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CHAPTER 12

MULTIPLE CHOICES - COMPUTATIONAL
12-1:

d. This is recorded when the working fund is replenished.

12-2:

c.
Sales
Cost of goods sold:
Purchases
Merchandise inventory, end
Gross profit
Expenses
Net income (loss)

12-3:

P800,000
180,000

620,000
P 80,000
198,000
P (118,000)

b
Sales
Cost of goods sold (P70,000 / 140%)
Gross profit
Less: Samples (P8,000 – P6,000)
Expenses
Net income

12-4:

P 700,000

P 70,000
50,000
P 20,000
P 2,000
2,800

4,800
P 15,200

a
Sales
Cost of goods sold
Gross profit
Expenses (P9,000 + P4,500)
Net income

12-5:

a

12-6:

a

12-7:

c

12.8

a
Shipment of merchandise to home office
Equipment sent to home office
Expenses assigned to branch by the home office
Cash remittance to home office
Home office account balance

P 100,000
72,000
P 28,000
13,500
P 14,500

P 80,000
50,000
8,000
(40,000)
P 98,000

1

12-9: d
12-10: a
Home Office account balance before closing, Dec. 32, 1008
P 35,000
Net income (loss)
Sales
P147,000
Cost of cost goods sold
Shipment to branch
P135,000
Inventory, 12/31
18,500 116,500
Gross profit
P 30,500
Expenses
13,500
17,000
Home Office account balance (Investment in Branch account balance) P 52,000
Shipment to Branch account has no beginning balance, because this was closed at the end
of 2011.
12-11: b
Petty cash fund
Accounts receivable
Inventory
Home Office account balance

Jan. 1, 2011
P 6,000
86,000
74,000
P166,000

Jan. 1, 2012
P 6,000
98,000
82,000
P186,000

12-12: d

Unadjusted balances, Dec. 31
Remittance in transit
Shipment in transit
Cash collections of home office
Adjusted balances, Dec. 31

(Branch Books)
Home Office
P 21,320
7,280
( 400)
P 28,200

(Home Office Books)
Investment in Branch
P 38,600
(10,400)
P 28,200

12-13: a
Unadjusted balance – Investment in Branch account, 12/31
Charge for advances by president
Erroneous entry for merchandise allowance
Share in advertising expense
Unadjusted balance – Home Office account, 12/31

P430,000
(5,500)
( 600)
(9,000)
P414,900

2

12-14: a
Unadjusted balances, 12/31
Shipment in transit
Collection of HO A/R by branch
Error in recording of branch profit
Returns of merchandise in transit
Adjusted balances, 12/31

(Branch Books)
(Home Office Books)
Home Office Investment in Branch
P 97,350
P 84,000
6,150
25,000
900
( 6,400)
P103,500
P103,500

12-15: a
(Branch Books)
Home Office
P27,350

Unadjusted balances
Error in recording shipment to Cavity branch
Error in recording shipment to Tagaytay branch
Branch AR collected by home office
(3,600)
Merchandise returns in transit
Error in recording branch profit
Adjusted balances
P23,750

(Home Office Books)
Investment in Branch
P25,550
(12,000)
15,000
( 1,200)
( 3,600)
P23,750

12-16: c
Unadjusted balance- Investment in Branch account
Remittance in transit
Shipment in transit
Expenses allocated
Error in recording remittance
Error in recording shipments
Unadjusted balance – Home Office account

Unadjusted balances,
Remittance in transit
Shipment in transit
Expenses allocated
Unrecorded HO collection of AR
Error in recording shipments
Adjusted balances
12.17

P 85,000
(10,000)
(20,000)
( 5,000)
3,000
( 9,000)
P 44,000

( Branch Books)
Home Office
P 44,000

(HomeOffice Books)
Investment in Branch
P 85,000
(10,000)

20,000
5,000
(3,000)
9,000
P 75,000

P 75,000

(Branch Books)
Home Office

(Home Office Books)
Investment in

a

Branch
Unadjusted balances
Branch AR collected by Home Office
Shipments in transit
Acquisition of furniture
Merchandise returns
Cash remittance in transit
Adjusted balances

