Home Office Branch Accounting at Cost

ADVANCED ACCOUNTING PART 2
HOME OFFICE AND BRANCH ACCOUNTING

BILLING AT COST
1. Which statement/s is/are true

I. In the income statement of the home office, Shipment to Branch account is
added to the beginning inventory to show merchandise available for sale.
II. Shipment to Branch account is eliminated in the combined income statement of
the home office and the branch.
III. In the Income statement of the branch, Shipment from Home Office account is
a deduction from merchandise available for sale.
a. I only
b. II only
c. III only
d. I and III
e. II and III
2. If the home office purchases office equipment for the branch and this is recorded in the books
of the home office, which entry is correct to record the purchase in the books of the home
office?
a. Debit office equipment and credit investment in branch
b. Debit investment in branch and credit office equipment
c. Debit office equipment and credit cash
d. Debit investment in branch and credit cash
e. No entry required
3. On December 31, 2018, the Branch Current account

account in the books of the home office shows a
balance before adjustment of P50,000 The following facts are ascertained:
a. Merchandise billed at P12,000 is in transit on December 31 from the home office to the
branch
b. The branch collected a home office accounts receivable for P3,500. The branch did not
notify the home office of such collection.
c. On December 30, the home office sent cash of P7,500 to the branch, but this was
charged to general expense. The branch has not received the cash as of December 31.
d. Branch profit for December was recorded by the home office at P2,400 instead of
P2,040.
e. The branch returned supplies of P1,500 to the home office but the home office has not
yet recorded the receipt of the supplies. All other transactions have been properly
recorded.
What is the adjusted balance of the reciprocal accounts at December 31, 2018? 59,140
4. The following were found in your examination of the interplant accounts between
between Home Office
and Cebu Branch:
a. Transfer of fixed assets from home office amounting to P53,960 was not booked by the
branch.
b. A P10,000 amount covering marketing expense
e xpense of another branch was charged by home
office to Cebu branch.
c. Cebu branch recorded a debit note on Inventory transfer from home office of P75,000
twice.
d. Home office recorded a cash transfer of P65,700 from Cebu branch as coming from Davao
branch.
1
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e. Cebu branch reversed a previous debit memo from Bacolod branch amounting to
P10,500. Home office decided that this charge is appropriately Davao’s branch’s cost.
f. Cebu branch recorded
recorded a debit memo from home office of P4,650 as P4,560 .
g. Before the above discrepancies were given effect, the balance in the home office books of
its Cebu branch current account was a debit balance of P165,920.
What is the unadjusted balance in the books of Cebu branch of its home office current account?
111,170
5. Using the same date of no. 4, what is the adjusted balance of the reciprocal accounts? 90,220
6. Using the same data of no. 4, how much is the net adjustment in the home office books related
to Cebu branch current account? 75,700 credit
7. The following are the postings to the inter-office

i nter-office accounts of Rita Ora Corporation for 2018
prior to the closing of books:
CEBU BRANCH CURRENT
Jan. 01 Balance 15,600 Oct. 01 Remittance from Branch 18,700

18, 700
Feb. 10 Shipments to branch 8,000 Dec. 05 Goods returned by branch 780
Apr. 30 Branch expenses 9,800 Dec. 31 Collection of branch A/R 6,500
Nov. 20 Shipments to branch 18,300
Dec. 28 Shipments
Shipments to branch 20,100
Dec. 29 Replenishment check for 11,500
branch
HOME OFFICE CURRENT
Sep. 30 Remittance to home office 18,700 Jan. 01 Balance 15, 600

Dec. 02 Goods returned 7,800 Feb. 15 Shipment from H/O 8,000
Dec. 30 Home office expenses paid 9,500 May 10 Expenses paid by H/O 9,800
Dec. 05 Shipments from H/O 13,800
Based on the above postings, the balances of the inter-office accounts before adjustment
adjustment are:
Branch Books Home Office Books

a. 57,230 debit balance 11,200 credit balance
b. 11,200 credit balance 57,320 debit balance
c. 57,320 credit balance 11,200 debit balance
d. 11,200 debit balance 57,230 credit balance
e. None of these
8. Using the same data of no. 7, what is the adjusted balance of the reciprocal accounts? 40,800
9. Wonderful Sales, Inc. opened a branch store in Cebu City on January 1, 201 8 to improve its
sales. The branch passed on credit makes collections, and pays expenses out of cash received.
Shipments to branch are billed at cost. Summaries of the branch transactions
transactions are as follows:
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Cash remitted to the home office 15,000

