Quizzer 3

Use the following information for questions 1 to 3.

The Liberty Company established a branch store in Makati on June 1, 20x5.
The branch is to receive substantially all merchandise for sale from the home
office. During the remainder of 20x5, shipments to the branch amounted to
P216,000 which include a 20% mark-up on cost. The branch purchased
P54,000 additional merchandise for cash and reported unsold merchandise
of P72,000 at year-end. The branch made sales of P351,000, paid expenses
of P86,400 and remitted to the home office all sales proceeds.
The allowance for everything of branch inventory account on the home office
books showed a balance of P9,000 after adjustments.
1. What was the branch inventory on December 31, 20x5 at cost?
2. How much of the branch ending inventory represented purchases from
outsiders?
3. The branch net income as far as the home office is concerned is:
Use the following information for questions 4 and 5.
Presented below are items taken from the unadjusted trial balance of
Progressive Company and its branch on December 31, 20x5.
Home Office
Branch
Books
Books
Shipments to branch P 360,000
Allowance for overvaluation of branch inventory 119,880
Shipments from home office P 468,000
Purchases (from outsiders) 173,520
Merchandise inventory, January 1 65,520
Merchandise inventory, December 31 58,500
Sales 648,000
Expenses 61,200

It is the company’s policy to bill all branches for merchandise shipments at

30% above cost.
4. How much of the branch inventory on January represents purchases from
outsiders?
5. Assuming that the branch ending inventory acquired from home office is P
46,800 at billed price, what is the net income (loss) of the branch insofar
as the home office is concerned?
Use the following information for questions 6 to 8.
The following information are taken from the books and records of Pacific
Company and its branch. The balances are at December 31, 20x5, the
second year of the company’s operation.

Home Office
Branch
Books
Books
Sales P 480,000
Expenses 120,000
 Shipments to branch P 240,00
Allowance for overvaluation of branch inventory 69,000

The branch obtains all of its merchandise from the home office. The home
office ships the merchandise at 125 percent of its cost. The ending inventory
of the branch is P48,000 at the billed price.
6. The beginning inventory of the branch at the billed price is:
7. The net income as reflected on the books of the branch is:
8. The true income of the branch is:
Use the following information for questions 9 to 11:
The following information are extracted from the books and records of Phil
Corporation and its branch. The balances are at December 31,20x5, the third
year of the corporation’s existence.
Home Office
Branch
Books
Books
Sales P 720,000
Expenses 240,000
Shipments from home office 432,000
Allowance for overvaluation of branch inventory P 87,000

The branch acquires all of its merchandise from the home office. The
inventories of the branch at billed prices are as follows:
January 1, 20x5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 90,000
December 31, 20x5 . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,800
9. The percentage of profit on cost that the home office uses to bill
merchandise shipped to branch is:
10. The balance of the Shipments to Branch account before the books are
closed is:
11. The adjusted profit of the branch is:
Use the following information for questions 12 and 13.
The following information are extracted from the books and records of Pinoy
company and its branch. The balances are at December 31, the fourth year
of the company’s operations.
Home Office
Branch
Books
Books
Sales P 240,000
Shipments to branch P 72,000
Shipments from home office 96,000
Purchases 36,000
Expenses 72,000
Inventory, January 1, 20x5 24,000
Allowance for overvaluation of branch inventory 28,800
There are no shipments in transit between the home office and the branch.
Both shipments accounts are properly recorded. The ending inventory at
billed price includes merchandise acquired from the home office in the
amount of P24,000 and P7,200 acquired from vendors for a total of P31,200.
12. How much of the beginning inventory was acquired from “outsiders”?
13. The true branch net income is:
Use the following information for questions 14 to 16:
The following account balances was taken from the books and records of
Bulacan Company and its branch on December 31,20x5.
Home Office
Branch
Books
Books
Sales P 552,000 P 480,000
Shipments to branch 360,000
Merchandise inventory, January 1 57,600 38,400
Purchases 720,000 144,000
Shipments from home office 450,000
Allowance for overvaluation of branch inventory 94,800
Merchandise inventory, December 31 67,200 49,680

The ending inventory of the branch includes P20,880 acquired from

outsiders.
14. The rate of mark-up on cost that the home office uses bill merchandise
shipped to the branch is:
15. The beginning inventory of the branch acquired from the home office
is:
16. The realized profit from the sales made by the branch is:
Use the following information for questions 17 and 18.
The unadjusted trial balances for the home office and the branch of Malakas
Company show the following items on December 31:

