On June 1, 2015, Infatuation Co.

established an agency in Manila, sending samples costing P80,000

which are useful until May 31, 2016 and have a salvage value of 10% of cost. A working fund of P65,000
is to be maintained using the imprest basis. During 2015, the agency submitted to the home office sales
order amounting to P675,000. Sales per invoice were P525,000 which were duly approved by the home
office. Collections during the year amounted to P280,330, net of 3% sales discount. The cost of
merchandise sold during the year is equal to 75% of the gross selling price. Vouchers for expenses
amounted to P35,000.
1. How much net income would be reported by the Manila agency on December 31, 2015?

The home office bills AMV branch at a mark-up above cost. During the year 2015, goods costing
P225,000 were shipped from the home office. There was no beginning inventory. The unrealized mark-
up account has a balance of P78,750 before any adjustments. The net income of the branch is
understated by P35,000.
2. How much is the ending inventory of the branch to be reported in its separate books? AMV gets its
inventories exclusively from its home office.

PROF Co. operates a branch in Manila. The following are selected accounts taken from December 31,
2015 financial statements of PROF and its branch:
HOME BRANCH
OFFICE
Sales P7,500,000 P3,750,000
Shipments to P1,250,000
branch
Shipments from P1,562,500
home office
Inventory, Jan. 1, P750,000 P375,000
2015
Inventory, Dec. 31, P630,000 P270,000
2015
Purchases P6,200,000 P950,000
Allowance for P337,500
overvaluation
before adjustment
Operating P300,000 P270,000
expenses

The ending inventory of the branch includes P120,000 purchased from outside suppliers.
3. What is the combined cost of ending inventory?

Comparative trial balances of the home office of HOH Corporation and its two branches at December
31, 2016 were as follows:
Home CHI MIN
Office Branch Branch
Cash P 5,000 P 15,000 P 22,000
Accounts receivable 80,000 30,000 40,000
Inventories 150,000 60,000 48,000
CHI Branch 170,000
MIN Branch 165,000
Plant assets 730,000 250,000 200,000
Purchases 900,000
Shipments from
home office 300,000 240,000
Expenses 300,000 75,000 50,000
Totals P2,500,000 P 730,000 P 600,000

Accounts payable P 100,000 P 45,000 P 30,000

 Other liabilities 80,000 15,000 5,000
Loading in branch
inventories 108,000
Share capital, P10 500,000
par
Retained earnings 262,000
Home office 170,000 165,000
Sales 1,000,000 500,000 400,000
Shipments to 450,000 ________ ________
branches
Totals P2,500,000 P 730,000 P 600,000

Additional information:
Home Office and branch inventories at December 31, 2016 were:
Home Office P 120,000
CHI Branch (at billed prices) P 72,000
MIN Branch (at billed prices) 96,000
4. How much net income will HOH Corporation report for year-ended 2016?

CDO ENTERPRISES operates a branch in ILIGAN CITY. At the close of business on December 31, 2016,
the ILIGAN CITY branch account in the home office books showed a debit balance of P200,000. The
inter-office accounts were in agreement at the beginning of the year. For purposes of reconciling the
inter-office accounts, the following facts were ascertained:
a. A machinery costing the home office P17,500 was picked up by the branch as P1,750.+ P15,750
b. The branch did not take up insurance premium of P2,000 charged by the home office.+
c. Freight charge on merchandise made by the home office for P9,800 was recorded in the branch
books as P8,900. + P900
d. Home office credit memo representing a discount on merchandise for P1,500 was taken up twice by
the branch. +
e. The branch failed to take up a P2,000 debit memo from the home office representing the share of
the branch in advertising. +
f. A remittance of P15,000 from the BUKIDNON branch was inadvertently taken up in the ILIGAN CITY
branch account but was corrected before yearend. *
g. + The home office inadvertently recorded a remittance for P13,500 from its BUTUAN CITY branch
as a remittance from it’s ILIGAN CITY branch.

5. Determine the balance in the branch books of the Home Office account (before adjustment) as of
December 31, 2016.

USJR, INC. established a branch in TAGBILARAN CITY to distribute part of the goods purchased by the
home office. The home office prices inventory shipped to the branch at 25% above cost. The following
account balances were taken from the ledger maintained by the home office and the branch.
USJR, INC. TAGBILARAN CITY BRANCH
Sales P336,000 P144,000 (20% still
uncollected)
Beginning
inventory 69,000 38,400 (1/3 from home office)
Purchases 222,000 40,000 (30% unpaid)
Shipments to
branch 66,000
Shipments from
home office 82,500
Operating
expenses 68,000 11,200 (4/5 unpaid)
Ending 48,000 21,600 (10% from outsiders)
inventory
6. Calculate the combined net income for the home office and the branch.

On May 1, 2016, the Home Office in BACOLOD CITY establishes a sales agency in SILAY CITY. The
following assets are sent to the sales agency on that date:

Cash for the working fund

to be operated under Imprest system P100,000
Merchandise Samples 240,000

During the month, the sales agency submits sales on account of P1,500,000 which was duly approved
by the home office. Cost of merchandise shipped to fill the orders from customers obtained by the sales
agency is P800,000. Home office disbursements chargeable to the agency are as follows: Furniture and
fixtures, P150,000; manager’s and salesmen’s salaries, P88,000;and rent, P35,000. On May 31, the
sales agency working fund is replenished: paid vouchers submitted by the sales agency amounted to
P42,000. Sales agency samples are useful until December 31, 2016, which at that time, are believed to
have a salvage value of 15% of cost. Furniture are depreciated at 30% per annum.
7. What is the net profit of the SILAY CITY AGENCY for the month of May, 2016?