Ramon Magsaysay Memorial Colleges

College of Business Education

Bachelor of Science in Real Estate Management Program
Pioneer Ave., General Santos City
Tel. No. 552-3348

Name: ______________________________ Date: ___________ Score: _____________

Subject : REV 2 CN 2220 PRELIM QUIZ 2
Instructor: Mrs. Marivic B. Peñaflor, CPA, MBA AY: 2023-2024 2ND Semester

General Instruction: Read the questions carefully before answering. Write the answer on the sheet provided.
Strictly no erasures allowed on final answer.

1. The Menu Corporation established its Butuan branch in March, 2023. During the first year of operations, the
home office shipped to the branch merchandise which had a cost of P1,080,000. Three-fourths of these
merchandise was sold by the branch for P1,269,000. Operating expenses of the branch amounted to
P243,000. Merchandise is billed by the home office to the branch at 25% above cost. How much net income
will the branch report?

2. On December 1, 2023, the Forward Company established an agency in Digos, sending its merchandise
samples costing P648,000 and a cash working fund of P175,000 to be maintained on the imprest basis.
During the month of December, the agency transmitted to the home office sales orders which were billed at
P2,551,500 of which P1,674,000 was collected. The agency paid expenses of P113,400, and received
replenishment thereof from the home office. On December 31, 2023, the agency samples were valued at
P533,250. It was estimated that the gross profit on goods shipped to bill agency sales orders average 25%
of cost. The net income for the month ended December 31, 2023 on agency operations amounted to:

3. At December 31, 2023, the following information has been collected by Xing Company’s office and branch
for reconciling the branch and home office accounts.
a. The home office’s branch account balance at December 31, 2023 is P472,000.
b. On December 30, 2023, the branch sent a check for P36,000 to the home office to settle its account.
The transaction regarding the check was entered twice by the home office.
c. On December 27, 2023 the branch returned P19,000 of seasonal merchandise to the home office for
the January clearance sale. The merchandise was recorded by the home office as P1,900.
d. The home office allocated general expenses of P7,000 to the branch. The branch had not entered
the allocation at year-end.
e. Branch store insurance premiums of P11,400 was paid by the home office. The branch recorded the
amount of P14,100.
f. Branch net income of P15,000 was entered by the home office as net loss.

The unadjusted balance of the home office account in the books of the branch at December 31, 2023 is:

4. The following were found in your examination of the interplant accounts between the home office and the
Kidapawan branch:
g. Transfer of fixed assets from the home office amounting to P161,880 was not booked by the branch.
a. P30,000 covering marketing expense of another branch was charged by the home office to
Kidapawan.
b. Kidapawan branch recorded a debit note on inventory transfers from the home office of P225,000
twice.
c. Home office recorded cash transfer of P197,100 from Kidapawan branch as coming from Tacurong
branch.

The net adjustment in Kidapawan branch’s books related to the home office current account is:
5. A home office transfers inventory to its branch at a 20% markup. During 2023, inventory costing the home
office P960,000 was transferred to the branch. At year-end, the home office adjusted its allowance for
overvaluation account downward by P218,400. The branch’s year-end balance sheet shows P57,600 of
inventory acquired from the home office. How much is the beginning inventory of the branch at cost?

6. Liane Company has two merchandise outlets, its main store and its Gensan branch. All purchases are made
by the main store and shipped to the branch at cost plus 10%. On January 1, 2023, the main store and
Gensan branch inventories were P68,000 and P19,800, respectively. During 2023, the main store purchased
merchandise costing P280,000 and shipped 25% of it to Gensan branch. At December 31, 2023 Gensan
branch has the following accounts: sales, P149,700; inventory, P24,200; expenses, P47,720. What is the
true income of the branch?

