Professional Documents
Culture Documents
During the month of June, the sales agency reported to the home office sales orders. These were
billed at P70,000, of which P40,000 was collected. The sales agency paid expenses of P2,800 but was
reimbursed by the home office. On June 30, 2013, the sales agency samples were valued at P6,000.
It was estimated that the gross profit on goods shipped to fill sales agency sales orders averaged
40% of cost.
What is the net income of the sales agency for the month of June 30, 2013?
A. 10,000 B. 10,400 C. 15,200 D. 23,200
Sales P 203,500
Expenses 18,755
Shipments from Home Office (debit) 186,120
Home office-current (credit) 48,125
Shipments to branches are billed at cost. Subic further reported an ending inventory (December 31)
of P25,245.
2. For 2011, the branch reported to the home office net profit amounting to:
A. 23,870 B. 25,245 C. 42,625 D. 48,125
3. What is the correct branch account-current balance on December 31, 2011 per home office’s
reckoning?
A. 46,750 B. 48,124 C. 65,505 D. 71,995
Cash P 4,200
Home Office Current P 17,500
Shipments from Home Office 67,680
Accounts Receivable 12,800
Expenses 6,820
Sales 74,000
P 91,500 P 91,500
4. The branch reported an inventory on December 31, 2011 of P9,180. The net profit of the branch for
2011 was:
A. 8,680 B. 9,180 C. 67,180 D. 74,000
5. The January 1, 2012 balance of the Branch Current account in the home office books should be:
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6. Branch inventory on December 31, 2011, P30,000. How much is the net profit of the branch?
A. 14,400 B. 21,900 C. 22,500 D. 104,400
7. The Branch current account in the home office books should be:
A. 90,000 B. 104,400 C. 134,400 D. 194,400
8. A reconciliation of the Dagupan branch account of White Co. and the Home Office account
carried on the branch’s books shows the following discrepancies at December 31, 2009:
a. A credit for merchandise allowance for P300 was taken by the branch as P360.
b. A charge by the branch of P550 for an advance taken by the president when he visited the
branch has not yet been recorded by the home office.
c. The branch has not yet taken up P900 covered by a debit memo from the home office as
share in advertising expense.
The Dagupan branch account in the home office books had a debit balance of P43,500 at
December 31, 2009. The reciprocal accounts were in agreement at the beginning of the year. The
unadjusted balance of the Home Office account in the branch’s books at December 31, 2009 was:
A. 1,810 B. 41,990 C. 42,950 D. 43,500
a. Remittance by branch (P7,200 of which was still in transit as of December 31, 2009), P 55,000
b. Shipments to branch (including goods still in transit as of December 31, 2009 of P22,000),
P160,000
c. Home office expenses paid by branch, not yet recorded by the Home Office, P5,700
Branch receivable collected by the home office, net of P100 discount, not yet recorded by the
branch, P8,900.
9. The unadjusted balance of the Investment in Branch account as of December 31, 2009 was:
A. 99,070 B. 128,170 C. 128,270 D. 133,970
10. Assuming the branch reported a net profit of P6,500, the adjusted balance of the interoffice
accounts immediately prior to their elimination must be:
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11. On January 4, 2013, Stronger Company opened its first branch in a nearby town. The branch
obtained merchandise solely from the home office; billings from these shipments were at cost to the
home office. The adjusted trial balances for the home office and the branch on December 31, 2013,
were as follows:
The physical inventories on December 31, 2013, were in agreement with the perpetual inventory
records of the home office and the branch. Determine the combined net income of the home
office and its branch.
A. 110,000 B. 115,500 C. 117,400 D. 121,400
12. The Home Office sells merchandise to its branch at 120% of cost. The Branch was established several
years ago with the policy that all its merchandise would be acquired from the Home Office.
Information from the records of the Home Office and Branch reveals the following for the current
year ended:
The balance that would appear in the Allowance for Unrealized Gross Margin in Branch Inventory
account on the Home Office books, after adjusting and closing entries have been prepared by the
Home Office, would be?
