NAME:____________________________________________ YEAR/SECTION:___________

CHOOSE THE BEST ANSWER

Reymart Corporation has one branch office named Michael branch. Reymart is performing the end-of-the-
period reconciliation of its Michael branch whose current balance is P0, and Michael home office account
whose current balance is P0. The following items are unsettled at the end of the accounting period(you
may assumed that the items has been reflected in the accounts of the underlined entity).

I. Reymart has agreed to removed P750 of excess freight charges charged to Michael when reymart
shipped twice as much inventory as Michael requested.

II. Michael mailed a check for P11,000 to reymart as a payment for merchandise shipped from reymart to
Michael. Reymart has not yet received the check.

III. Michael returned defective merchandise to reymart. The merchandise was billed to Michael at P4,000
when its actual cost was P3,000.

IV. Advertisitng expense attributable to the branch office were paid for by home office in the amount of
P5,000.

1. If the adjusted balances for the Michael branch account the reymaret home office account is
P500,000, what unadjusted balance was listed in (1) reymart’s Michael branch account and (2)
Michael home office account.

a. (1)P520,250 and (2)P505,000 c. (1)P514,000 and (2)P516,000

b. (1)P515,000 and (2)P495,750 d. (1)P504,000 and (2)P500,750

Ryan company is engaged in merchandising both at home office in Makati and a branch in Cebu.
Selected accounts in the trial balances of home office and the branch at Dec. 31,2019 follow:

Debit Home Office Branch

Inventory, January P23,000 P11,550

Branch P58,300
Purchases P190,000
Shipments from home office P105,000
Freight in from Home Office P5,500
Sundry expenses P50,000 P25,000

Credit

Home office P53,300

Sales P155,000 P140,000
Shipments to branch P110,000 P140,000
Allow. For overvaluation of branch
Inventory – Jan. 1 P1,000

Additional Information:

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  Cebu branch receives all its merchandise from home office. The home office bills the goods at
cost plus 10% mark-up. At Dec.31,2008, a shipment with billing price of P5,000 was in transit to
the branch. Freight on the shipment was P250 which is to be treated as part of the inventory
 Dec.31,2008 inventories , excluding the shipment on transit was :
Home office at cost P30,000
Cebu branch at billed value P10,400
( excluding freight of P520)

2. Net income of home office was:

a. P10,000 c.P20,000
b. P15,000 d.P22,000

3. True income of Cebu branch was

a. P3,870 c. P870
b. P13,470 d. P10,470

The Angela Company bills the branch for merchandise at 135% of cost. On December 31 the ff.
information were reported by the branch:

Merchandise Home Merchandise from

office (at billed priced) purchased from outsiders (at
cost)

Merchandise Inventory
December 1 P16,200 P4,000

Merchandise into stock

December 1-31 P20,250 P12,000

Merchandise Inventory
December 31 P18,900 P5,000

4. Assuming that the branch has a net income of P20,000 and had returned to the home office
merchandise originally acquired at a billed price of P540. The true branch profit as far as the home
office is concerned is:

a. P24,690 c. P20,000
b. P24,130 d. P24,410

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Profit and Loss data for Joshua Sales Company and its branch for 2019 follow:
H.O Branch
Sales P1,060,000 P315,000
Inventory, Jan.1 (at cost) 115,000

Inventory, Jan. 1:
Acquired from Home office (billed price) P50,000
Acquired from outsiders (at cost) 35,000
Purchases P820,000 120,000
Shipments to branch (at cost) 110,000
Shipments from Home office (at billed price) 132,000
Inventory, December 31 (at cost) 142,000
Inventory, December 31:
Acquired from home office (billed price) P66,000
Acquired from outsiders (at cost) P70,000
Operating Expense 200,000 100,000

Records show that the branch was billed for merchandise shipment as follows:
In 2007, cost +25%
In 2008, cost + 20%

5. The combined net income of the home office and the branch on Dec. 31, 2019 is :
a. P212,000 c. P247,000
b. P225,000 d. P269,000