7. At December 31, 2024, the following information has been collected by Maxwell Company’s office and branch
for reconciling the branch and home office accounts.
1. The home office’s branch account balance at December 31, 2024 is P590,000. The branch’s home
office account balance is P506,700
2. On December 30, 2024, the branch sent a check for P40,000 to the home office to settle its account.
The check was not delivered to the home office until January 3, 2020
3. On December 27, 2024; the branch returned P15,000 of seasonal merchandise to the home office
for the January clearance sale. The merchandise was not received by the home office until January
6, 2020
4. The home office allocated general expenses of P28,000 to the branch. The branch had not entered
the allocated at the year-end
5. Branch store insurance premiums of P900 were paid by the home office. The branch recorded the
amount at P600
The correct balance of the reciprocal account amounted to:

8. The Manila branch of Divine 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 January 25 all of the
branch merchandise is destroyed by a fire. No insurance was maintained. Branch accounts show the
following information:
Merchandise inventory, Jan 1 P173,000
Shipments from home office (Jan 1- 25) 200,000
Sales 350,000
Sales returns and allowances 30,000
Sales discounts 3,000
What is the cost of the merchandise destroyed by the fire?
9. The income statement submitted by the D.C branch to the Home Office for the month of December 31,
2024 follows:
Sales 600,000
Cost of sales:
Inventory Dec. 1, 2024 80,000
Shipments from Home Office 350,000
Purchases 30,000
Total 460,000
Inventory, Dec. 31, 2024 100,000 360,000
Gross margin 240,000
Operating expenses 180,000
Net income for the month 60,000

The branch inventories consisted of Dec 1 Dec 31

Merchandise from home office 70,000 84,000
Local purchases 10,000 16,000
Total 80,000 100,000
After the necessary adjustment, the home office ascertained the true net income of the branch to be
156,000. At what percentage of cost did the home office bill the branch for merchandise shipped to it?
10. Prestige Buy Company has established a branch in Serenda by sending goods costing P46,225 and
P20,000 cash on July 1, 2023. Home office initiated transactions for the remainders of 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 initiated by the branch. Because of this, there is a significant discrepancy
between the balance of the reciprocal accounts.
 Prestige Buy Company acquired a money counter and vault amounting to P105,000 for the
Serenda Company branch on August 1, 2023. As per agreement, the branch will keep all the
property, plant and equipment records.
 Goods costing P80,000 were shipped from Prestige Buy Company to Serenda branch on
November 9, 2023.
 Additional cash amounting to P13,250 was transferred to the Serenda branch on December 2,
2023.
 Illustrado Trading, a Serenda branch customer has incorrectly paid P6,250 cash to the home
office on December 16,2023.
 Prestige Buy Company incurred P16,250 of advertising cost and P24,000 of salaries. Serendra
Company branch is to shoulder 30% and 20% of these expenses, respectively.
For the purpose of recording the reciprocal accounts the controller has instructed the Serendra branch
accountant to send a copy of the Home Office Current general ledger to the home office.

Home Office Current

8/3 Supplies and equipment P105,000 7/1 Goods from HQ P46,225
acquisition
11/5 Cash remittance 19,500 7/1 Cash 20,000
12/20 Return of goods to HQ 12,250 8/15 Collection of HQ’s 28,400
AR
11/10 Goods from HQ 57,500
12/4 Cash 12,575

Balance P27,950

The unadjusted balance of Investment in Serendra branch account is?