Furniture acquired by the branch for cash 4,000
Depreciation on the furniture 800
At the close of the year, the branch inventory was
P6,000
How much is the branch income or loss for the period? 6,200
10. Using the same data of no. 9, how much would be the total assets of the branch at December
31? 21,400
11. The branch manager of Victoria Secrets in Cebu submitted a report as of June 30, 2018
containing the following information:
Petty cash fund P 1,500

Sales 198,720
Sales Returns 3,600
Accounts written off 1,920
Shipments from home office 136,080
Accounts receivable, June 30, 2011 136,080
Accounts receivable, June 30, 2012 43,800
Inventory, June 30, 2011 37,170
Inventory, June 20, 2012 42,370
Expenses 57,930
Based on the above information, what can you assume as the balance of the branch current
account as of June 30, 2017? 174,750
12. Using the same data of no. 11, and assuming that all cash collected by the branch was remitted
to the home office, how much would be total remittances for the period? 285,480
For questions 13-16:
Below are the account balances per books of the Home office and Branch of Alto Corporation at
December 31, 2018
HOME OFFICE BRANCH

Dr. Cr. Dr. Cr.
Cash 3,400 1,840
Accounts Receivable 11,440 1,760
Merchandise inventory 10,000 4,800
Prepaid expenses 1,960 1,160
Property and equipment, net 10,000 3,600
Branch current account 12,000
Purchases 24,000 8,000
Shipments from home office 10,000
Operating expenses 8,600 7,040
Accounts payable 2,680 2,200
Home office 12,0000
Capital stock 20,000
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81,400 81,400 38,200 38,200
Ending inventories are as follows:

follows: Home office – P7,200; Branch – P5,600.
From the foregoing data, calculate the following:
13. Net income/loss in a combined income statement. 18,960

14. Total assets in a separate balance sheet of the home office. 45,760
15. Total equities (liabilities plus home office) in a separate balance sheet of the branch. 13,960
16. Total shareholders’ equity in a combined balance sheet. 43,080
17. In a combined income statement, which of the following is/are deducted from the cost of good
available for sale to determine the cost of goods sold?
a. Ending inventory
b. Beginning inventory
c. Shipment from home office
d. Shipment to branch
e. a and d
18. On November 1, 2018, Asia Pacific Corporation established and agency in Cebu City sending its
merchandise samples costing P31,500 and a working fund of P18,000 to be maintained on the
imprest basis. During the month, the agency transmitted to the home office sales orders which
were billed at P128,760 of which 50% was collected. On November1, a home office
disbursements chargeable
chargeable to the agency is the procurement of office furniture costing P60,000
which is to be depreciated on a double-declining balance method. The office furniture is
estimated to have an economic life of 5 years. The agency paid expenses of P7,630 and
received replenishment from the home office. On November 20, 2018 the agency samples were
valued at P20,150. The gross profit on goods shipped averages 66-2/3% of cost. How much is
the net income (loss) of the agency for the month of November, 2018? 30,524
19. Turbo Corporation operates a branch in Cebu. At the end of 2018, the following are the
unadjusted balances per books:
Investment in Branch P150,000

Home Office 117,320
a. The branch has not received the P25,000 cash sent by the home office. This was
erroneously charged to General Expense by home office.
b. The home office has billed the branch the amount of P37,500 for merchandise which was
in transit on December 31.
c. A home office account receivable for P10,500 was collected by the branch. Said collection
was not reported to the home office by the branch.
d. Supplies of P4,500 were returned by the branch to the home office but the home office
has not reflected in its records the receipt of the supplies.
e. The branch made a profit of P10,000 for the month of December but the home office
erroneously recorded it as P11,180.
After reconciling the books based on the forgoing information, what is the adjusted balance of
the reciprocal accounts? 179,820
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Shipments from Color Company 186,120

