fire. The branch records that were recovered showed the following:
Inventory, January 1, 2016 (at billed price)
Shipments received from home office,
January to July (at billed price)
Purchases, at cost, from outside sources,
all re-sold at a 20% mark – up
Sales
Sales returns and allowances
P165,000
110,000
7,500
169,000
3,750
The Best Co. will file an insurance claim. How much is the estimated cost of the
merchandise destroyed by fire?
a. P120,000
b. P130,000
c. P140,000
d. P150,000
49. The following information are extracted from the books and records of Rona
Company and its branch. The balances are at December 31, 2016 of the company’s
operations.
Sales
Shipments to branch
Shipments from home office
Purchases
Expenses
Inventory, January 1,2016
Allowance for overvaluation of branch
Inventory
Home Office
P78,000
Branch
P260,000
104,000
39,000
78,000
26,000
31,200
However, no shipments in transit between the home office and the branch were
made. Both shipments accounts are properly recorded. The ending inventory includes
merchandise acquired from the home office in the amount of P26,000 and P7,800
acquired from outsiders for a total of P33,800.
Compute the (1) realized inventory profit of home office from sales made by the
branch, and (2) the amount of branch merchandise beginning inventory that was
acquired from the home office.
a. (1) P24,700; (2) P15,600
b. (1) P31,200; (2) P20,800
c. (1) P22,533; (2) P15,600
d. (1) P24,700; (2) P20,800
51. The Dumaguete City branch of Silliman Enterprises, Negros, was billed for
merchandise shipments from home office at cost plus 25% in 2015 and cost plus
20% in 2016. Other pertinent data for 2012 show:
Sales
Inventory, beginning
at cost
at billed price
Purchases
Inventory transfers
To Dumaguete,at cost
From Negros, at billed price
Inventory, end
at cost
at billed price
Expenses
Dumaguete branch
P63,000
8,900
Home Office
P212,000
23,000
164,000
42,000
50,400
28,500
11,700
20,300
76,400
Compute the (1)net income(loss) of Dumaguete City per branch books and (2) The
combined net income(loss) of Silliman Enterprises.
a. (1) P(4,900); (2) P18,740
b. (1) P(4,900); (2) P22,430
c. (1) P3,330; (2) P22,430
d. (1) P8,230; (2) P25,270
52. The Quezon City branch of Asser Enterprises, Manila, was billed for merchandise
shipments from home office at cost plus 25% in 2015 and cost plus 20% in 2016.
Other pertinent data for 2016 show:
Sales
Inventory, beginning
at cost
at billed price
Purchases
Inventory transfers
To Dumaguete,at cost
From Negros, at billed price
Inventory, end
at cost
at billed price
Expenses
Quezon City branch
P63,000
8,900
Home Office
P212,000
23,000
164,000
42,000
50,400
11,700
20,300
28,500
76,400
Compute the (1) realized inventory profit from branch sales (or overvaluation of cost
of goods sold, and (2) the ending inventory that should be presented in the combined
income statement.
a. (1) P8,230;
b. (1) P8,230;
c. (1) P7,993;
d. (1) P9,520;
53. Selected accounts
and its branch follow:
(2) P40,200
(2) P38,250
(2) P38,250
(2) P37,860
from the December 31, 2016 trial balances of Betty Star Co.
Inventory, Jan. 1
Branch Current
Purchases
Shipments from Home Office
Freight In
Expenses
Home Office Current
Sales
Shipments to branch
Branch merchandise markup
5-star
P46,000
116,000
380,000
104,000
(310,000)
(200,000)
(22,000)
Branch
P23,100
209,000
10,450
58,100
(106,000)
(280,000)
-
As of December 31, 2016, a shipment with a billing price of P11,000 was in transit to
the branch. Freight cost, typically 5% of the billing price, is inventoriable.
Merchandise on hand at year – end were: at home office, P64,000 at cost; at branch,
P33,000 at billing price.
Compute the (1) branch net income in so far as home office is concerned, and (2)
the combined net income for 2016:
a. (1) P40,900; (2) P84,900
b. (1) P32,100; (2) P76,100
c. (1) P32,000; (2) P76,000
d. (1) P33,000; (2) P77,000
54. Swift Corporation, operates a number of branches in Metro Manila. On June 30,
2016, its Sn. Lorenzo branch showed a Home Office Account balance of P27,350 and
the home Office books showed a Sn. Lorenzo branch account balance of P25,550.