Home Office
Branch
Books
Books
Allowance for overvaluation of branch inventory P 43,200
Shipments to branch 96,000
Purchases (from outsiders) P 30,000
Shipments from home office 115,200
Merchandise inventory, January 1 180,000

Branch inventory on December 31 is P120,000, including P19,200 acquired

from outsiders.
The home office bills the branch at 120% cost.
17. How much of the branch inventory as of January 1 represented
purchases from outsiders?
18. The realized branch profit to be adjusted is:
Use the following information for questions 19 and 20.
The following data were taken from the records of Luzon Corporation of
Manila and its Rizal Branch for 20x5:
Manila Office Rizal Branch
Sales P 636,000 P 189,000
Inventory, January 1 69,000 26,700
Purchases 492,00
 Shipments to branch 126,000
Shipments from home office 151,200
Inventory, December 3 1 85,500 35,100
Expenses 229,200 60,900

In 20x5, Manila office billed the Rizal branch at 120% of cost which was lower
by 5% than last year’s.
19. The true branch income (loss) in so far as the home office is concerned
is:
20. The combined net income of the home office and the branch is:
Use the following information for questions 21 and 22.
On December 3, 20x4, the home office of Bernadette Office Supply Company
recorded a shipment of merchandise to its Manila branch as follows:
Manila Branch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30,000
Shipment to Manila Branch . . . . . . . . . . . . . . . . . . . . 25,000
Unrealized profit in Manila 4,000
Branch . . . . . . . . . . . . . . . .
Cash (for freight charges) . . . . . . . . . . . . . . . . . . . . . . 1,000

The Manila Branch sells 40% of the merchandise outside entities during the
rest of December 20x5. The books of the home office and Manila Branches
are closed on December 31 of each year.
On January 5, 20x5 the Manila branch transfers half of the original shipment
to the Bulacan branch, and the Manila branch pays P500 for freight on the
shipments.
At what amounts should the 60% of the merchandise remaining unsold at
December 31, 20x4 be included in:
21. The inventory of the Manila branch at December 31, 20x4 amounted to:
22. The published balance sheet of Bernadette Office Supply Company at
December 31, 20x4.
23. The Manila Branch of the Great Company is billed for merchandise by the
home office at 20% above cost. The branch in turn, prices merchandise
for sales purposes at 25% above billed price. On February 29, all of the
branch merchandise is destroyed by fire. No insurance was maintained.
Branch accounts show the following information:
Merchandise inventory, January 1 (at billed price) . . . . . . . . . . P
26,400
Shipments from home office (January 1 – February 29) . . . . . . .20,000 .
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15,000
..
.
Sales returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Sales allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 .
What was the cost of merchandise destroyed by fire?
a. P36,000 c. P36,800
b. P30,667 d. P30,000

Solutions
1. P63,000
Merchandise inventory, December 31 at cost –
From outsiders (see no.2) . . . . . . . . . . . . . . . . . . . . . . . . . . P 18,000
.....
From home office (see no.2) . . . . . . . . . . . . . . . . . . . . . . . . 45,000
....
P63,000

2. P18,000
Branch inventory, 12/31 per books . . . . . . . . . . . . . P 72,000
....
Less Branch inventory from HO at billed price:
Overvaluation of branch P 9,000
inventory . . . . . . . . . . .
Cost of branch inventory (P9,000 ÷ 45,000 54,000
20%) . . . . . . .
Branch inventory from outsiders . . . . . . . . . . . . . . . P 18,000
....

3. P93,600
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 351,000
.....
Cost of sales:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,000
.....
Shipments from HO at cost (P216,000 180,000
÷120%) . . .
Cost of goods available per sale . . . . . . . . . . . 234,000
..
Less inventory, 12/31 (see 63,000 171,000
no.1) . . . . . . . . . . . . . . .
Gross 180,000
Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,400
......
Branch net income as far as the HO is concerned . . P 93,600
.

4. P14,040
Allowance for overvaluation of branch inventory . . P119,880
.
Less Overvaluation of shipments from HO:
Billed 468,000
price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost (P468,000 ÷ 130%) . . . . . . . . . . . . . . . . 360,000 108,000
.....
Overvaluation of beginning inventory from HO: . . . P 11,880
.
Add Beginning inventory from HO, at cost (11,880
÷ 39,600
30%) .
Beginning inventory from HO, at billed price . . . . . P 51,480
..
 Merchandise inventory, January P 65,520
1................
Less Beginning inventory from HO, at billed price
(see 51,480
above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Beginning inventory from P 14,040
outsiders . . . . . . . . . . . . . . .