Operating expenses 18,755
Home office current 48,125
Shipments to branch are billed at cost. The December 31 inventory of the branch was P25,245.
What is the correct balance on December31, 2018 of the investment in branch account in the
books of the home office? 71,995
21. JYP Corporation operates a number of branches in Metro Cebu. On June 30, 2018, its Mandaue
branch showed a Home office current account balance of P27,550 and the home office books
showed an investment in Mandaue branch account of P25,550. The following information may
help you in reconciling both accounts.
a. A P12,000 shipment, charged by home office to Mandaue branch was actually sent to and
retained by Tabunok branch.
b. A P15,000 shipment, intended and charged to Pardo branch was shipped to Mandaue
branch and retained by the latter.
c. A P2,000 emergency cash transfer from Tabunok branch was not taken up in the home
office books
d. Home office collected a Mandaue branch accounts receivable of P3,600 and failed to
notify the branch.
e. Home office was charged for P1,200 for merchandise returned by Mandaue branch on
June 28. The merchandise is in transit.
Home office erroneously recorded Mandaue branch net income for June at 16,275.
The branch reported a net income of P12,675.
What is the reconciled amount of the reciprocal accounts? 23,750
22. Bighit Corporation established a branch in Davao City on January 1, 2018. The branch sells on
credit, makes collections, pays expenses, and makes some purchases.
Shipments to branch are billed at cost.
Summaries of the branch transaction during the year are as follows:
Purchases 10,000
Shipments from Bright Corporation 48,000
Operating expenses paid 7,200
Sales on account 59,750
Collections from customers (net of 3% 37,830
discount)
Cash remitted to Bighit Corporation 12,000
Additional information:
a. The furniture was acquired on January 1, 2018. It has an estimated economic life of five
years with a scrap value of P500. Depreciation is computed using the sum-of-the-years’
digit method.
b. At the close of the year, the branch inventory was P20,000.
What is the balance of the home office current account at December 31, 2018? 46,880
23. A reconciliation of the branch current account in the head office of T.O.P Bearbricks Company
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a. Collection of the branch accounts receivable by the home office, P800. Th e branch was
not notified.
b. Shipment in transit to the branch on December 31, P3,200.
c. Acquisition of furniture by the branch, P1,200 (for home office). The furniture account is
maintained on the home office books. Home office has not been notified
notified of the
acquisition.
d. Return excess merchandise by the branch but not received yet by the home office,
P1,500.
e. Cash remittance by the branch on December 31, P500. This was still in transit.
The Home Office current account in the branch books before adjustment has a credit balance of
P44,000 at December 31, 2018.
What is the adjusted balance of the reciprocal accounts at December 31? 46,400
24. As of December 31, 2018, the branch reported total assets of P140,000 and total liabilities of
P30,000. On the same date, the assets of the home office consisted among others, of the
following: Cash, P50,000; Accounts receivable-net, P20,000; Merchandise Inventory, P40,000;
Prepaid expenses, P10,000; and Plant assets P80,000.
If the home office has unpaid liabilities of P90,000, how much can you assume as the amount of
total shareholders’ equity it should report in its December 31 balance sheet? 220,000
25. Park B., Inc. decided to create a branch in Cebu City at the start of 2018. The branch operation
had the following transactions during 2018.
a. Merchandise costing P350,000 and cash of P200,00 were transferred from the home
office.
b. The branch purchased on account additional merchandise inventory of P400,000 from
other distributors.
c. Sales of P650,000 were made by the branch during the period. The cost of these sales of
these sales was P425,000. Cash of P600,000 was collected from sales during the year.
d. Advertising costs of P40,000, sales commissions of P65,000, and other operating costs of
P45,000 were incurred and paid by the branch.
e. The branch paid P370,000 on account to other distributors and remitted P120,000 to the
home office.
What is the balance of the Home Office current account at December 31, 2018? 505,000
26. On November 1, 2018, Asia’s Pacific Corporation established an agency in Cebu City sending its
merchandise samples costing ₱31,500 and a working fund of ₱18,000 to be maintained on the imprest
basis. During the month, the agency transmitted to the home office sales orders which were billed at
₱128,760 of which 50% was collected. On November 1, a home office disbursement chargeable to the
agency is procurement of office furniture costing ₱60,000 which is to be depreciated on a double-
declining balance method. The office furniture is estimated to have an economic life of 5 years. The
agency paid expenses of ₱7,630 and received replenishment from the home office. On November 20,
2018 the agencies sampled were valued at₱20,150. The gross profit goods shipped averages 66-2/3% of
cost. How much is the net income (loss) of the agency for the month of November, 2018? 30,524
27. Tosca Corporation operates a branch in Cebu. At the end of 2018, the following are the unadjusted
balances per books:
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a. The branch has not received the ₱25,000 cash sent by the home office. This was erroneously
charged to the general expense by the home office.
b. The home office was billed the branch the amount of ₱37,500 for merchandise which was in transit
on December 31.
c. A home office account receivable of ₱10,500 was collected by the branch said collection was not
reported to the home office by t he branch.
d. Supplies of ₱4,500 were returned by the branch to the home office but the home office has not
reflected in its records the receipt of the supplies.
e. The branch made a profit of ₱10,000 for the month of December but home office erroneously
recorded it as ₱11,180
After reconciling the books based on the foregoing information, what is the adjusted balance of the
reciprocal accounts? 179,820
28. ET Company ships and bills merchandise to its branch at cost. The branch carries its own accounts
receivable and makes its own collections. The branch also pays its expenses. The transaction for 2018
are reflected in the branch trial balance that follows:
DR. CR.
Cash 11,900
Home Office Current 90,000
Shipment from ET Company 120,000
Accounts Receivable 62,000
Expenses 8,100
Sales 112,500
Total 202,500 202,500
December 31 Inventory totals of ₱30,000.
What is the December 31 balance of the home office current account in the books of the branch?
104,400
29. Cebu Branch of the Color Company submitted the following data for 2018, its first year of operations:
Sales ₱ 203,500
Shipments from color company 186, 120
Operating Expense 18,755
Home office Current 48,125
Shipments to the branch are billed at c ost. The December 31 inventory of the branch was ₱25,245.
What is the correct balance on December 31, 2018 of the investment in branch account in the books of
the home office? 71,995
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d. Home office collected a Mandaue branch accounts receivable of ₱3,600 and failed to notify the
branch.
e. Home Office was for ₱1,200 for merchandise returned by the Mandaue branch of June 28. The
merchandise is in transit.
Home office erroneously recorded the Mandaue branch net income for June at ₱16,275.
The branch reported a net income of ₱12,675.
What is the reconciled amount of re ciprocal accounts? 23,750
31. Bright Corporation established a branch in Davao City on January 1, 2018. The branch sells on credit,
makes collections, pays expenses, and makes some purchases. Shipments to branch are billed at cost.
Summaries of the branch transactions during the year are as follows:
Purchases ₱ 10,000
Shipments from Bright Corporation 48,000
Operating expenses paid 7,200
Sales on Account 59,750
Collect from customer (net of 3% discount) 37,830
Cash remitted to Bright Corporation 12,000
Additional Information:
a. The furniture was acquired on January 1, 2018. It has an estimated economic life of
5 years with a scrap value of ₱500. Depreciation is computed using the sum-of-the-
years’ digital method.
b. At the close of the year, the branch inventory was ₱20,000.
How much is the branch net income or loss for the year? 10,880
32. Using the same data on no. 31, what is the balance of the home office current account at December 31,
2018? 46,880
For nos. 33-36
The following are selected balances and transactions of the Cebu Branch for 2018:
January 1, 2018 Balance:

Cash ₱ 16,000
Accounts Receivable 20,000
Merchandise Inventory 35,000
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35. Home Office Current account balance at December 31 45,900

36. Branch Total assets at December 31 96,400
37. A reconciliation of the branch

branch current account in the head office of Marnelli
Marnelli Company and home
home office
current account carried in the branch books showed the following discrepancies at December 31 , 2018:
a. Collection of the branch accounts receivable by the home office, ₱800. The branch was not notified.
b. Shipments in transit to the ranch on December 31, ₱3,200.
c. Acquisition of furniture by the branch, ₱1,200 (for home office). The furniture account is maintained
on the home office books. Home office has not been notifies o f the acquisition.
d. Return excess merchandise by the branch, but not received yet by the home office, ₱1,500.
e. Cash remittance by the branch on December 31, ₱500. This was still in transit.
The Home Office current account in the branch books before adjustment has credit balance of ₱44,000
at December 31, 2018.
What is the unadjusted balance of the branch current account in the home office books at December
31? 49,600
38. Using the same data of no. 12, what is the adjusted balance of the reciprocal accounts at December 31?
46,400
39. As of December 31, 2018, the branch reported total assets of ₱140,000 and total liabilities of ₱30,000.
On the same date, the asset of the home office consisted, among others, of the following: Cash,
₱50,000; Accounts receivable-net, ₱20,000; merchandise inventory, ₱40,000; prepaid expenses,
₱10,000; and plant assets, ₱80,000.
If the home office has unpaid liabilities of ₱90,000, how much can you assume as the am ount of total
shareholders’ equity it should report in its December 3 1 balance sheet? 220,000
40. Below are two inter-office T-acco unts of Glen Company:
BRANCH CURRENT
Beg. 35,100:
12/03 shipment 25,000:
12/31 shipment 12,500:
12/31 profit 2,400:
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41. The posting to the inter-office accounts of San Miguel Trading for June, 2018 are as follows:
BRANCH CURRENT
2018 2018
Jan. 1 balance 75,500 : May 15 Expenses paid by branch 1,200
Mar. 1 Shipments 15,000 : Oct. 1 Remittance 20,000
Jun. 1 Expenses paid 3,200 : Dec. 15 Branch rec’ble collected 12,500
Nov. 30 shipments 25,000
Dec. 29 shipments 18,700
HOME OFFICE
2018 2018
May 10 Home Office Expense 1,200 :Jan. 1 Balance 75, 500
Sep. 25 Remittance 20,000 :March 10 Shipments 16,500
Dec. 27 Remittance 18,200 :Dec 5 Shipments 25,000
What is the adjustment balance of the reciprocal accounts? 86,100
42. James Company opened an agency in Makati in 2018. The following is the summary of the transactions
of the agency:
Sales orders sent to the home office ₱ 55,000