11. During 2023, goods were shipped to the branch at 120% above cost. The reciprocal account in the income
statement of the home office amounted to P237,500. The balance of the contra branch current account
reports a balance of P375,000 before adjustment. The beginning inventory of the branch from the home
office at cost is P360,000 and from outsiders, P93,000. The branch purchased goods from outsiders during
the year amounting to P125,200. If the ending inventory of the branch as reported in the combined
statement of financial position is P345,000. The branch income as reported in the combined financial
statement and as reported in the branch’s books are P201,125 and 120,750, respectively. How much is the
cost of goods sold to be reported in the branch’s income statement for the year ended December 31,
2023?
12. On September 1, 2023, Ayalla Mails Main Office established two branches: Ortigas and Makati branches.
 The home office transferred P480,000 worth of cash and P2,100,000 worth of inventory to its
Ortigas branch. The home office transfers merchandise to its branch at a mark-up of 25% above
cost.
 The home office instructed Ortigas to transfer 75% of the goods and cash received to Makati.
 In addition, on October 1, 2023, shipments from home office were received by Ortigas
amounting to P750,000 at cost and the branch paid freight costs amounting to P39,000.
 60% of the said shipments were sold to outsiders.
 On November 1, 2023, Ortigas transferred 50% of the remaining October shipments from
Alabang to Makati, with Makati branch paying freight costs of P15,000.
  Had the merchandise been shipped from Alabang to Makati City branch, only P11,400 worth of
freight would have been incurred.
How much is the balance of the Makati branch account of the Home Office books?
13. Makati Garment Company operates a branch in Bacolod City. At the end of the year, the branch account in
the books of the home office at Makati shows a balance of P600,000. The following information was
ascertained:
 The branch made a profit of P40,400 for the month of December but the home office
erroneously recorded it as P44,720.
 The branch has not received the cash in the amount of P100,000 sent by home office on
December 31. This was charged to General Expense account by the home office.
 The home office has billed the branch the amount of P150,000 for merchandise, which was in
transit on December 31.
 Supplies of P18,000 was returned by the branch to the home office but the home office has not
yet reflected in its records the receipt of the supplies.
 A home office accounts receivable for P42,000 was collected by the branch. Said collection was
not reported to the home office by the branch.
What is the unadjusted balance of the Home Office account of Bacolod branch:
14. On October 1, 2023, the Greenbelt Main Office established a sales agency in Ortigas.
 The main office sent samples of its merchandise amounting to P8,400 and a working fund
amounting to P72,000 to be maintained on the imprest basis.
 The samples sent were intended to last until June 1,2024. During the first two months of
operations, the agency transmitted to the home office sale of goods costing P291,600, but the
home office were not able to full-up 25% of the said transmitted sales of orders.
 Collections from customers amounted to P73,941, net of 2% sales discount.
 Payments made by the agency during October and November were as follows: annual rent of
P57,600, advertising expense worth P5,600 and utilities amounting to P7,200.
 It also purchased an equipment worth P9,000 which will be depreciated at 20% per annum.
 The gross profit rate on sales agency order is 20% of gross sales.
Net income of the agency for the two months ended November 30, 2023 is