5. P47,340
Sales P648,000
………………………………………………………
Cost of sales:
Merchandise inventory January
1-. . . . . . . . . . . .
From outsiders (see P14,040
no.4) . . . . . . . . . . . . . . . . .
From HO, at cost (see no.4) . . . . . . . . . . . . 39,600 P 53,640
...
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,520
.....
Shipments from HO, at cost
(equal Shipments to Branch) . . . . . . . . . . . . . . . 360,000
...
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587,160
.....
Less Merchandise inventory, December 31 -
From outsiders (P58,500– P46,800) . . . . . . 11,700
....
From HO, at cost (P46,800 ÷ 36,000 47,700 539,460
130%) . . . . . . . . .
Gross 108,540
profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,200
.....
Branch net income insofar as the HO is
concerned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 47,340
....

6. P45,000
Balance of Allowance for overvaluation of branch
inventory account before adjustment . . . . . . . . . P 69,000
Less Overvaluation of shipments from HO:
Billed price (P240,000 x 125%). . . . . . . . . . . . . . . . . P 250,000
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 60,000
Overvaluation of beginning inventory. . . . . . . . . . . . . 9,000
Add Beginning inventory at cost (P11,640 ÷ 25%) . . . . 36,000
Branch beginning inventory at billed price . . . . . . . . . P 45,000

7. P63,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 480,000
Cost of sales: (see no.6) . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning inventory. . . . . . . . . . . . . . . . . . . . . . . . . P 45,000
 Shipments from HO (P240,000 x 125%). . . . . . . . . . 300,000
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,000
Less ending inventory. . . . . . . . . . . . . . . . . . . . . . . . 48,000 297,000
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,000
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000
Branch net income, per books . . . . . . . . . . . . . . . . . . . P 63,000

8. P122,400
Branch net income, per books (see no. P 63,000
7) . . . . . . . . .
Add realized profit -
Allowance for overvaluation of branch P 69,000
inventory
Less Overvaluation of branch ending
inventory:
Billed price. . . . . . . . . . . . . . . . . . . . . . . . . P 48,000
.....
Cost (P48,000 ÷ 125%). . . . . . . . . . . . . . . 38,400 9,600 59,40
..... 0
True branch net income. . . . . . . . . . . . . . . . . . . . . P
... 122,400

9. 20%
Inventories, January 1, 20x5 at billed P 90,000
price. . . . . . . . . . . . . . . . . . . . . .
Shipments from 432,000
HO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522,000
.......
Less Allowance for overvaluation of branch inventory. . . . . . . . . 87,000
...
Cost of merchandise from home P435,000
office . . . . . . . . . . . . . . . . . . . . . . . .

Allowance for overvaluation of branch P 87,000

inventory . . . . . . . . . . . . . . .
Divide by Cost of merchandise from HO (see P 435,000
above) . . . . . . . . . . . .
Percentage of profit on cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20%
.....

10. P360,000
Shipments from HO, at billed price . . . . . . . . . . . . . . . . . . . . . . . P 432,000
.....
Divide by the billing percentage . . . . . . . . . . . . . . . . . . . . . . . . . 120%
.....
Balance of shipments to Branch account. . . . . . . . . . . . . . . . . . . P 360,000
...

11. P129,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P
....... 720,000
Cost of sales:
Inventories, January 1 at cost (P90,000 ÷ P 75,000
 120%) . . . . . . . . . .
Shipments from HO, at cost (see no. 360,000
10) . . . . . . . . . . . . . . . .
CGAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435,000
......
Inventories, December 31 at cost (P100,800 ÷ 120%) . 84,000 351,000
.....
Gross 369,000
profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,00
...... 0
Adjusted branch profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P
..... 129,000

12. P4,800
Inventory , January 1 per books . . . . . . . . . . . . . . . . . . . . . . . P 24,000
....
Less Inventory, January 1 from HO at billed price
Allowance for overvaluation of branch inventory . . . . . . P 28,900
..
Overvaluation of shipments from HO (P96,000 – 24,000
P72,000) . .
Overvaluation of beginning inventory from HO . . . . . . . 4,800
...
Add Inventory for HO, at cost (P4,800 ÷ 14,500 19,200
33.33%) . . . . . . . . . .
Inventory, January 1 from P 4,800
outsiders. . . . . . . . . . . . . . . . . . . . . . . . .