A. 800 B. 2,000 C. 4,000 D. 4,800
13. The Mandaluyong branch of Have-It-All Enterprise is billed for merchandise it receives at 125% of
cost. The branch turns around and sells them at 25% above billed price. On February 15, the entire
branch’s merchandise was destroyed by fire. The recovered branch records show:
Inventory, January 1 (at billed price) P165,000
Shipments, January 1 to February 15 (at billed price) 110,000
Purchases (at cost) from other sources
(all resold at mark-up of 20% on cost) 7,500
Sales 169,000
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14. Primary Sales, Inc. has a branch in Cubao. The Cubao branch buys merchandise from third parties
and receives merchandise from the Home Office for which it is billed at 20% above cost. Below are
excerpts from the trial balance and data on the Home Office and Cubao branch for the month just
ended:
Home Office:
Cr. Allowance for Overvaluation of Inventory P 370,000
Cr. Shipments to Branch 850,000
Branch:
Dr. Beginning Inventory 1,440,000
Dr. Shipments from Home Office 1,020,000
Dr. Purchases 420,000
Month-end additional data:
Ending Inventory 1,460,000
From Home Office (at billed price) 1,170,000
From Outsiders (at cost) 290,000
The amount of allowance for overvaluation that was realized from the Branch sales for the month
just ended amounted to?
A. 175,000 B. 195,000 C. 200,000 D. 370,000
16. What is the Iloilo City branch Cost of Sales in the books of the Home Office?
A. 60,900 B. 73,080 C. 123,480 D. 171,360
During 2009, the main store purchases merchandise costing P40,000 and shipped 40% of it to the
Cebu City branch. At December 31, 2009, the following journal entry to prepare the books for the
next accounting period was prepared:
Sales 32,000
Inventory 4,840
Inventory 3,960
Shipments from Main Store 17,600
Expenses 10,480
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18. Assuming the main store has P11,200 worth of inventory unsold at the end of 2009, the inventory of
the main store and the branch that should appear on the Combined Statement of Financial Position
as at December 31, 2009 is:
A. 15,160 B. 15,600 C. 16,040 D. 17,200
19. The Cindy Company established a branch store in Makati on June 1, 2009. The Branch is to receive
substantially all merchandise for resale from the Home Office. During the remainder of 2009,
shipments to the branch amounted to P180,000 which included a 20% markup 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 shows a
balance of P7,500 after adjustment. How much of the branch ending inventory represented
purchases from outsiders?
A. 15,000 B. 22,500 C. 30,000 D. 52,500
Use the following information to answer questions 23 to 24:
Presented below are items taken from the unadjusted trial balances of Queen Company and its
branches in December 31, 2009:
20. It is the company’s policy to bill all branches for merchandise shipments at 30% above cost. How
much of the branch inventory in January represents purchases from outsiders?
A. 11,700 B. 42,000 C. 42,900 D. 90,000
21. Assuming that the branch ending inventory acquired from Home Office is P39,000 at billed price,
what is the profit (loss) of the branch in so far as the home office is concerned?
A. (50,850) B. 9,450 C. 40,450 D. 42,000
22. Green Manufacturing Co. opened a branch in Davao City on January 1, 2009 to expand the
market of its product. Merchandise shipped during 2009 to the Davao City branch totaled P104,000,
which was 125%of cost. At the end of the year, the inventory was P12,500 at billing price. The
Branch extends credit, makes collections and pays expenses from the cash received. The company
used the periodic inventory method. The other transactions affecting the Branch were as follows:
sales on account P117,000; expenses, of which were unpaid as of December 31, 2009, P20,000; cash
received from customer’s accounts after deducting P1,480 of cash discounts, P84,000; and cash
remitted to the Home Office during the year, P65,000. In so far as the home office is concerned, the
true profit (loss) of the branch was?
A. (18,300) B. 22,320 C. 24,300 D. 24,320
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Home
Office Branch
Books Books
Sales P600,000
Expenses 200,000
Shipments from Home Office 444,000
Allow. for Overvaluation in Branch Inventory P 72,500
The Branch acquires all of its merchandise from the Home Office. The inventories of the Branch at
billed prices are as follows: January 1, 2009, P 75,000 and December 31, 2009, P84,000.