Sales orders filled by the home office in 2018 46,500
Freight on shipment to agency 1,100
Collections, net of 2% discount 39,690
Selling expenses paid from agency working fund 2,820
Administrative expenses charged to the agency 5% of sales
Samples shipped to agency:
Cost 3,000
Inventory 1,100
The company maintains its gross margin on agency sales at 30%, excluding the freight cost on shipments
to agency.
How much is the agency cost of sales including freight? 33,650
43. Use the same data on no. 42; determine the agency net income or loss. 4,995
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Expenses 57,930
How much is the branch net income for 2018? 3,390

2018? 3,390
45. Using the same data no. 19 and assuming that all cash collected by the branch is remitted to tower
cosmetics home office, how much is the remittance for the period? 187,860
46. Cebu Sales decided to create a branch in Naga City at the start of 2018. The branch operation had the
following transaction during 2018.
a. Merchandise costing ₱350,000 and cash of ₱200,000 were transferred from the home office.
b. b. The branch purchased on account additional merchandise inventory of ₱400,000
c. c. Sales of ₱650,000 were made by branch during the period. The costs of these sales are
₱425,000. Cash of ₱600,000 was collected from sales during the year.
d. d. Advertising cost of ₱40,000, sales commission of ₱65,000, and other operating cost of
₱45,000 were incurred and paid by the branch.
e. e. The branch paid ₱370,000 on account to other distributors and remitted ₱120,000 to home
office.
How much would be the total asset o f the branch? 535,000
47. What is the ending balance of home office account? (Use data of no.46) 505,000
48. On December 31, 2018, the investment in branch account on the home office’s books has a balance of
₱85,000. In analyzing the inter-company transaction recorded in each of these accounts for December,
you discover the following discrepancies:
a. A ₱10,000 branch remittance to the home office initiated in December 27, 2018 was recorded on the
home office books on January 4, 2019.
b. A home office merchandise shipment to the branch on December 29, 2018 was recorded by the
branch on January 5, 2019. The cost of this merchandise is ₱20,000.
c. The home office incurred ₱12,000 of advertising expense and allocated ₱5,000 of this amount to the
branch on December 15, 2018. The branch has not recorded this transaction.
d. A branch custome r erroneously remitted ₱3,000 to home office. The home office recorded his cash
collected on December 23, 2018. Meanwhile, back at the branch, no entry has been made yet.
e. Merchandise costing ₱42,000 was sent to the branch by the home office December 10, 2018. The
billing was at cost, but the branch re corded the transaction at ₱34,000.
What is the unadjusted balance of the home office account? 75,000

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On January 1, 2019, what is the balance of investment in branch account in the books of the home
office? 52,000

Home Office Branch Accounting at Cost

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Home Office Branch Accounting at Cost

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ADVANCED ACCOUNTING PART 2

HOME OFFICE AND BRANCH ACCOUNTING

1. Which statement/s is/are true

3. On December 31, 2018, the Branch Current account

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7. The following are the postings to the inter-office

CEBU BRANCH CURRENT

Jan. 01 Balance 15,600 Oct. 01 Remittance from Branch 18,700

HOME OFFICE CURRENT

Sep. 30 Remittance to home office 18,700 Jan. 01 Balance 15, 600

Branch Books Home Office Books

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Cash remitted to the home office 15,000

Petty cash fund P 1,500

For questions 13-16: