TANAUAN INSTITUTE

Advance Accounting Part 2

Seatwork II
Problem I.
On December 31, the Inv. in Branch account on
the home books shows a balance of P150,000.
The following facts are ascertained:
1. Merchandise billed at P5,000 is in transit
on December 31, from the home office
to the branch.
2. The branch collected a home account
receivable for P2,000. The branch did
not notify the home office of cash
collection.
3. On December 30, the home office
mailed a check of P10,000 to the branch
but the bookkeeper charged the check
to General Expenses; the branch has not
received the check as of December 31.
4. Branch profit for
December
was
recorded by the home office at P8,900
instead of P9,800.
5. Branch returned supplies of P1,000 to
the home office but the home office has
not yet recorded the receipt of the
supplies.
Compute the balance of the Home Office
account on the branch book as of December 31
before its adjustment.
Prepare a reconciliation statement to compute
the adjusted balances on December 31.
Problem II.
The AB Trading Co. operates a branch in Iloilo.
At close of business on December 31, 2016,
Home Office account in the branch books
showed a credit balance of P372,900. The
interoffice accounts were in agreement at the
beginning of the year. For purpose of reconciling
the interoffice accounts, the following facts
were ascertained;
a. A furniture costing the home office
P4,600 was picked up by the branch as
P460. The branch will maintain and use
the asset.
b. The branch writes off uncollectible,
accounts of P1,260. The allowance for
doubtful accounts is maintained on the
books of the home office. The home
office was not yet notified.
c. Freight charge on merchandise made by
the home office for P2,715 was recorded
in the branch books as P7,215.
d. Home office credit memo for P9,710 was
recorded by the branch at P7,91 0.
e. Iloilo branch failed to take up a P2,450
debit memo from the home office.

f.

The home office inadvertently recorded

a remittance for P3,730 from its Ilocos
branch as remittance from its Iloilo
branch.
g. Insurance premium of P1,675 charged
by the home office was taken up twice
by the branch.
h. A P14,500 branch remittance to the
home office initiated on December 28,
2016, was recorded on the home office
books on January 2, 2009.
i. A home office inventory shipment to
Ilocos branch on December 29, 2016,
was recorded by the branch on January
3, 2017; the billing of P47,000 was at
cost.
j. A branch customer remitted a P19,000
to the home office, The home office
recorded
this
cash
collection
on
December 22, 2016. Meanwhile, back at
the branch, no entry has been made yet.
Determine the balance of the Investment in
Branch account before adjustments.
Problem III.
The following information are extracted from
the books and records of PP Company and its
branch. The balances are at December 31,
2016, the third year of the corporation's
existence.
Home Office
Books

Sales
Expenses
Shipments from home office
Allowance for overvaluation

Branch
Books
P600,000
200,000
360,000

P72,500

The branch acquired all of its merchandise from

the home office. The inventories of the branch
at billed prices are as follows:
January 1, 2016
P75,000
December 31, 2016
84,000
The adjusted profit of the branch in so far as the
home office is concerned is:
Problem IV.
Xero Corporation operates a number of
branches in Metro Manila. On June 30, 2016, its
Sta. Clara branch showed a Home Office
account balance of P27,350 and the Home
Office books showed a Sta. Clara branch
account balance of P25,550. The following
information may help in reconciling both
accounts:
a. A P12,000 shipment charged by Home
Office to Sta. Clara branch was actually
sent to and retained by Sta. Isabel
branch.

b. A P15,000 shipment, intended and

charged to Sto. Domingo branch was
shipped to Sta. Clara branch and
retained by the latter.
c. A P2,000 emergency cash transfer from
Sta. Isabel branch was not taken up in
the Home Office books.
d. Home Office collects a Sta. Clara branch
accounts receivable of P3,600 and fails
to notify the branch.
e. Home office was charged for P1,200 for
merchandise returned by Sta. Clara
branch on June 28. The merchandise is
in transit.
f. Home office erroneously recorded Sta.
Clara branch's net income for May, 2008
at P16,275. The branch reported a net
income of P12,675.
What is the reconciled amount of the Home
Office and Sta. Clara branch reciprocal
accounts?
Problem V.
The LL Company established a branch in Makati
City on June 1, 2016. The branch is to receive
substantially all merchandise from the home
office. During the remainder of 2008, shipments
to the branch amounted to P180,000 which
included a 20% mark-up on cost. The branch
purchased P45,000 additional merchandise for
cash and reported unsold merchandise of
P60,000 at year-end. The branch made sales of
P292,500, paid expenses of P72,000 and
remitted to the home office all sales proceeds.
The allowance for overvaluation of branch
inventory account on the home office books
showed a balance of P7,500 after adjustment.
Compute the: (1) branch inventory on
December 31, 2016 at cost, and (2) the branch
net income as far as the home office is
concerned:
Problem VI.
Nicole Companys Kalibo branch reports a profit
of P17,000 for the year 2016 and a balance in
its Home Office account at the end of the year
of P88,000 after closing. The branch income
currently is unrecorded by the home office.
During the year, the home office had shipped
inventory to the branch at an intracompany
profit of P14,000. Of that amount, P6,000
currently is unrealized.
Assuming the branch has made all entries to
adjust and close its books for 2016, what is
balance in the home offices Investment in
Branch account?
Problem VII.

The Meycauayan branch of Marco Company, at

the end of its first quarter of operations,
submitted the following income statement:
Sales
Cost of sales:
Shipments from home office
Local purchases
Total
Inventory at end
Gross margin on sales
Expenses
Net income

P300,000

P280,000
30,000
P310,000
50,000

260,000
P 40,000
35,000
P 5,000

Shipments to the branch were billed at 140% of

cost. The branch inventory as at September 30
amounted to P50,000 of which P6,600 was
locally purchased. Markup on local purchases,
20% over cost. Branch expenses incurred by
home office amounted to P2,500.
On September 30, the branch inventory at cost
and net income realized by the home office
from the branch operations, respectively are:
Problem VII.
The following data were taken from the records
of Star Corporation of Manila and its Bulacan
Branch for 2016:
Sales
Inventory, Jan. 1
Purchases
Shipment to branch
Shipment
from
home office
Inventory, Dec. 31
Expenses

Manila office
P 530,000
57,500
410,000
105,000
71,250
191,000

Bulacan branch
P157,500
22,250

126,000
29,250
50,750

In 2016, Home office billed the branch at 120%

of cost which was lower by 5% than last years.
The combined net income of the home office
and the branch for 2016 was:
Problem VIII.
A home office transfers inventory to its branch
at a 20% markup on cost.
During 2008,
inventory costing the home office P80,000 was
transferred to the branch. At year-end, the
home
office
adjusted
its
Unrealized
Intercompany
Inventory
Profit
account
downward by P18,200. The branchs year-end
balance sheet shows P4,800 of inventory
acquired from the home office.
How much is the beginning inventory of the
branch at cost?
Problem IX.
The Armani Corp. established a branch store in
Ortigas on June 30, 2016. The branch is to
receive substantially all merchandise for sale
from the home office. During the remainder of
2016, shipments to the branch amounted to
P240,000 that included a 20% mark-up on cost.

The branch purchased P 180,000 additional

merchandise for cash and reported unsold
merchandise for P 145,000 at year-end. The
branch made sales of P420,000, paid expenses
of P105,000 and remitted to the home office all
sales proceeds.

The allowance for overvaluation of branch

inventory account on the home office books
showed a balance of P22,500 after adjustment.
1. The branch ending inventory that
represented purchase from outsiders
2. The branch net income as far as the
home office is concerned