Chapter 12

Problem I
(a)Working Fund Agency ..
5,000
Cash .
5,000
(b)Accounts Receivable ..................................... 50,000
Sales-Agency .
50,000
(c)Cash ..................................... 35,000
Accounts Receivable ..
35,000
(d)Expenses-Agency ..
Cash .

4,500

(e)Expenses-Agency ..
Cash .

2,250

(f)Cost of Goods Sold-Agency

Merchandise Shipments-Agency .

36,000

4,500
2,250
36,000

Problem II
(a) Branch Books:
(a) Cash ..
Home Office

42,500

(b) Shipments from Home Office

Home Office ...

50,200

(c) Accounts Receivable .

Sales ..

60,000

(d) Purchases
Accounts Payable

22,500

(e) Home Office ..

Accounts Receivable ..

53,400

(f) Accounts Payable ...

Cash ..

12,250

(g) Furniture & Fixtures

Cash ..

8,000

(h) Expenses ..
Cash ..

18,000

42,500
50,200
60,000
22,500
53,400
12,250
8,000
18,000

(b) Home Office Books:

(a) Branch .
Cash .

42,500

42,500

(b) Branch
Shipments to Branch ..

50,200

(c) Accounts Receivable ...

Sales

105,000

(d) Purchases .
Accounts Payable .

122,500

(e) Cash ..
Accounts Receivable

113,600

(f) Accounts Payable .

Cash

124,000

(g) Expenses
Cash

26,600

(h) Cash ..
Branch ...

53,400

(i) Retained Earnings .

Cash ...

10,000

50,200
105,000
122,500
113,600
124,000
26,600
53,400
10,000

BARTON CO.
Balance Sheet for Branch
December 31, 20x4
Assets

Liabilities

Cash
Accounts Receivable
Merchandise Inv...
Prepaid Expenses
Furnitures & Fixtures .
P 8,000
Less accum. Depr
650
Total Assets

P 4,250
12,600
23,500
750
7,350
P48,450

Accounts Payable P 10,250

Accrued Expenses
300
Home Office .. 37,900

Total Liabilities .P48,450

BARTON CO.
Income Statement for Branch
For Year Ended December 31, 19X6
Sales
Cost of Goods Sold:
Purchases
Shipments for home office .
Merchandise available for sale
Less merchandise inv, December 31 ..
Cost of Goods Sold ..
Gross Profit .

P66,000
P22,500
50,200
P72,700
23,500

49,200
P16,800

Expenses
Net loss ...

18,200
P 1,400

BARTON CO.
Income Statement for Branch
For Year Ended December 31, 20x4
Assets
Cash ..
Accounts Receivable ..
Merchandise Inventory
Prepaid Expenses .
Furniture & Fixtures . P 20,000
Less accum. Depr..
5,580
Branch
Total Assets ...

Liabilities & Stockholders Equity

P 23,200
19,050
48,500
2,050
14,420
37,900
P145,120

Liabilities
Accounts payable P 21,300
Accrued Expenses .
1,350
Stockholders Equity
Capital stock, P20 par P50,000
Retained Earnings .
72,740
Total liabilities and stockholders
equity

P22,650
122,470
P145,120

BARTON CO.
Income Statement for Home Office
For Year Ended December 31, 20x4
Sales .......
Cost of goods sold:
Merchandise inventory, January 1 .
Purchases ...
Merchandise available for sale
Less shipments to branch ...
Merchandise available for own sale ..
Less merchandise inventory, December 31 .
Cost of Goods Sold .
Gross Profit
Expenses
Net income from own operations ..
Deduct branch net loss .
Total Income .

P105,000
P 40,120
122,500
P162,620
50,200
P112,420
48,500

63,920
P 41,080
27,630
P 13,450
1,400
P 12,050

BARTON CO.
Income Statement for Home Office
For Year Ended December 31, 20x4
Sales .
Cost of goods sold:
Merchandise inventory, January 1 ..
Purchases
Merchandise available for sale
Less merchandise inventory, December 31 ..
Cost of goods sold .
Gross profit ..
Expenses ..
Net Income .

P171,000
P 40,120
145,000
P185,120
72,000

113,120
P 57,880
45,830
P 12,050

(a) Branch Books:

Expenses .
Accumulated Depreciation F&F.

650

Sales
Merchandise Inventory .
Income summary ..

66,000
23,500

Income Summary
Shipments from Home Office
Purchases
Expenses ..

90,900

Home Office
Income Summary

1,400

650

89,500
50,200
22,500
18,200
1,400

(b) Home Office Books

Expenses .
Accumulated Depreciation F&F.

1,180

Sales
Merchandise Inventory .
Shipments to Branch ..
Income summary ..
Income Summary
Merchandise Inventory
Purchases .
Expenses ..

105,000
48,500
50,200

Branch Income
Branch .

1,400

Income Summary ..
Branch Income

1,400

Income Summary ..
Retained Earnings ..

12,050

190,250

Problem III
(a) Branch Books:
Jan.

Cash .
Home Office

1,500

Shipments from home office .

Home Office

10,200

1,500

10,200

1,180

203,700
40,120
122,500
27,630
1,400
1,400
12,050

Home Office ..
Cash ..

900

Accts. Rec. Home office .

Home Office

2,600

1-31

Accts. Rec.-Home Office .

Sales ..

6,200

1-31

Cash ..
Accounts Receivable ..

2,600

1-31

Purchases .
Accounts Payable

3,000

1-31

Accounts Payable .
Cash ..

1,450

1-31

Expenses ..
Cash .

1,250

1-31

Cash
Accts. Rec.-Home Office ...

1,600

1-31

Home Office
Accts. Rec.-Home Office .

150

1-31

Shipments from Home Office

Home Office .

1,250

Home Office
Cash
(b) Home Office Books:

1,000

Jan.

1-31

Jan.

900
2,600
6,200
2,600
3,000
1,450
1,250
1,600
150
1,250
1,000

Branch .. 1,500
Cash
Branch .. 10,200
Shipments to Branch ..

10,200

Store Furniture and Fixtures Branch .. 3,000

Store Furniture and Fixtures ...

3,000

Accumulated Depr. Store F&F .. 750

Accumulated Depr. Store Furniture
And Fixtures, Branch ..
750
Calculation of depreciation: 2.5years at P300, (10% of
P3,000), or P750

Store Furniture and Fixtures Branch ..

Branch

Branch 2,600
Accounts Receivable .........

900

1,500

900
2,600

1-31

Accounts Receivable 34,600

Sales ................................

34,600

1-31

Cash . 40,000
Accounts Receivable

40,000

1-31

Purchases .31,600
Accounts Receivable .

31,600

1-31

Accounts Payable 36,200

Cash ...

36,200

1-31

Accrued Expenses Payable .

Expenses .
Cash ..

250
8,950

1-31

Allowance for Doubtful Accounts ..

Branch ..

150

1-31

Branch .
Shipments to Branch

1,250

1-31

Cash
Branch .

1,000

9,200
150
1,250
1,000

EAGLE CO.
Balance Sheet
January 31, 20x4
Assets

Liabilities

Cash ............................
Accounts Receivable ..
Accts. Rec.-home office .
Merchandise Inventory
Merchandise in Transit .
Total assets

P 1,100
3,600
850
9,800
600
P37,200

Accounts Payable . P 2,400

Accrued expenses .
400
Home Office 14,050
Total Liabilities . P37,200

EAGLE CO.
Income Statement for Branch
For Month Ended January 31, 20x4
Sales .
Cost of Goods Sold:
Purchases
P 3,000
Shipments from home office .
11,450
Shipments from home office in transit ..........
600
Merchandise Available for Sale ..
P15,050
Less merchandise inv. Dec 31, 19X9 ................P9,800

P 6,200

Merchandise in transit ..
600
10,400
Cost of Goods Sold .
Gross Profit
Expenses
Net Loss .. ..

4,650
P 1,550
2,110
P 560

EAGLE CO.
Balance Sheet for Home Office
January 31, 20x4
Assets
Cash
Accounts Receivable P34,000
Less allowance for doubtful accounts .. 1,050
Merchandise Inventory .
Store furniture and fixtures P12,000
Less accumulated depreciation . 3,950
Store furniture and fixtures-branch P 3,900
Less accumulated depreciation
785
Branch office ...
Total Assets

P 9,100
32,950
44,500
8,050
3,315
14,050
P111,765

Liabilities
Accounts Payable .. P29,150
Accrued Expenses ..
750
Total Liabilities ..
Stockholders Equity
Capital Stock P50,000
Retained earnings .. 31,865
Total stockholders equity
Total liabilities and stockholders equity

P29,900

81,865
P111,765

EAGLE CO.
Income Statement for Home Office
For Month Ended January 31, 20x4
Sales
Cost of goods sold:
Merchandise inventory, January 1 ..
P46,000
Purchases
31,600
Merchandise available for sale
77,600
Less shipments to branch
12,050
Merchandise available for own sales .
P65,550
Less merchandise inventory, January 31
44,500
Cost of goods sold
Gross Profit
Expenses
Net income from own operations .
Deduct branch net loss
Total Income

P 34,600

21,050
P 13,650
9,325
P 4,225
560
P 3,665

EAGLE CO.
Income Statement for Home Office
For Month Ended January 31, 20x4
Assets
Liabiities and Stockholders Equity
Liabilities
Cash ... P 10,200
Accounts Payable P30,700
Accounts receivable .. P38,450
Accrued Expenses 1,100
P 31,800
Less allow for doubtFul accounts ..
1,050
37,400
Merchandise Inventory .. 54,900
Stockholders Equity
Store furn. & fixtures P15,900
Capital Stocks P50,000
Less accum depr
4,735
11,165
Retained earnings 31,865
81,865
Total assets P113,665
Total liab. And stockholders equity . P113,665
EAGLE CO.
Combined Income Statement for Home Office and Branch
For Month Ended January 31, 20x4
Sales ..
Cost of goods sold:
Merchandise Inventory, January 1 .
P46,000
Purchases ...
34,600
Merchandise available for sale ...
P80,600
Less merchandise inventory, Jan 31 ...
54,900
Cost of goods sold ...............................
Gross profit ...
Expenses
Net Income ..

P 40,800

25,700
P 15,100
11,435
P 3,665

(a) Branch Books

Jan.

31

Shipments from Office-in Transit

Home Office .

600

31

Expenses . 475
Home Office .
31
Expenses
35
Home Office ..
1/120 x P3,000, or P25 (depreciation for one month;
Asset life, 10 years); 1/90 x P900, or P10 (depreciation
For one month; asset life, 7.5 years)
31

Merchandise Inventory
Merchandise in Transit ..
Income Summary

9,800
600

31

Expenses ..
Accrued Expenses .

350

31

Sales .

6,200

600
475
35

10,400
350

Income Summary ..

6,200

31

Income Summary .
Shipments from Home Office .
Ship. From Home Office in Trans .
Purchases
Expenses ..

17,160

31

Home Office ..
Income Summary ...

560

11,450
600
3,000
2,110
560

(b) Home Office Books:

31

Branch .
Shipments to Branch .

600

31

Branch .
Expenses ...

475

31

Branch .
Accumulated Depreciation, Store
Furniture and Fixtures Branch ..

35

31

600
475

35

Expenses .
100
Accumulated Depreciation store
Furniture and Fixtures branch .
1/120 x P12,000, or P100 (depreciation for one
Month; asset life, 10 years)

31

Income Summary
Merchandise Inventory

46,000

31

Merchandise Inventory ..
Income Summary ..

44,500

31

Expenses .
Accrued Expenses .

750

31

Sales
Purchases
Expenses ..

40,925

31

Branch Income .
Branch ..

560

31

Income Summary .
Branch Income ...

560

31

Income Summary .
Retained Earnings ..

3,665

100

46,000
44,500
750
31,600
9,325
560
560
3,665

Problem IV
1.

Socrates Company
Home Office and Plato Branch
Reconciliation of Reciprocal Ledger Accounts
June 30, 20x4
Investment in
Plato Branch
Ledger
Account
(Debit)
Balances prior to adjustment
P85,000
Add: Merchandise shipped to branch
Less: Acquisition of office equipment by branch
(carried in accounting records of home office) (14,500)
Collection of branch trade accounts receivable
Payment of cash by branch
(22,000)
Adjusted balances
P48,500
(a)

2.

Accounting records of home office:

Office Equipment: Plato Branch
Investment in Plato Branch
To record acquisition of office equipment by branch.
Cash in Transit
Investment in Plato Branch
To record cash in transit from branch.

(b)

Home Office
Ledger
Account
(Credit)
P33,500
24,000

14,500

22,000

Accounting records of branch:

Home Office
9,000
Trade Accounts Receivable
To record collection by home office of branch accounts
receivable.
Inventories in Transit
Home Office
To record shipment of merchandise in transit from
home office.

Problem V
((a)
Balances before Adjustments ..
Adjustments:
Additions:
Merchandise in transit to branch .
Collection of Home office receivable by Branch
Understatement of branch net income for Nov..
Deductions:
Merchandise return to home office in transit .

24,000

BRANCH
ACCOUNT
P 8,400

2,500
90
P10,990
640

(9,000)
_______
P48,500

14,500

22,000

9,000

24,000

HOME OFFICE
ACCOUNT
P 9,735
615
P10,350

Corrected Balances

P10,350

(b) Branch Books:

Shipments from Home Office-in Transit .
Home Office ...

615

Home Office Books:

Branch
Accounts Receivable ..

2,500

Branch
Retained Earnings .

90

Merchandise Returns from Branch in Transit .

Branch ..

640

P10,350

615

2,500
90
640

Problem VI

1.
Balances before adjustments
Adjustments:
Additions:
Advertising charged to branch but not yet recorded
on branch books
Merchandise in transit to branch but not yet shown
on branch books
Collection of home office account by branch not yet
recorded by home office
Deductions:
Overstatement of branch profit for 20x0 on home
office books
Cash in transit to home office but not yet shown on
home office books
Overstatement of charge for merchandise from
home office on branch books (home office shipped
200 units @ P37.85, or P7,570, and 200 units @ P44,95,
or P8,990, a total of P16,560; branch erroneously
recorded shipment at P16,650, an overstatement of
P90
Corrected balances
2. Home office books:
Jan. 31 Retained Earnings
Wilshire Branch
31

Cash in Transit
Wilshire Branch

31

Wilshire Branch

Branch
Account
P 77,150

Home office
Account
P 56,450

600
4,400
____750
P77,900

_______
P61,450

540
16,000

_______
P 61360
540
16,000
750

___90
P 61,360

540
16,000

Accounts Receivable
Branch Books:
Jan. 31 Advertising Expense
Home Office
31

Shipments from Home Office In Transit

Home Office

31

Home Office
Shipments from Home Office

750
600
4,400
90

600
4,400
90

Problem VII

1.
Balances before adjustments
Adjustments:
Additions:
Corrected branch income for January (P1,440
P215)
Understatement of branch paid by home office for
December
Expenses of branch paid by home office
Deductions:
Collection by home office of branch receivable
Correction of branch income for January
Merchandise transferred to Brentwood branch but
incorrectly charged by Beverly Hills branch
Merchandise returns to home office in transit
Uncollectible accounts of branch
Corrected Balances

Branch
Account
P 59,365

Home Office
Account
P 57,525

1,225
310
_______
P 60,900

____215
P 57,740
65
215

1,400
840
__1,200
P 57,460

_______
P 57,460

2. (a) Entries to bring branch books up to date:

Correction in Income of Prior Periods
Home Office

215

Home Office
Income Summary

215

Home Office
Accounts Receivable
(b) Entries to bring home office books up to date:
Beverly Hills Branch
Beverly Hills Branch Income

65

1,225

215
215
65

1,225

Beverly Hills Branch

Retained Earnings

310

Shipments to Beverly Hills Branch

Beverly Hills Branch

1,400

Brentwood Branch
Shipments to Brentwood Branch

1,400

Merchandise Returns from Branch In Transit Beverly

Hills Branch
Beverly Hills Branch
Allowance for Doubtful Accounts Beverly Hills Branch
Beverly Hills Branch
Problem VIII
1.
(b) Mdse. allowance by home
office
(f) Truck repairs charged by home
office

Net credit Total

(a) Purchase of office furniture for

branch
(c) Branch charge for interest
(d) Branch charge for labor
(e) Branch charge for freight

310
1,400
1,400

840

840

1,200

1,200

Home Office
(a) Charge for office furniture
350.00
by home office
(d) Charge for labor by home
293.00
office
(e) Charge for freight by home
office
(h) Proceeds from sale of truck
643.00
1,556.50
1,229.50
Branch
(b) Mdse. allowance for
870.00
branch
325.00 (g) Proceeds from sale of
truck
433.00
_785.00
2,413.00
_______ Net Debit Total
2,413.00

Balance in branch account per home office book, September 30, 20x2
Deduct net debit total per home office books for transactions that involve
discrepancies
Add net credit total per branch books for transaction that involve
discrepancies
Balance in home office account per branch books, September 30, 20x2

780.00
866.00
78.50
475.00
2,199.50
_______
2,199.50

300.00
475.00
______
775.00
1,638,000
_2,413.00
P 131,690.00
1,638.00
P 130,052.00
__1,556.50
P 131,608.50

2.

3.

4.

Balance in home office account per branch books,

September 30, 20x2
Add: (a) Failure by branch to take up full furniture charges
(b) Recognition by branch of excess merchandise
allowance
(c) Failure by branch to recognize charge by home
office for interest
(e) Failure by branch to recognize full freight
charges
(f) Truck repairs charge to home office account in
error
Deduct: (d) Recognition by branch of excess labor
charges
(h) Credit entry to home office made in error on
sale of truck
Corrected interoffice balance, September 30, 20x2

P 90.00
50.00
325
706.50
293.00
433.00
__475.00

Balance in branch account per home office books,

September 30, 20x2
Add credit to branch account made in error for proceeds from sale of
truck
Corrected interoffice balance, September 30, 20x2
Office Furniture
Merchandise allowances
Home office interest charges payable
Interest expense
Freight In
Repairs on truck
Labor
Trucks
Home Office

P 131,608.50

90.00
50.00
250.00
75.00
706.50
293.00

___1,464.50
P 133,073.00

___908.00
P 132,265.00
P 131,690.00
_____475.00
P 132,265.00

433.00
475.00
556.50

Multiple Choice Problem

1. d

2. b

Assets:
Inventory, January 1
Imprest branch fund
Accounts receivable, January 1
Total Assets
Less: Liabilities
Home Office Current Account
Assets:
Inventory, December 31
Imprest branch fund

Branch A
P 21,000
2,000
55,000
P 78,000
-0P 78,000
Branch A
P 19,000
2,000

Branch B
P 19,000
1,500
43,500
P 64,000
-0P 64,000
Branch B
P 12,000
1,500

Accounts receivable, December 31

Total Assets
Less: Liabilities
Home Office Current Account

70,000
P 91,000
-0P 91,000

53,500
P 67,000
-0P 67,000

3. d incidentally, the entry in the books of the branch would be as follows:

Profit and loss summary xxx
Home Office Current. Xxx
4. c
Assets:
Inventory
Petty cash fund
Accounts receivable
Total Assets
Less: Liabilities
Home Office Current Account

January 1,20x4
P 37,000
3,000
43,000
P 83,000
_____-0P 83,000

5. a refer to No. 4 for computations

6. a
Sales
Less: Cost of goods sold:
SFHO
Less: Inventory, ending
Gross profit
Less: Expenses
Net Loss..
7. a
Assets:
Cash
Inventory
Accounts receivable
Total Assets
Less: Liabilities
Home Office Current Account
8. a nominal accounts have zero beginning balance.
9. d

January 1, 20x5
P 41,000
3,000
49,000
P 93,000
_____-0P 93,000

P 74,000
P67,680
9,180

58,500
P 15,500
6,820
P 8,680

January 1, 20x6
P 4,200
9,180
12,800
P 26,180
_____-0P 26,180

Branch
Current

H. Office
Current

Unadjusted balance, 6/30/20x4

P 225,770
P 226,485*
Add (Deduct): Adjustments
1 Erroneous recording of branch equipment
3150
2. Insurance premium recorded twice
(
675)
3. Erroneous recording of freight
(
90)
4. Discount on merchandise
(
800)
5. Failure by the branch to record share in advertising
700
6. error by the home office to record remittance of Cebu
3,000
________
Adjusted balance, 6/30/20x4
P 228,770
P 228,770
* The P226,485 is compute simply by working back with P228,770 adjusted balance as the starting point.

P2-07

10. c

Unadjusted balance
Add (deduct) adjustments:
In transit
Remittance
Returns
Cash in transit
Expenses - HO
Expenses branch
Error
Adjusted balance
11. d

Unadjusted balance
Add (deduct) adjustments:
Excess freight
Cash in transit
Returns
Expenses branch
Adjusted balance

Home Office Books

(Branch CurrentDr. balance)
P518,575

Branch Books
(Home Office Current
Cr. balance)
P452,276
10,500

( 17,000)
(
775)
(

800)

25,000

________
P 500,000

12,000
_____224
P 500,000

Home Office Books

(Branch CurrentDr. balance)
P515,000

Branch Books
(Home Office Current
Cr. balance)
P495,750

( 11,000)
( 4,000)
________
P 500,000

750)
5,000

P 500,000

12. c refer to No. 11 for computations

13. a refer to No. 11 for computations
14. d refer to No. 11 for computations
15. d - No entry should be made in the books of the home office, since the freight should
chargeable to the branch and the payment of the freight was made by the branch.
16. a
Home Office Books
Branch Books
(Branch Current(Home Office Current
Dr. balance)
Cr. balance)
Unadjusted balance
P85,000
P33,500
Add (deduct) adjustments:
Collection of branch receiv
( 9,000)
Shipments in transit
24,000
Purchase by branch of office
equipment
( 14,500)
Remittance
( 22,000)
_________
Adjusted balance
P 48,500
P 48,500
17. b

Unadjusted balance

Home Office Books

(Branch CurrentDr. balance)
P590,000

Branch Books
(Home Office Current
Cr. balance)
P506,700

be

Add (deduct) adjustments:

Remittance
Returns
Error by the branch
Expenses branch
Adjusted balance
18. c

Unadjusted balance
Add (deduct) adjustments:
In transit
HO A/R collected by br.
Supplies returned
Error in recording Br. NI
Cash sent to branch
to General Expense by HO
Adjusted balance

(40,000)
(15,000)
________

300
28,000

P 535,000

P 535,000

Home Office Books

(Branch CurrentDr. balance)
P150,000

Branch Books
(Home Office Current
Cr. balance)
P117,420
37,500

10,500
( 4,500)
( 1,080)
25,000
P 179,920

25,000
P 179,920

Home Office Books

(Branch Current- Dr.
balance)
P40,000

Branch Books
(Home Office Current
Cr. balance)
P31,100

19. d refer to No. 18 for computation.

