Problem 1

The discrepancies enumerated below were discovered in the inter-office account of ABC TRADING
CORPORATION with its NUEVA ECIJA CITY branch and the corresponding account carried on the latter’s
books as of December 31, 2020.

a. Merchandise shipments of P75,000 which were made by the home office on December 28,
2020 were received by the NUEVA ECIJA branch on January 4, 2021
b. The branch collected P325,000 of its own accounts and another P25,000 from a home office
customer who erroneously paid his account to this branch. All of these collections were
immediately deposited for the account of the home office. Meanwhile, back at the home office,
no entry had been made as of December 31, 2020
c. A charged for labor by the home office of P1,200 was recorded twice by the branch
d. A charged of P200 was made by the home office for freight on merchandise, by the amount was
recorded by the Branch as P2,000
e. A charged for P45,000 (furniture and fixtures) on the home office books was taken by the branch
as P4,500
f. The home office had incorrectly charged the branch the amount of P12,500 for repair costs.
However, the branch had made no entry
g. The home office corrected the entry in (f) in January 3, 2021 and a credit memo was
inadvertently sent to the branch who subsequently made the corresponding entry on December
31, 2020 based on the credit memo.

The inter-office accounts were in balance as of January 1, 2020. The balance of the inter-office account
on the home office books as of December 31, 2020 was P727,000

1. How much is the adjusted balance of the inter-office account as of December 31, 2020?
2. What is the adjusted balance of the inter-office account on the books on the branch as of
December 31, 2020?
Problem 2

The following selected transactions took place between the home office and its two branches Calumpit
branch and Betis branch

a. Home office shipped merchandise to its Calumpit Branch costing P400,000

b. Home office sent cash of P500,000 to Betis branch
c. Upon instruction of the home office, Betis branch effected a fund transfer of P100,000 to
Calumpit branch
d. Betis branch collected Calumpit branch accounts receivable of P400,000 less 2% discount
e. Betis branch paid P200,000 representing the travelling expenses of Mr. Henry Ayala, chief
finance officer, when the latter attended the Southeast Asia Regional business conference in
Tokyo, Japan. Of the amount paid, 60% was charged to the home office, 20% to Calumpit branch
and the balance to Betis branch
f. Calumpit branch paid accounts payable of the Home Office and that of Betis branch amounting
to P30,000 and P20,000 respectively.
g. Home office shipped merchandise to Betis branch with a total billed price of P200,000. The
home office paid freight of P5,000 for the account of the receiving branch
h. Home office subsequently instructed Betis branch to reship one-half of the goods to Calumpit
branch. Additional freight of P1,000 was paid by Betis branch. Had the goods been shipped
directly from home office to Calumpit branch, the freight would have been only P3,000.

1. Journal entries to record the above transactions on the books of the home office and its two
branches
Problem 3

ABC Co. operates a branch in Quezon City. At the end of the year 2020, the home office account in the
books of the branch shows a balance of P450,000. The following information are ascertained:

a. The home office has billed the branch the amount of P20,000 for merchandise, which was in
transit on December 31
b. A home office accounts receivable for P10,500 was collected by the branch. Said collection was
not reported to the home office by the branch
c. Supplies of P4,500 was returned by the branch to the home office but the home office has not
yet reflected in its record the receipt of the supplies
d. The branch has not received the cash in the amount of P25,000 sent by home office on
December 31. This was charged to general expense
e. The home office inadvertently recorded a remittance for P4,800 from its Bacolod branch as a
remittance from its Quezon City branch
f. The branch failed to take up a P580 debit memo from the home office representing the share of
the branch in marketing expense
g. Advertising expense of P1,225 charged by the home office was taken up twice by the branch
h. Freight charge on merchandise made by the home office for P1,125 was recorded in the branch
books as P1,215
i. An equipment costing the home office P2,500 was picked up by the branch as P250

Compute the balance of unadjusted balance of the Branch Current account as of December 31, 2019