Franco Company, which prepares financial reports at the end of the calendar year, established a branch on

July 1, 2019.  The following transactions occurred during the formation of the branch and its first six months of
operations, ending December 31, 2019.

1.    The Home Office sent P35,000 cash to the branch to begin operations.

2.    The Home Office shipped inventory to the branch. Intracompany billings totaled P75,000, which was the
Home Office's cost. (Both the Home Office and the Branch use a periodic inventory system.)

3.    The branch acquired merchandise display equipment which cost P15,000 on July 1, 2009. (Assume that
branch fixed assets are carried on the home office books).

4.    The branch purchased inventory costing P53,750 from outside vendors on account.

5.    The branch had credit sales of P106,250 and cash sales of P43,750.

6.    The branch collected P55,000 of its accounts receivable.

7.    The branch paid outside vendors P35,000.

8.    The branch incurred selling expenses of P18,750 and general and administrative expenses of P15,000.
These expenses were paid in cash when they were incurred and include the expense of leasing the branch's
facilities.

9.    The home office charged the branch P2,500 for its share of insurance.

10. Depreciation expense on the display equipment acquired by the branch is P1,250 for the six-month period.
(Depreciation expense is classified as a selling expense.)

11. The branch remitted P12,500 cash to the home office.

12. The branch's physical inventory on December 31, 2009 is P41,250, of which P31,250 was acquired from
the home office (there was no beginning inventory).

Requirement: Prepare journal entries in the books of the home office and in the books of the branch office for
the above transactions.

Let’s Analyze – Activity 1

Home Office Branch

1. Investments in branch 35,000 Cash 35,000

Cash 35,000 Home office 35,000
2. Investments in branch 75,000 Shipments from HO 75,000
Shipments in branch 75,000 Home Office 35,000
3. Equipment – Branch 15,000 Home Office 15,000
Investment In Branch 15,000 Cash 15,000

4. No Entry Purchase 53, 750

A/P to Vendor 53,750
5. No Entry Account Receivable 106,250
Cash 43,750
Sales 150,000

6. No Entry Cash 55,000

Account Receivable 55,000

7. No Entry A/P To Vendor 35,000

Cash 35,000

8. No Entry Selling Expenses 18,750

Administrative Exp. 15,000
Cash 33,750

9. Cash 2,500 Home Office 2,500

Investments in branch 2,500 Cash 2,500

10. Investment In Branch 1,250 Selling Expense 1,250

Accumulated Dep- Equip. 1,250 Home Office 1,250

11. Cash 12,500 Home Office 12,500

Investments in branch 12,500 Cash 12,500

12. No Entry Cost of Goods Sold 53, 750

Shipments from the HO 43,750
Inventories- Outside Vendors 10,000