20. a

Unadjusted balance
Add (deduct) adjustments:
In transit
HO A/R collected by br.
Cash in transit
Error in recording Br. NI
Adjusted balance

5,800

500
2,000
( 3,600)
P38,900

2,000
_______
P38,900

Home Office Books

(Branch Current- Dr.
balance)
P49,600

Branch Books
(Home Office Current
Cr. balance)
P44,00

21. a refer to No. 20 for computations

22. a

Unadjusted balance
Add (deduct) adjustments:
Collection of branch A/R
In transit
Purchase of furniture
Return of excess merchandise
Remittance
Adjusted balance
23. b refer to No. 22 for computations

(
( 1,200)
( 1,500)
( 500)
P46,400

800)
3,200

_______
P46,400

24. (C)

Sales (P350,000 + P100,000).P 450,000

Less: Cost of goods sold:
Purchases (P400,000 + P50,000).
P 450,000
Less: Inventory, ending
90,000 360,000
Gross profit
P 90,000
Less: Expenses
Salaries and commission..
P 70,000
Rent
20,000
Advertising supplies (P10,000 P6,000)
4,000
Other expenses.
5,000
99,000
Net Loss..
P( 9,000)

25. a
In adopting the imprest system for the agency working fund, the home office writes a check to the
agency for the amount of the fund. Establishment of the fund is recorded on the hom e office
books by a debit to the Agency working fund and credit cash. The agency will request fund
replenishment whenever the fund runs low and at the end of each fiscal period. Such a request is
normally accomplished by an itemized and authenticated statement of disbursements and the
paid vouchers. Upon sending the agency a check in replenishment of the fund, the home office
debits expense or other accounts for which disbursements from the fund were reported and
credits cash.
26. d
Normally, transactions of the agency are recorded in the books of the home office separately
identified with the appropriate agency.

Quiz- XII

1. P78,000
Assets:
Inventory, January 1
Imprest branch fund
Accounts receivable, January 1
Total Assets
Less: Liabilities
Home Office Current Account

Branch A
P 21,000
2,000
55,000
P 78,000
_____-0P 78,000

Branch B
P 19,000
1,500
43,500
P 64,000
_____-0P 64,000

2. P64,000 refer to No. 1

3. P10,416
Sales .
Less: Cost of goods sold:
Purchases...
Shipments from home office
Less: Inventory, ending (P3,391 + P7,625).
Gross profit
Add (deduct):
Expenses..
Interest expense.
Gain on sale...

P 80,000
P 25,000
56,216
11,016

70,200
P 9,800
( 7,500)
(
684)
8,800

Net Income..
4. P31,416 = P21,000 + P10,416
5. Zero, since it is a nominal account
6. P117,420

Unadjusted balance
Add (deduct) adjustments:
In transit
HO A/R collected by br.
Supplies returned
Error in recording Br. NI
Cash sent to branch
to General Expense by HO
Adjusted balance

Home Office Books

(Branch CurrentDr. balance)
P150,000

P 10,416

Branch Books
(Home Office Current
Cr. balance)
P117,420
37,500

10,500
( 4,500)
( 1,080)
25,000
P 179,920

25,000
P 179,920

7. P179,920 - refer to No. 6 for computation.

8. c
9. a
10. P7,100
Sales

P17,600

Less: Cost of goods sold

Gross profit
Less: Expenses
Salaries and commission [P1,750 + (5% x (P17,600 P10,000)
Rent expense
Advertising expense
Samples expense [(P5,000 P2,000) x 1/6]
Advertising materials expense (3/5 x P1,250)
Depreciati0n expense [(P2,400 / 5 years) x 1/12]
Miscellaneous expense
Net income

10,500
P 7,100

P 2,130
800
325
500
750
40
___600

__5,145
P 1,955

11. P5,145 refer to No. 10

12. P1,955 refer to No. 10

Theories
1.
2.
3.
4.
5.
6.
7.
8.
9.
10,

decentralized
Home Office Current
Branch Income
Home Office
intracompany
True
True
False
False
True

11.
12.
13.
14.
15.
16.
17.
18.
19.
20.

False
False
False
True
True
False
True
False
True
True

21.
22.
23.
24.
25.
26.
27.
28.
29.
30.

False
True
True
True
False
C
A
A
D
A

31.
32.
33.
34.
35.
36.
37.
38.
39.
40.

E
B
c
d
A
C
A
B
B
B

41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.

A
C
B
D
D
C
B
B
C
C
C
D