23. The percentage of profit on cost that the Home Office uses to bill merchandise shipped to Branch is:
A. 16.24% B. 25.50% C. 120.50% D. 125.00%
25. How much is the adjusted Allowance for Overvaluation in Branch Inventory balance at December
31?
26. The Iris Co. owns the Royal Crown in Quezon City and a branch in Davao City. During 2009, the
Home Office shipped to the Branch supplies costing P120,000 at a billed price of 20% above cost.
The inventories of supplies at the Branch were as follows: January 1, 2009, P90,000; December 31,
2009, P108,000.
On December 31, 2009, the Home Office holds inventories of P160,500 which includes P10,500 held
on consignment. Both locations use the periodic inventory method. How much is the inventories in a
combined Statement of Financial Position as of December 31, 2009?
A. 210,000 B. 240,000 C. 270,000 D. 300,000
27. Assuming the merchandise is unsold at year-end, how much will the Zamboanga branch report as
merchandise inventory?
A. 12,000 B. 13,520 C. 13,550 D. 13,950
28. Assuming the merchandise is unsold at year-end, Sure Buy Corporation will include it as an asset in its
Annual Report to the Shareholders amounting to:
A. 11,000 B. 11,320 C. 11,350 D. 11,750
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29. The home office of Glendale Company, which uses the perpetual inventory system, bills shipments
of merchandise to the Montrose Branch at a markup of 25% on the billed price. On August 31, 2013,
the credit balance of the home office’s Allowance for Overvaluation of Branch Inventories ledger
account was P60,000. On September 17, 2013, the home office shipped merchandise to the branch
at a billed price of P400,000. The branch reported an ending inventory, at billed price, of P160,000
on September 30, 2013. Determine the realized gross profit as of September 30, 2013.
A. 120,000 B. 125,000 C. 130,000 D. 135,000
30. During 2013, goods were shipped to the branch at 120% above cost. The reciprocal account in the
income statement of the home office amounted to P237,500. The balance of the contra branch
current account reports a balance of P375,000 before adjustment.
The beginning inventory of the branch from the home office at cost is P360,000 and from outsiders,
P93,000. The branch purchased goods from outsiders during the year amounting to P125,200. If the
ending inventory of the branch as reported in the consolidated statement of financial position is
P345,000. The branch income as reported in the consolidated financial statement and as reported
in the branch’s books are P201,125 and P120,750, respectively. How much is the cost of goods sold
to be presented in the branch’s income statement for the year ended December 31, 2013?
A. 470,700 B. 514,500 C. 551,075 D. 790,500
31. Rusty Company operates a branch in Cebu City. On December 31, 2013, the Home Office Current
account in the branch books showed a credit balance of P261,456. The interoffice accounts were
in agreement at the beginning of the year. For purposes of reconciling the interoffice accounts, the
following facts were determined:
- Cebu City branch paid P16,250 representing registration and seminar fee of the senior vice-
president for finance of the company, when the vice president attended a convention. Of the
amount paid, 40% was charged to Rusty Company, 20% to Cebu, and the remaining amount to
Rusty’s other branch located in Davao City. Cebu branch recorded a receivable from the
home office at the said amount and credited cash. Rusty Company was not yet notified of the
said event.
- Total general expenses were P43,275. Rusty Company allocated 2/5 of the expenses to Cebu
City branch. The branch erroneously debited 2/5 of the allocated amount to its reciprocal
account twice.
- Rusty Company transferred inventory costing P22,500 to Cebu branch and the branch paid the
corresponding freight of P1,250. Cebu branch was instructed by Rusty to transfer ¾ of the said
inventories to Davao branch and to shoulder the freight costing P1,750. Cebu branch made the
transfer on its books but it recorded the transfer at ¼ of the original inventories and credited the
payment for freight at P175 by mistake.
- Cebu City branch recorded a machinery costing P10,616 which it purchased for its own use on
December 31, 2013. The machinery will be recorded in the books of the home office. Rusty
recorded the memo received from the branch by debiting its reciprocal account and crediting
liability account to Cebu branch in the amount of P10,661.
What is the unadjusted balance of the Investment in Cebu branch account on December 31, 2013?
A. 283,131 B. 290,267 C. 293,517 D. 300,441