The following information may help in reconciling both accounts:
 A P12,000 shipment, charged by Home Office to Sn. Lorenzo branch, was
actually sent to and retained by Sto. Tomas branch.
 A P15,000 shipment, intended and charged to San Jose branch was shipped
to Sn. Lorenzo branch and retained by the latter.
 A P2,000 emergency cash transfer from Sto. Tomas branch was not taken
up in the Home Office books
 Home office collects a Sn. Lorenzo branch accounts receivable of P3,600
and fails to notify the branch.
 Home office was charged for P1,200 for merchandise returned by Sn.
Lorenzo branch on June 28. The merchandise is in transit.
Home office erroneously recorded Sn. Lorenzo’s net income for May, 2016 at
P16,275. The branch reported a net income of P12,675.
55. What is the reconciled amount of the Home Office and Sn. Lorenzo branch
reciprocal amounts?
a. P21,750
b. P23,750
c. P27,350
d. P20,150
56. On December 31, 2016, the investment in Branch account on the home office’s
books has a balance of P102,000. In analyzing the activity in each of these accounts
for De cember you find the following differences:
 A P12,000 branch remittance to the home office initiated on December
27,2016, was recorded on the home office books on January 3,2017.
 A home office inventory shipment to the branch on December 28, 2016, was
recorded by the branch on January 4, 2012; the billing of P24,000 was at cost.
 The home office incurred P14,400 of advertising expenses and allocated P6,000
of this amount to the branch on December 15, 2016. The branch has not
recorded this transaction.
 A branch customer erroneously remitted P3,600 to the home office. The home
office recorded this cash collection on December 23,2016. Meanwhile, back at
the branch, no entry has been made yet.
 Inventory costing P51,600 was sent to the branch by the home office on
December 10, 2016. The billing was at cost, but the branch recorded the
transaction at P40,800.
Compute the (1) Unadjusted Balance of the Home Office Account and (2) Adjusted
Balance of the Reciprocal Account as of December 31, 2016:
a. (1) P76,800; (2) P114,000
b. (1) P52,800; (2) P93,600
c. (1) P151,200; (2) P139,200
d. (1) P52,800; (2) P90,000
57. 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 cost. 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. Considered as savings
b. Charged to Cebu Branch
c. Charged to Davao Branch
d. Charged to the Head Office
58. On December 3, 2016, the home office of Kathy Office Supply Company recorded
a shipment of merchandise to its Davao Branch as follows:
Davao Branch ----------------------------------- 30,000
Shipment to Branch ----------------------Unrealized Profit in Branch inventory ---Cash ( for freight charges) ---------------
25,000
4,000
1,000
The Davao branch sells 40% of the merchandise to outside entities during the rest of
December 2016. The books of the home office and Kathy Office Supply are closed on
December 31 of each year.
On January 5, 2017, the Davao branch transfer half of the original shipment to the
Baguio Branch, and the Davao Branch pays P500 as the shipment.
The entry on the books of the Davao Branch to record receipt of the shipment from
the home office on December 3, 2016 would be:
a. Shipments from Home Office -------------Freight-out ---------------------------------Home Office ---------------------------
29,000
1,000
b. Shipments from Home Office -------------Accounts Receivable -----------------------Freight-in ---------------------------------Home Office ---------------------------
25,000
4,000
1,000
c. Shipments from Home Office -------------Home Office ---------------------------
30,000
d. Shipments from Home Office -------------Freight-in ---------------------------------Home Office ---------------------------
29,000
1,000
30,000
30,000
30,000
30,000
59. Using the same information in No. 58, at what amounts should the 60% of the
merchandise remaining unsold at December 31, 2016 be included in (1) the inventory
of the Davao Branch at December 31, 2016, and (2) the published balance sheet of
Kathy Office Supply Company at December 31, 2016 shows inventory at:
a. (1) P15,600 ; (2) P18,000
b. (1) P17,400 ; (2) P15,000
c. (1) P18,000 ; (2) P15,600
d. (1) P18,400 ; (2) p16,000
60. Using the same information in No. 58, what is the entry on the books of Baguio
Branch for the January 5, 2017 transfer, assuming that the freight cost of the
merchandise from the home office to Baguio Branch would have been P600:
a. Shipments -----------------------------------Home Office -----------------------------
15,100
b. Shipments -----------------------------------Freight-in ------------------------------------Home Office -----------------------------
14,500
600
c. Shipments -----------------------------------Freight-in ------------------------------------Home Office -----------------------------
15,100
600
d. Shipments -----------------------------------Freight-in ------------------------------------Home Office -----------------------------
14,500
1,100
15,100
15,100
15,600
15,600
61. Using the same information on 58, 59, and 60, what is the entry on the books of
Davao Branch in respect to January 5, 2017 transfer:
a. Home Office ----------------------------------Inventory -------------------------------
15,500
b. Home Office ----------------------------------Shipments inventory ------------------Cash (for freight charges) -------------
15,100
c. Home Office ----------------------------------Cash (for freight charges) -------------Inventory --------------------------------
15,500
d. Home Office ----------------------------------Cash (for freight charges) ------------Freight-in -------------------------------Inventory --------------------------------
15,600
15,500
15,000
100
500
15,000
500
600
14,500
62. Using the same information in Nos. 58, 59 and 60, what is the entry on the home
office books in respect to January 5, 2017 transfer:
a. Home Office ----------------------------------Cash --------------------------------------Inventory ----------------------------------
15,500
b. Shipments ------------------------------------Freight-in ------------------------------------Home Office Current ---------------------
14,500
600
c. Branch Current – Baguio --------------------Excess Freight -------------------------------Branch Current – Davao -----------------
15,100
400
d. Branch Current – Baguio --------------------Excess Freight -------------------------------Branch Current – Davao -----------------
15,100
600
500
15,000
15,100
15,500
15,700
63. Lipton Company had an agency in Antipolo. For the period just ended, the agency
transactions showed the following:
Receipts from sales ---------------------------------------------Disbursements:
Purchases --------------------------------------------------Salaries and commissions ---------------------------------Rent ---------------------------------------------------------Advertising supplies ---------------------------------------Other expenses ---------------------------------------------
P350,000
400,000
70,000
20,000
10,000
5,000
The agency had P100,000 receivables and P50,000 payables as of the end of the
period. Also, they were inventories on hand of P90,000 and unused advertising
supplies of P6,000. The agency was set up as an experiment for one period and would
be closed if losses were incurred. The agency should:
a.
b.
c.
d.
Review again because it was a break even operation.
Close with the period’s operational loss of P155,000.
Close with the period’s operational loss of P9,000.
Continue with the period’s profit of P25,000.
64. The JJ Company, Inc. opened an agency in Makati in 2016. The following is a
summary of the transactions of the agency:
Sales orders sent to home office ------------------------------P66,000
Sales orders filled by home office in 2016 --------------------55,800
Freight on shipment to agency --------------------------------1,320
Collections, net if 2% discount --------------------------------47,628
Selling expenses paid from the agency working fund--------3,384
Administrative expenses charged to agency ------------------ 5% of gross sales
Samples shipped to agency:
Cost -------------------------------------------------------P3,600
Inventory, December 31, 2016 --------------------------1,320
The company maintains its gross margin on agency gross sales at 30%
excluding the freight cost on shipments to agency.
The agency’s cost of sales including freight and agency’s net income would
amount to:
Cost of Sales
a. P39,000
b. 47,520
c. 40,380
d. 40,380
Net Income
P5,994
7,668
5,994
7,320
65. Happy Inc. opens a sales agency in Davao City, and a working fund for P20,000
is established on the imprest basis. The first payment from the fund is P3,000 for
rent. This transaction should be recorded by the home office as follows:
a. No Entry
b. Rent ---------------------------Cash -------------------------c. Davao Agency ----------------Cash -------------------------d. Davao Agency ----------------Working Fund ---------------
3,000
3,000
3,000
3,000
3,000
3,000
66. Sad Co. has a sales agency in Cebu. Agency revenues and expenses are recorded
in separate agency accounts, with the operating results of both the agency and the
home office generated at each month-end. For the month of October 2016, the home
office paid P10,000 for advertising costs on behalf of the agency and recorded this
as follows:
a. Cebu agency
10,000
Cash
10,000
b. Advertising Expense
10,000
Cash
10,000
c. Accounts Receivable – Cebu Agency 10,000
Cash
10,000
d. Advertising expense – Cebu Agency 10,000
Cash
10,000
67. The home office ships merchandise to the branch at 25% percent above cost. If
the balance before closing in the Intracompany Inventory Profit account is P66,000
and Shipments from Home Office amounted to P300,000, what was the cost of the
branch’s beginning inventory?
a. P30,000
b. P24,000
c. P80,000
d. P96,000
68. The home office ships merchandise to the branch at 50% above cost. On its books
the branch shows a beginning inventory of home office merchandise amounting to
P15,000 and shipments from home office of P110,000. Its ending inventory of home
office merchandise is P5,000. What amount should the home office adjust the
allowance for overvaluation of branch inventory account?
a. P40,000
b. P55,000
c. P60,000
d. P62,500
69. Power Corporation shipped inventory to its Bacolod branch, costing P375,000
plus freight. Power bills inventory to its branches at 120% of original cost, plus the
actual amount of shipping charges. At the end of the year, the Bacolod branch had
resold 50% of the inventory from the home office. Shipping cost paid by Power were
P2,000.
What amount should the inventory be reported in the branch’s statement of financial
position?
a.
b.
c.
d.
P187,500
P188,500
P226,000
P377,000
70. Using the question in No. 69, at what amount should the branch’s inventory from
the home office be reported in the statement of financial position of Power
Corporation as a whole?
a. P157,520
b. P188,500
c. P189,500
d. P377,000
71. Oro Corporation has a branch in Cebu. The branch reported income of P130,000
for 2013. The branch has a balance in its Home Office account at the end of the year,
after closing, P765,000. Branch income has not been recorded by Oro’s home office.
During the year, Oro shipped inventory to the branch at a price of P160,000; oro’s
original cost was P90,000. All but 45% of the inventory has been resold to unrelated
parties by year –end.
What is
a.
b.
c.
d.
the balance in Oro’s Investment in Branch account?
P594,500
P603,500
P635,000
P765,000
72. A branch’s ending inventory of merchandise shipped
purchased from outside vendors amounts to P50,000. The
the Unrealized Gross Profit in Branch Inventory account is
office practice of shipping merchandise at 20% above
purchased from outside vendors contained in the ending
amounts to:
a. P38,000
b. P30,000
c. P18,000
d. P14,000
by the home office and
post – closing balance in
P6,000 due to the home
cost. The merchandise
inventory of the branch
73. Merchandise shipped to a branch for P30,000, which includes a 20% markup on
cost, was returned by the branch. To record the receipt of the returned merchandise,
the home office should make the following entry:
a. Shipments to Branch
30,000
Investment in Branch
25,000
Allowance for overvaluation of Br. Inv.
5,000
b. Investment in Branch
30,000
Shipment in Branch
30,000
c. Shipments to Branch
25,000
Allow. for Overvaluation of Br. Inv.
5,000
Investment in Branch
30,000
d. Shipment to branch
24,000
Unrealized Profit in Br. Inv
6,000
Investment in Branch
30,000
74. During 2016, Jose Corporation transferred inventory from its home office to its
Laguna Branch at a billed price of P110,000. The inventory originally cost the
company P90,000. The home office reported sales and cost of goods sold of
P1,400,000 and P590,000, respectively. The Laguna branch reported sales and cost
of goods sold of P675,000 and P300,000, respectively. All of the inventory had been
sold by year – end. What is the cost of goods sold to be reported in the 2016 combined
statement of comprehensive income?
a. P890,000
b. P870,000
c. P800,000
d. P780,000
75. The Simon Company always ships merchandise to a branch outlet at a 30% mark
–up above cost. During 2016, this branch received P182,000 in such shipments while
also acquiring goods from outside vendors at cost of P96,000. Half of the branch’s
December 31, 2016, inventory of P57,200 came from home office acquisitions. At the
beginning of 2013, the branch held merchandise with transfer price of P49,400. All
of this inventory had been purchased directly from the home office. At the end of
2016, what is the adjusted balance in Simon’s Allowance for Overvaluation in Branch
Inventory account?
a. P4,250
b. P5,340
c. P6,000
d. P6,600
76. Lakas, Inc., starts a branch operation to sell more of its merchandise. Inventory
costing P60,000 is shipped to this branch at a billed price of P90,000. During the
initial year, the home office pays P17,000 in expenses for the branch. The branch
sells 80% of the inventory that it received for P110,000 and remits P70,000 in cash
to the home office. What is the correct Home Office account balance on the records
of the branch? Closing entries have not been made.
a. P7,000
b. P37,000
c. P75,000
d. P147,000
77. Lamp starts a branch operation on January 1, 2016.