A reconciliation of the inv. In branch account in the head office of Phil. Company and the Home office
account carried on the branch books showed the following discrepancies at Dec. 31, 2019

a) Collection of branch receivable by the home office P800. The branch was not notified.
b) Shipment in transit to branch on Dec. 31, 2019, P3,200
c) Acquisition of furniture by the branch, P1, 200. The furniture account is to be maintained on the
home office books. The home office was not notified of the acquisition
d) Return the excess merchandise by the branch but not yet received by the home office,P1, 500
e) Cash remittance by the branch on Dec. 31, 2019, P500. This was still in transit
f) The home office account on the branch books has a credit balance of P44, 000 at Dec. 31, 2019.

6. COMPUTE: (1) the unadjusted balance of Inv. In Branch account on the home office books at
Dec. 31, 2019; (2) adjusted balance of the reciprocal account on Dec. 31, 2019
a. (1) P49,600 (2) P47,200
b. (1) P49,600 (2) P46,400
c. (1) P47,400 (2) P40,000
d. (1) P50,100 (2) P46,000

On Dec. 1, 2019, the Dustine Company established an agency in Las pinas, sending its merchandise
valued at P 15,750 in month of December, The agency transmitted to the home office sales orders which
were billed at P64,380 of which P20,400 was collected. A home office disbursement chargeable to the
sales agency is the acquisition of furniture and fixtures for las pinas, P25,000 to be depreciated at 24%
per annum. The agency paid expenses of P3,815 and received replenishment thereof from the home
office. On Dec. 31, 2019, the agency samples were valued at P10,075. It was estimated that the gross
profit on goods shipped to bill agency sales orders average 25% of cost.

7. How much is the net income of the agency for the month ended Dec. 31, 2019?

a. P2,886 c. P12,876
b. 3,386 d. (2,614)

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Blad Company bills its Bulacan branch merchandise shipments at 125% of cost. As of cut-off date, Dec.
31, 2019 the ff. data were available:

Merchandise home office Mdse. Purchased from outsiders Total

(at billed prices)
Merchandise
Dec. 1 P300,000 P120,000 P420,000
Additions to stock
During dec. P450,000 P360,000 P810,000
Merchandise,
Dec. 31 P420,000 P150,000 P570,000

The branch returned P15,000 worth of merchandise to the home office acquired at billed price.

8. The amount of the allowance for overvaluation that was realizes as income in view of branch
sales for the month of December was:
a. P63,000 c. P87,500
b. P66,000 d. P84,000

The San Miguel Branch of Taiwan Products, Inc. buys merchandise from outsiders and receives
merchandise from the home office for which it is billed at 20% above cost. Below are excerpts from the
rial balances and data on the home office and San Miguel Branch for the month of April, 2019:
HOME OFFICE:
Cr. Allowance for overvaluation of branch P370,000
Merchandise
Cr. Shipment to branch 850,000
BRANCH:
Dr. Beginning inventory 1,440,000
Shipments from home office 1,020,000
Purchases 410,000
Month-end additional data:
Ending inventory of branch 1,460,000
From Home Office, billed price of 1,170,000
From outsiders, at cost 290,000

9. The total cost of goods sold of the Sam Miguel Branch at cost (net of overvaluation) for the
month just ended amounted to:
a. P 1,410,000 c. P 1,235,000
b. P1.835,000 d. P 1,850,000

Sunshine Commercial Corp. maintains a branch in Iloilo City. Selected balances taken from the books of
Sunshine Commercial and its Iloilo Branch as of December 31, 2019 are as follows:
Home office Branch Office
Merchandise Inventory, January 1 P 120,000 P 8,000
Purchases P 150,000 P 30,000
Shipments from Home office 93,750
Shipments to Branch 75,000
Branch Inventory Allowance 19,750
Sales 115, 000 176,500
Merchandise Inventory, December 31 14,000 10, 350

P4, 350 of the Branch’s ending inventory came from suppliers other than the home office.