P 440,000
( 8,000)
32,000

P 464,000

P 496,000
(12,000)
(15,000)
( 5,000)
P 464,000

3

PROBLEMS
Problem 12-1
Home Office Books
1. Investment in branch
Cash

30,000

2. Investment in branch
Shipment to branch

75,000

Branch Books
Cash
30,000
75,000

3. No entry
4. No entry
5. Shipment to branch
Investment in branch

30,000
Home office

30,000

Shipment from home office
Home office

75,000

Purchases
Accounts payable

10,000

75,000
10,000

Accounts receivable
Sales
2,000
2,000

6. No entry

125,000
125,000

Home office
2,000
Shipment from home office
Cash

105,000
Accounts receivable

7. No entry

2,000
105,000

Accounts payable

7,000
Cash

7,000
8. No entry

Salaries
Rent
Utilities
Other operating expenses

10,000
5,000
2,000
12,000
Cash

29,500
9. Investment in branch
Accumulated dep’n

10. Cash
Investment in branch

7,500
7,500

65,000

Depreciation
Rent
Insurance
Home office

1,500
5,000
1,000
7,500

Home office

65,000

65,000

Cash
65,000

11. Cash

3,000
Investment in branch

12. Investment in branch
Branch income

3,000
10,000
10,000

Home office
Accounts receivable
Sales
Inventory, end

3,000

125,000
5,000
Shipment from

3,000

HO

73,000
Purchases

10,000

4

Salaries
10,000
Rent
Utilities

10,000
2,000
Other operating expenses

12,500
Home office

10,000

Problem 12-2
a.

Books of the Branch
1.

2.
3.

Cash
Merchandise inventory
Home office

200,000
350,000

Merchandise inventory
Accounts payable

400,000

Accounts receivable
Sales

650,000

Cost of goods sold
Merchandise inventory

425,000

Cash

600,000

550,000
400,000
650,000
425,000

Accounts receivable
4.

5.

b.

Advertising expense
Sales commission
Other expense
Cash
Accounts payable
Home office
Cash

40,000
65,000
45,000
150,000
370,000
120,000
490,000

Manila Sales – Naga Branch
Income Statement
Year Ended December 31, 2011
Sales
Cost of goods sold
Gross profit
Expenses:
Advertising expense
Sales commissions
Other expenses
Net income

c.

600,000

P650,000
425,000
225,000
P40,000
65,000
45,000

150,000
P 75,000

Manila Sales – Naga Branch
Statement of Financial Position

5

December 31, 2011
Cash
Accounts receivable
Merchandise inventory
Total assets

P160,000
50,000
325,000
P535,000

Accounts payable
Home office

P

30,000
505,000

Total liabilities and capital

P535,000

Problem 12-3
Home Office Books

Branch Books
(1) Adjusting Entries

a. Investment in branch
Cash

63,750

b. Investment in branch
Shipment to branch

75,300

c. Accounts receivable
Sales

157,500

d. Purchases
Accounts payable

183,750

e. Cash

170,400

Cash
Home office
Shipment from HO
Home office

75,300

73,300

Accounts receivable
Sales

99,000

157,500
183,750

Purchases
33,750
Accounts payable
33,750
Cash

Accounts receivable

f. Accounts payable
Cash
g. Expenses
Cash
Furniture & fixtures – branch
Investment in branch
h. Cash

63,750

63,750

170,400

186,000
186,000
39,900

75,300
99,000

80,100
Accounts receivable

Home office
Cash

80,100

Accounts payable
Cash

18,375

80,100
80,100
18,375

39,900

12,000
12,000
80,100

Investment in branch

Home office
Cash

12,000
12,000

80,100
Expenses
Cash

i. Retained earnings
Cash

63,750

27,000
27,000

15,000
15.000

(2) Adjusting Entries
j. Expenses
Acc. Depreciation
k. Investment in branch
Acc. Dep’n – Br. F & F

1,750
1,750
975
975

Expenses
Home office

975
975

6

l. Prepaid expenses
Expenses

375

m. Expenses
Accrued expenses

150

375

Prepaid expenses
Expenses

1,125

150

Expenses
Accrued expenses

1,125
450
450

Closing Entries
Home Office Books
n. Sales
Shipments to branch
Merchandise inv., 12/31
Merchandise inv. 1/1
Purchases
Expenses
Income summary

157,500
75,300
72,750

o. Branch loss
Investment in branch

2,100

p. Income summary
Branch loss

2,100

q. Income summary
Retained earnings

3.