13. P66,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P
..... 240,000
Cost of sales:
Inventory, January 1(cost)
From outsiders (see no.12) . . . . . . . . . . . . . . . . P
..... 4,800
From HO, at cost . . . . . . . . . . . . . . . . . . . . . . . . 14,50 P
..... 0 19,200
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000
......
Shipments from HO, at cost . . . . . . . . . . . . . . . . . . 72,000
....
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,200
......
Less Inventory, December 31 (cost) -
From 7,200
outsiders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
From HO, at cost (P24,000 ÷ 133%). . . . . . . . . 18,00 25,200 102,00
..... 0 0
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,000
......
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,000
......
 True branch net P66,000
income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14. 25%
Shipments from home office (billed P
price) . . . . . . . . . . . . . . . . . . . . . . . . . 450,000
Divide by shipments to branch (cost) . . . . . . . . . . . . . . . . . . . . . . . . 360,000
.....
Billing 125%
percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Less percentage at 100
cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of mark-up on 25%
cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15. P24,000
Balance of allowance for overvaluation of branch inventory account P 94,800
Less Overvaluation of shipments from HO (P450,00 – P360,000) . . . 90,000
....
Overvaluation of beginning inventory from 4,800
HO . . . . . . . . . . . . . . . . . . . . .
Add Cost of beginning inventory from HO (P4,800 ÷ 25%) . . . . . . . . 19,200
....
Branch beginning inventory from P 24,000
HO . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16. P89,040
Balance of allowance for overvaluation of branch P
inventory 94,800
Less Overvaluation of branch ending inventory:
Billed price (P49,680 – P
P20,880) . . . . . . . . . . . . . . . . . . . . . 28,800
Cost (P28,800 ÷ 23,040 5,760
125%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P89,040
......
17. P36,000
Balance of Allowance for overvaluation of branch inventory . . . . . P 43,200
..
Less Overvaluation of shipments from HO (P115,200 – P96,000) . . . 19,200
. ...
Overvaluation of beginning inventory from HO . . . . . . . . . . . . . . . . 24,000
....
Add Cost of beginning inventory from HO (P24,000 ÷ 20%) . . . . . . . 120,00
.... 0
Beginning inventory from HO, at billed price. . . . . . . . . . . . . . . . . . . P
.... 144,000
Merchandise inventory, January 1 per P
books . . . . . . . . . . . . . . . . . . . . . . 180,000
Less beginning inventory from HO (see 144,000
above) . . . . . . . . . . . . . . . . . . . . .
Branch beginning inventory from P 36,000
outsiders . . . . . . . . . . . . . . . . . . . . . . . .
18. P26,400
Balance of allowance for overvaluation of branch P
 inventory 43,200
Less Overvaluation of branch ending inventory from HO:
Billed price (P120,000 – P19,200) . . . . . . . . . . . . . . . P100,80
..... 0
Cost (P100,800 ÷ 84,000 16,800
120%) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized branch profit to be P
adjusted . . . . . . . . . . . . . . . . . . . 26,400

19. P9,990
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P
...... 189,000
Cost of sales:
Inventory, January 1 at cost (P27,000÷ 125%) . . . . P 21,360
....
Shipments from HO, at cost . . . . . . . . . . . . . . . . . . . 126,000
....
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,360
......
Inventory, December 31 at cost P35,100 ÷ 120%) . 29,250 118,110
....
Gross 70,890
profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,900
......
True branch P 9,990
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20. P67,290
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P
...... 636,000
Cost of sales:
Inventory, January 1. . . . . . . . . . . . . . . . . . . . . . . . . P 69,000
.....
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,000
......
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,000
......
Less Shipment to branch . . . . . . . . . . . . . . . . . . . . . 126,000
.....
Cost of goods available for own sale . . . . . . . . . . . . 435,000
...
Less Inventory, December 31. . . . . . . . . . . . . . . . . . 85,500 349,500
....
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286,500
......
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229,200
......
Net income of home office . . . . . . . . . . . . . . . . . . . . . . . 57,300
....
Add Branch net income (see no. 9,990
19) . . . . . . . . . . . . . . . . . . .
Combined net P 67,290
 income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21. Branch Inventory, 12/31/20x4: P30,000 x 60%...................................P 18,000

22. Branch Inventory, at cost: (P25,000 + P1,000) x 60%.........................P 15,600
23. P30,000
Merchandise inventory, January 1 P 26,400
Shipments from home office __20,000
Cost of goods available for sale P 46,400
Less: Cost of goods sold, at BP:
Sales P 15,000
Less: Sales returns ___2,000
Net sales P 13,000
Divided by: SP based on cost ____125% __10,400
Merchandise inventory, ending at BP P 36,000
Divided by: Billed price ____120%
Merchandise inventory, ending at cost
lost due to fire) P 30,000