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10. As far as the Home office is concerned, the cost of sales of the branch was:
a. P 97,120 c. P 121, 400
b. P 102, 850 d. P 131, 850

The following were found in your examination of the interplant accounts between the Home Office and the
Butuan Branch

Transfer of fixed assets from Home Office amounting to P53,960 was not booked by the branch.

P10,000 covering marketing expense of another branch was charge by Home Office to Butuan.

Butuan recorded a debit note on inventory transfers from Home Office of P75,000 twice.

Home Office recorded cash transfer pg P65,700 from Butuan Branch as coming from Davao Branch.

Butuan reversed a previous debit memo from Cagayan de Oro Branch amounting to P10,500. Home
Office decided that this charge is appropriately Davao Branch’s cost.

Butuan recorded a debit memo from Home Office of P4,650 as P4,560.

11. The net adjustment in the Home Office books related to the Butuan Branch Current account
a. P75,700 c. P86,200
b. P65,700 d. P94,820

The following information are taken from the books and records of Pacific Company and its Branch. The
balances are at December 31, 2019, the second year of the Company’s operation.
Home Office Branch Office
Books Books
Sales ……………………………………………………………………………………… P 400,000
Expenses ………………………………………………………………………………… P 102,000
Shipment to Branch ………………………………… P 200,000
Branch Inventory Allowance ………………………. P 57,000
The branch obtains al its merchandise from the home office. The home office ships the
merchandise at 125% of its cost. The ending inventory of the branch is P40,000 at the billed price.

12. The true income of the branch is:

a. P 54,625 c. P102,000
b. P112,000 d. P 52,500

The Best Corporation operates a branch in Dagupan City. The Home Office Ships merchandise to the
branch at 125% of its cost. Selected information from the December 31, 2019 trial balance are as follows:
Home Office Branch Office
Books Books
Sales ………………………………………………… P 600,000 P300,000
Shipment to Branch ………………………………… 200,000
Purchases ………………………………………………….. 350,000
Shipments from Home Office ………………………………………………………… 250,000
Inventory, January 1 …………………………………….... 100,000 40,000
Allowance for Overvaluation
Of Branch Inventory ………………………………………. 58,000
Expenses .………………………………………………. 120,000 50,000

Inventory at December 31, 2019:

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 Home Office ………………………………………………………………………… P30,000
Branch Office ………………………………………………………………………. P60,000

13. The combined net income of the Home Office and the Branch after adjustment is:
a. P326,000 c. P500,000
b. P 496,000 d. P280,000

Presented below are items taken from the unadjusted trial balances of XY Company and its branch on
December 31, 2019:
Home Office Branch Office
Books Books

Shipment to Branch …………………………….. P 2,250,000

Allowance for evaluation ……………………….. 749,000
Shipment from Home Office ………………………………………………………… P 2,925,000
Purchases (from Outsiders) ……………………………………………………………. 1,084,000
Merchandise Inventory,
January 1 ………………………………………………………………………. 921,375
Merchandise Inventory,
December 31 ………………………………………………………………….. 365,625
Sales …………………………………………………………………………… 4,800,000
Expenses ………………………………………………………………………………. 382,500

Assuming that the branch ending inventory acquired from outsiders is P73,125
14. What is the net income (loss) of the branch insofar as the Home Office is concerned?
a. P534,250 c. P315,250
b. P681,750 d.(P147,750)

During the year 2019 the Home Office bill BX Branch at 140% of cost. Goods billed at P346,500 were
shipped to the branch. The Account Allowance for overvaluation has a balance of P122,400 before
adjustment. The beginning inventory of the branch from the Home Office at cost is P93,600; the beginning
inventory of the branch from outsiders is P15,200, purchases from outsiders is P180,500.

15. Cost of Goods Available for sale of the branch

a. P486,800 c. P659,200
b. P623,240 d. P463,500

16. On June 1, 2019, EliteFum Co. established an agency in Davao, sending samples costing
P4,200,000 which are useful until May 31, 2020 and have a salvage value of 20% of cost. A working fund
of P3,412,500 is to be maintained using the imprest basis. During 2019, the agency submitted to the
home office sales order amounting to P35,437,500. Sales per invoice were P27,562,500 which were duly
approved by the home office. Collections during the year amounted to P14,784,000 net of 4% sales
discount. The cost of merchandise sold during the year is equal to 70% of the gross selling price.
Vouchers for expenses amounted to P1,837,500.

How much net income would be reported by the BGC agency on December 31, 2019?
a. 4,471,250
b. 4,135,250
c. 5,535,250
d. 3,855,250

17. The reciprocal account on the books of the home office is called:
a. Home office
b. Investment in branch
c. Both a and b
d. Neither a or b

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18. The reciprocal account on the books of the branch is called:
a. Home office
b. Investment in branch
c. Both a and b
d. Neither a or b

19. A home office ships inventory to its branch at a mark-up 125% above cost. The required balance of
the allowance for overvaluation account s P1,425,999. During the year, the home office sent merchandise
to the branch costing P9,000,000 At the start of the year the branch’s Statement of Financial Position
shows P1,800,000 of inventory on hand that was acquired from the home office.
By what amount will the Allowance for Unrealized Gross margin in Branch Inventory account be
debited at the end of the year?
a. 12,250,000
b. 10,825,000
c. 1,185,000
d. 2,610,000

During the year 2019 goods billed at P3,250,000 were shipped to the branch 130% of cost. The account
Loading in Branch inventory has a balance of P1,225,000 before adjustment. The beginning inventory of
the branch from the home office at cost is P2,375,000; beginning inventory of the branch from outsiders is
P540,000; purchases from outsiders is P1,450,000.

20. How much s the total goods available for sale of the branch from the home office?
a. 5,308,335
b. 6,337,500
c. 8,090,000
d. 6,100,000

21. The transfer of cash to the branch is recorded by the home office as debit to:
a. Investment in branch
b. Cash
c. Home office
d. None of these

Metro Company has established a branch in Tacloban by sending goods costing P184,900 and P80,000
cash on July 1,2019. Home office initiated transactions for the remainderof the year are found below. At
the end of the year, the company’s controller has found out that the accounting staff assigned in recording
the transactions between the home office and the branches had failed to record all the transactions
initiated by the branch. Because of this, there is a significant discrepancy between the balance of the
reciprocal accounts.
 The home office acquired computer equipment amounting to P420,000 for the branch on August
1, 2019. As per agreement, the branch will keep all the property, plant and equipment records.
 Goods costing P320,000 were shipped from the home office to branch on November 9,2019.
 Additional cash amounting to P53,000 was transferred to the branch on December 2,2019.
 A branch customer has incorrectly aid P25,000 cash to the home office on December 16,2019.
 The home office incurred P65,000 of advertising cost and P96,000 of salaries. Tacloban branch is
to shoulder 30% and 20% of these expenses, respectively

For the purpose of reconciling the reciprocal accounts the controller has instructed the branch accountant
to send a copy of the Home Office Current general ledger to the home office.

Home Office Current

8/3 Equipment acquisition P420,000 7/1 Goods from HO P184,900
11/5 Cash remittance 79,,000 7/1 Cash 80,000

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12/20 Return of Goods to HO 49,000 8/15 Collection of HO’s 113,600
AR
11/10 Goods from HO 230,000
12/4 Cash 50,300

Balance 111,800

Compute the following:

22. Unadjusted balance of Investment in Tacloban account?
a. 1,142,800
b. 1,044,800
c. 1,071,600
d. 1,058,200
23. Net adjustment in the Home Office current account. Indicate whether net debit or credit.
a. 946,499 net debit
b. 946,400 net credit
c. 996,400 net debit
d. 996,400 net credit

24. Upon receiving a report of branch income in the home office include a debit in investment in
branch and a credit to:
a. Home office
b. Income summary
c. Branch income
d. Retained earnings – branch

PrestigeFix Co. operated a branch in Cebu. On December 31,2019, the Cebu branch in the home office
books showed a debit balance of P3,132,660. The interoffice accounts were in agreement at the
beginning of the year. For purposes of reconciling the interoffice accounts, the following facts were given:
It is the policy of the home office to bill its branches at 20% above cost.
 Shipments from home office to Cebu branch costing P435,000 were in transit as of year-end.
Cebu branch recorded the said transfer twice at cost one on December 31,2019 and the other on
January 1,2020.
 The home office allocated to the Cebu Branch ¾ of the rent expenses it paid for the year ended
2019. The rent expense was P144,000. The home office send a debit memo to Cebu branch for
the allocated amount, but the branch recorded the said debit memo by debiting the home office –
current account and crediting rent payable.
 The branch wrote-off uncollectible accounts amounting to P60,,720. The allowance for doubtful
accounts is maintained in the books of the home office. The home office recorded the write-off as
a write-off of its own receivable.
 The branch collected accounts receivable from home office’s customers amounting to P317,520,
net of 2% cash discount. The branch treated the said transaction as if it was a collection from its
own customers. The home office was not yet notified of the said collection.

25. What is the unadjusted balance of the home office-current account in the books of Cebu
branch on December 31,2019.
a. 2,855,940
b. 2,768,940
c. 2,781,900.
d. 2,754,420

26. Expenses paid by the Home office but incurred by the branch has an entry to the home office
that includes a debit to:
a. Home office
b. Investment in Branch

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 c. An expense account
d. Accounts receivable

Fire company has a branch in Baguio and Davao. The reciprocal accounts between the home office and
the branches were in agreement at the beginning of 2019. However at December 31,2019, the following
reciprocal balances are found in the home office books.

Investment in Baguio P186,500

Investment in Davao 84,000

Data for reconciliation of the reciprocal accounts are as follows:

 On December 29, 2019, the home office has instructed Baguio to transfer P74,000 cash to
Davao. Baguio recorded this transaction immediately. Upon receipt, Davao has recorded this
transfer at P47,000. The home office however has not yet recorded this interbranch transaction
as of the end of the year.
 Fire has transferred goods costing P28,900 to Baguio branch and paid P2,500 of shipping cost on
December 16,2019. Baguio shipped all of these goods to Davao upon instruction of the home
office on December 30, 2019. Shipping cost is P3,600 freight collect. Had the goods were
shipped directly to the Davao, P5,000 of freight cost should have been incurred. The interbranch
shipment was not recorded by the branches and the home office as well.
 Baguio has collected cash of P5,750 from Davao’s customer. This transaction is not yet recorded
by Davao and the home office.
 The home office has already allocated P11,000 and P9,000 of administrative expenses to Baguio
and Davao respectively. The branches are not yet notified.
 Baguio remitted P14,30 cash to the home office on December 12, 2019. The home office has
failed to record the said remittance.
 Davao returned goods costing P6,850 to the home office. The goods were shipped on December
19 and received on December 24 but no entries have been made in the home office books.

Compute for the following:

27. Adjusted balance of investment in Baguio account

a. 72,550
b. 66,800
c. 86,850
d. 103,950
28. Adjusted balance of Investment in Davao account
a. 181,450
b. 182,550
c. 175,700
d. 145,400
29. Unadjusted balance of Home Office Current account in Baguio’s books
a. 52,150
b. 87,200
c. 107,250
d. 92,950

30. Unadjusted balance of Home Office Current account in Davao’s books

a. 236,250
b. 122,000
c. 115,150
d. 84,850

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NAME:____________________________________________ YEAR/SECTION:__________________

SUGGESTED ANSWERS

1 B 16 D
2 D 17 B
3 B 18 A
4 D 19 B
5 A 20 D
6 B 21 A
7 A 22 C
8 A 23 B
9 C 24 C
10 B 25 B
11 A 26 B
12 C 27 A
13 A 28 C
14 A 29 D
15 C 30 C

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