Branch Books

60,180
183,750
41,445
20,175
2,100

Sales
99,000
Merchandise inv., 12/31 35,250
Income summary
2,100
Purchases
33,750
Shipment from HO
75,300
Expenses
27,300
Home office
2,100
Income summary

2,100

2,100
18,075
18,075

Individual Financial Statements
Cebu Company – Home Office
Income Statement
Year Ended December 31, 2011
Sales
Cost of sales
Merchandise inventory, 1/1
Purchases
Goods available for sale
Shipment to branch
Goods available for own sale
Merchandise inventory, 12/31
Gross profit
Expenses
Net operating income
Branch income (loss)
Net income

P157,500
P 60,180
183,750
P243,930
( 75,300)
P168,630
( 72,750)

95,880
P 61,620
41,445
P 20,175
( 2,100)
P 18,075

Cebu Company – Branch
Income Statement
Year Ended December 31, 2011
Sales
Cost of sales
Purchases

P 99,000
P 33,750

7

Shipments from home office
Goods available for sale
Merchandise inventory, 12/31
Gross profit
Expenses
Net income (loss)

75,300
P109,050
35,250

73,800
P 25,200
27,300
P( 2,100)

Problem 10-3, continued

Cebu Company – Home Office
Statement of Financial Position
December 31, 2011
Assets
Cash
Accounts receivable
Merchandise inventory, 12/31
Prepaid expenses
Furniture and fixtures
Less: Accumulated depreciation
Branch furniture and fixtures
Less: Accumulated depreciation
Investment in branch
Total assets
Liabilities and Stockholders’ Equity
Liabilities
Accrued expenses
Accounts payable
Total liabilities
Stockholders’ Equity
Capital stock
Retained earnings
Total liabilities and stockholders’ equity

P 34,800
28,575
72,750
3,075
P30,000
8,370

21,630
P12,000

975

11,025
45,825
P217,680

P 2,025
31,950
P 33,975
P 75,000
108,705

183,705
P217,680

Cebu Company – Branch
Statement of Financial Position
December 31, 2011
Assets
Cash
Accounts receivable
Merchandise inventory, 12/31
Prepaid expenses
Total assets

P 6,375
18,000
35,250
1,125
P61,650

Liabilities and Capital
Accounts payable
Home office
Total liabilities and capital

P 450
15,375
P61,650

8

Problem 12-3, continued:
4.
Combined Financial Statements
Cebu Company
Combined Income Statement
Year Ended December 31, 2011
Sales
Cost of sales
Merchandise inventory, 1/1
Purchases
Goods available for sale
Merchandise inventory, 12/31
Gross profit
Expenses
Combined net income

P256,500
P 60,180
217,500
P277,680
108,000

169,680
P 86,820
68,745
P 18,075

Cebu Company
Statement of Financial Position
December 31, 2011
Assets
Cash
Accounts receivable
Merchandise inventory
Prepaid expenses
Furniture and fixtures
Less: accumulated depreciation
Total assets
Liabilities and Stockholders’ Equity
Accrued expenses
Accounts payable
Capital stock
Retained earnings
Total liabilities and stockholders’ equity

P 41,175
47,475
108,000
4,200
P42,000
9,345

32,655
P233,505
P 2,475
47,325
75,000
108,705
P233,505

Problem 12-4
Branch Books

Home Office Books
(a) and (b) Closing Entries
Sales
145,000
Sales
560,000
Inventory, 12/31
60,000
Inventory, 12/31
90,000
Inventory, 1/1
18,000
Shipments to branch
145,000
Shipments from HO
145,000
Inventory, 1/1
Expenses
20,000
Purchases
Income summary
23,000
Expenses
Income summary
Income summary

22,000

Investment in branch

45,000
540,000
90,000
120,000

22,000

9

Home office

22,000

Branch income

22,000

Branch income
22,000
Income summary
22,000
Income summary
142,000
Retained earnings
142,000

Problem 12-4, continued:
(c)

CG Corporation
Combined Statement Working Paper
Year Ended December 31, 2011
Eliminations
Home
Office

Debits
Cash
Accounts receivable
Inventory, 1/1
Investment in branch
Equipment (net)
Purchases
Shipments from HO
Expenses
Total debits

36,000
54,000
45,000
70,000
95,000
540,000
90,000
930,000

Branch

Debit

Credit

7,000
29,000
18,000

Income
Statement
Dr (Cr)

43,000
83,000
63,000
(2) 70,000
95,000
540,000

145,000
20,000
219,000

(1)145,000
110,000

Inventory 12/31 (BS)
Total assets

150,000
371,000

Credits
Accounts payable
Home Office
Capital stock
Retained earnings, 1/1
Sales
Shipments to branch
Total credits

54,000
144,000
560,000
145,000
930,000

145,000

Inventory, 12/31 (IS)

90,000

60,000

27,000

4,000
70,000

31,000
(2) 70,000
54,000
144,000
(705,000)
(1)145,000

219,000
(150,000)
215,000

Net income
Total liabilities & equity
1.
2.

Balance
Sheet

215,000
142,000

142,000
371,000

To eliminate shipments to branch and shipments from HO
To eliminate reciprocal accounts.

10

Problem 12-5
(1)

Oro Company
Working Paper for Combined Statements
Year Ended December 31, 2011
Home
Office

Branch

Debits
Cash
Notes receivable
Accounts receivable (net)
Inventories
Furniture & fixtures (net)
Investment in Branch
Cost of goods sold
Operating expenses

63,000
10,500
120,600
143,700
72,150
124,050
300,750
104,250

128,700
32,850

Totals

939,000

275,700

Credits
Accounts payable
Common stock
Retained earnings
Home Office
Sales
Totals

Eliminations
Debit
Credit

Income
Statements
Dr (CR)

21,900
55,950
36,300

84,900
10,500
176,550
45,000
72,150

(2)135,000
(1)124,050
(2)135,000

564,050
137,100
389,100

61,500
300,000
37,500

61,500
300,000
37,500
124,050
151,650

540,000
939,000

Balance
Sheet

275,700

(1)124,050
(691,650)
289,050

289,050

Net Income

9,900

(9,900)
389,100

(1) To eliminate shipments
(2) To eliminate reciprocal accounts.

Closing Entries
2.

Branch Books

Sales
Income Summary
Cost of goods sold
Operating expenses
Home Office

3. Home Office Books
151,650
9,900
128,700
32,850
9,900

Branch loss

9,900

11

Income summary

9,900

Investment in Branch
Income summary
Branch loss

9,900

9,900
9,900

Problem 12-6
a.

b.

Investment in Branch account (Home Office Books)
Unadjusted balance
Error in recording cash transfer, April 8
Cash transfer recorded in subsequent year, Dec. 31
Error in recording allocated depreciation, Dec. 31
Adjusted balance

P138,200
( 45,000)
( 15,000)
6,000
P 84,200

Home Office account (Branch Books)
Unadjusted balance
Error in recording salary allocation, April 5
Error in recording inventory transfer, July 6
Unrecorded allocated depreciation, Dec. 31
Adjusted balance

P(93,000)
( 200)
12,000
( 3,000)
P(84,200)

Adjusting Entries
Home Office Books

Branch Books

Other income
Investment in branch –
Rizal

45,000

Cash

15,000

200
200

45,000

Investment in branchRizal
Investment in branch
Accumulated dep’n

Salary expense
Home office

Home office
12,000
Shipments from HO

12,000

Depreciation expense
Home office

3,000

15,000
6,000
6,000

3,000

Problem 12-7
a.

Investment in Branch account (Home Office Books)
Unadjusted balance, Dec. 31
Cash remittance in transit
Merchandise returns in transit
Adjusted balance, Dec. 31

P166,400
(30,000)
(12,000)
P124,400

Home Office account (Branch Books)
Unadjusted balance, Dec. 31
Error in recording expense
Shipment in transit
Supplies charged to branch
Collection of branch receivable
Adjusted balance, Dec. 31

P103,200
7,200
24,000
8,000
( 18,000)
P124,400

12

b.

Adjusting Entries
Home Office Books
Cash
30,000
Shipment to branch
12,000
Investment in branch
42,000

Branch Books
Shipment from HO
24,000
Supplies
8,000
Expenses
7,200
Accounts receivable
18,000
Home office
21,200

Problem 12-8
(1)

Reconciliation Statement
(Home Office Books) (Branch Books)
Investment in Branch
Home Office
Unadjusted balances, 1/31
Advertising charged to branch
Home office AR collected by branch
Shipment in transit
Error in recording receipt of merchandise
Understatement of depreciation
Remittance in transit, 1/31

(2)

P59,720

P 43,268
480

600
( 180)
( 432)
(12,800)
P47,088

P 47,088

Adjusting Entries
Home Office Books
Retained earnings
Cash
Accounts receivable
Investment in branch

Branch Books
432
12,800

Advertising
480
Shipments from HO
3,520
600
Shipment from HO
12,632
Home office

180
3,820

Problem 12-9
(1)

Branch Books
Adjusting Entries
Shipment from home office
Operating expenses (P4,200 + P3,900)
Home office

57,600
8,100
65,700

Closing Entries
Sales
Inventory, 12/31 (P64,580 + P57,600)
Inventory, 1/1
Shipment from HO (P623,200 + P57,600)
Operating expenses
Income summary

