ACCTG 8

HO, Branch and Agency Accounting

JE Problems

Problem 1

On May 1, 2018, the home office in Manila establishes a branch in Quezon City to act as a sales agency.
The following assets are sent to the sales agency on May 1:

Cash (for the working fund to be operated under the imprest system) P 10,000
Samples from the merchandise stock 50,000

During May, the sales agency submits sales on account of P 176,000 duly approved by the home office.
Cost of merchandise shipped to fill the orders from customers obtained by the sales agency is P 105,000.

Home Office disbursements chargeable to the sales agency are as follows:

Furniture and fixtures P 24,000

Manager’s and salesmen’s salaries 7,500
Rent 8,000

On May 31, the sales agency working fund is replenished; paid expense vouchers submitted by the sales
agency amounting to P 9,250. Sales agency samples are useful until Dec. 31 which, at this time, are
believed to have a salvage value of 40% of cost. Furnitures are depreciated at 20% per annum.

Required : Journal entries assuming: agency profit is determined separately.

Problem 2

Assume that Anthony Trading established a sales agency, Senior Agency. The results of operations are
recorded separately from those of the other sales agencies.

The following are transaction in relation to Senior Agency of Anthony Trading:

a. The transfer of P10,000 to Senior agency to establish a working fund.

b. Shipped merchandise to Senior agency for use as samples, P4,000.
c. Purchase of Senior agency equipment, P20,000.
d. Sales order from Senior Agency are filled and customers are billed, P100,000 and goods are delivered
by the home office.
e. The following expenses are incurred out of working fund: utilities, P2,000; advertising expense,
P2,500; Office supplies, P3,000.
f. Cost of goods sold identified with Senior Agency, P60,000.
g. Depreciation expense for Senior Agency equipment, P2,000.
h. Replenishment of Senior Agency’s working fund.
i. Senior Agency samples inventory amounted to P1,000, net realizable value.
Required:

1. Prepare journal entries for each transaction.

2. Prepare closing entries.