778,200
122,180

Income summary
Home office

116,990

47,800
680,800
54,790
116,990
116,900

13

Problem 12-9, continued:

(2)

Home Office Books
Accounts receivable
Investment in branch
Cash (P20,000 + P19,200)
Investment in branch
Branch income

(3)

470
330
800
116,990
116,900

Reconciliation Statement
Unadjusted balances, 12/31
Error in recording remittance to branch
Shipment in transit
Expenses charged to branch
Branch net income
Freight erroneously charged to branch
Cash remittance in transit to HO
Adjusted balances, 12/31

Home Office Books
Branch Books
(Investment in Branch) (Home Office)
P 206,344 P 140,974
20,000
57,600
8,100
116,990
116,990
( 470)
( 19,200)
P 323,664 P 323,664

Problem 12-10
a.

Branch Books:
Home Office account balance, January 1, 2011
Remittance to the home office
Shipments received from the home office (P440,000 – P39,000)
Credit memo from the home office
Merchandise returned to the home office
Home Office account balance, December 31, 2011

b.

P 134,000
(189,000)
401,000
12,000
( 10,400)
P
347,600

Reconciliation Statement
Home Office Books
(Investment in Branch)

Unadjusted balances, 12/31/011
Remittance in transit
Shipment in transit
Advertising charged to branch
Accounts receivable collected by HO
Error in recording remittance

P 397,100
( 42,000)

12,000

Branch Books
(Home Office )

P 347,600
39,000
17,000
(24,500)
(12,000)

14

Adjusted balances, 12/31/011

P 367,100

P 367,100

Problem 12-1111
a.

P 2,000
Sales (P 27,000 + P 33,000 + P 26,000) ………………….
Cost of Goods Sold (P 36,000 + P 18,000) ……………….
Gross Profit ………………………………………………
Rent Expense ……………………………………………..
Property Tax Expense ……………………………………
Depreciation Expense ……………………………………
Miscellaneous Expense ………………………………….
General Corporate Expense ………………………………
Net Income ………………………………………………

b.

P 86,000
(54,000)
P 32,000
P 4,000
5,000
4,000
11,000
6,000

P 180,000
Initial Transfers ………………………………………….
June Inventory Shipment ………………………………..
Property Tax Payment …………………………………..
September Inventory Shipment …………………………
Expense Allocation ……………………………………..
Cash Transfer …………………………………………...
Balance in Home Office/Branch Accounts (correct) …..

c.

(30,000)
P 2,000

Journal Entries – Tarlac Branch
2011
1/10
Cash ………………………………….
Inventory …………………………….
Equipment ……………………………
Home Office ……………………
1/20
2/1

4/1

Rent Expense …………………………
Cash …………………………….
Cash …………………………………..
Sales ……………………………

P 188,000
18,000
5,000
26,000
6,000
(63,000)
P 180,000

30,000
36,000
122,000
188,000
4,000
4,000
27,000
27,000

Cost of Goods Sold …………………..
Inventory ……………………….

18,000

Cash ………………………………….
Sales …………………………...

33,000

18,000
33,000

15

Cost of Goods Sold ………………….
Inventory ………………………
5/1
6/5

18,000
18,000

Miscellaneous Expenses …………….
Cash …………………………...

7,000

Inventory …………………………….
Home office …………………...

18,000

7,000
18,000

Problem 12-11, continued:

7/6
9/9
10/1

11/1
12/22
12/31
12/3
d.

Property Tax Expense ……………….
Home Office …………………..

5,000

Inventory ……………………………
Home Office ………………….

26,000

5,000
26,000

Cash …………………………………
Sales ………………………….

26,000

Cost of Goods Sold ………………..
Inventory ……………………..

18,000

Miscellaneous Expenses …………...
Cash ………………………….

4,000

Home Office ………………………
Cash ………………………….

63,000

Depreciation Expense …………….
Accumulated depreciation …..

4,000

General Corporate Expenses ………
Home Office …………………..

6,000

26,000
18,000
4,000
63,000
4,000
6,000

TARLAC BRANCH
Statement of Financial Position
December 31, 2011
Assets
Cash …………………………………………….
Inventory ……………………………………….
Equipment ……………………………………...
Accumulated Depreciation …………………….
Total Assets ……………………………
Equity
Home Office* …………………………………..

P 38,000
26,000
P 122,000
(4,000)

118,000
P 182,000
P 182,000

*Home office balance is P 180,000 as computed in Part b plus the P 2,000 net
income for the period.

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