15. 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 2023. However at December 31, 2023, 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, 2023, 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, 2023. Baguio shipped all of these goods to Davao upon instruction of the
home office on December 30, 2023. Shipping cost is P3,600 freight collect. Had the goods were
shipped directly to 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 P14,300 cash to the home office on December 12, 2023. 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 the unadjusted balance of Home Office Current account in Davao’s books
16. The following transactions were entered in the branch current account of The Fort Head Office for the year
2023:
Branch Current – Rockwell
Beg. Balance, 1/1/23 2,296,290 166,500 Collection of AR,
9/12/23
Shipments to branch, 4/1/23 1,062,000
Cost forwarded, 6/1/23 75,000
Operating expenses charged to the branch, 14,400
12/31/23
 Shipments to the branch during the year were made at 20% above cost.
 The balance of the Allowance for Overvaluation of Branch Inventory account was P106,500 at
the beginning, and the allowance was written down to P73,500 at year-end.
 On December 10, 2023, the home office purchased a piece of equipment amounting to
P180,000 for its branch in Rockwell. The said equipment has a useful life of five years and will
be carried in the books of the branch, but the home office recorded the purchase by debiting
Equipment.
 The branch recorded the depreciation of the equipment by debiting the Home Office Current
account and crediting Accumulated Depreciation.
 Debit memo regarding the allocation of operating expenses to the Rockwell branch was
received by the branch of January 2, 2024.
 The Rockwell branch reported net income of P988,650.
 It also remitted cash to the home office on December 31, 2023 amounting to P165,000, which
the home office received and recorded on January 2, 2024.
The interoffice accounts were in agreement at the beginning of the year/
How much is the net income of Rockwell branch that will be reported in the combined income statement
of the Fort Company?
17. Rustans Trading Co. operates a branch in Cebu City. On December 31, 2023, the Home Office Current
account in the branch books showed a credit balance of P261,456. The interoffice accounts were in
agreement at the beginning of the year. For purposes of reconciling the interoffice accounts, the following
facts were determined:
 Cebu City branch paid P16,250 representing registration and seminar fee of the senior vice
president for finance of the company, when the vice president attended a convention. Of the
amount paid, 40% was charged to Rustans Trading, 20% to Cebu, and the remaining amount to
Rustans’ other branch located in Davao City. Cebu branch recorded a receivable from the home
office at the said amount and credited Cash. Rustans Trading was not yet notified of the said
event.
 Total general expenses were P43,275. Rustans Trading allocated 2/5 of the expenses to Cebu
City branch. The branch erroneously debited 2/5 of the allocated amount to its reciprocal
account twice.
 Rustans Trading transferred inventory costing P22,500 to Cebu branch and the branch paid the
corresponding freight of P1,250. Cebu branch was instructed by Rustans to transfer ¾ of the
said inventories to Davao branch and to shoulder the freight costing P1,750. Cebu branch made
the transfer on its books but it recorded the transfer at ¼ of the original inventories and credited
the payment for freight at P175 by mistake.
  Cebu City branch recorded a machinery costing P10,616 which it purchased for its own use on
December 31, 2023. The machinery will be recorded in the books of the home office. Rustans
Trading recorded the memo received from the branch by debiting its reciprocal account and
crediting liability account to Cebu branch in the amount P10,661.
What is the unadjusted balance of the Investment in Cebu Branch account on Dec. 31, 2023?
18. On January 2, 2024, Miguel Company established a sales agency in Las Pinas City. During the year, the
following transactions occurred:
 Transfer of P 10,000 worth of merchandise to Las Pinas Agency to establish a working fund.
 Receipts of sales orders from the agency, P 100,000.
 Collection of agency accounts by the home office, P 70,000
 Home office disbursements representing agency expenses, P 9,000.
 Replenishment of the agency working fund upon receipt of expenses vouchers for P 4,500
 Cost of goods sold identified with the agency sales, P 72,000.

What is the net income ( loss) of the agency for the year, P 2024?
19. On December 31,2024, the investment in Davao Branch account of the home office’s books has a balance
of P 150,000. Upon further inspection of the related documents and entries for December, you note the
following discrepancies:
1. A P 15,000 branch remittances to the home office on December 27,2024 was only recorded on the
home office books on January 4,2015.
2. A home office inventory shipment worth P 25,000 to the branch on December 29,2023 was
recorded by the branch on January 3,2015.
3. The home office incurred P 15,000 of advertising expense. It was determined that 20% of this
amount should be allocated to the branch. As of December 31,2024, the branch has not yet
recorded this transaction.
4. A customer of the Davao branch erroneously remitted P 5,000 to the home office. The home office
recorded this cash collection on December 31, 2024. Upon notification on December 28,2024, the
branch appropriately recorded the transaction in their books.
5. Inventory costing {45,000 was sent to the branch on December 10,2024 but was recorded by the
branch at P 40,000 only.

Assuming that the home office bills its branch for merchandise shipments at cost, compute the
unadjusted balance of the home office current accounts as of December 31,2024:
20. Summarized information for Marithes Co. and Jean branch, Marithes’s only branch, at December 31, 2023,
is as follows:
Debits Home office Jean branch
Cash P 1,800 P 550
Accounts receivable 4,500 2,000
Inventories, January 1, 2023 10,000 2,750
Jean branch 7,500
Other assets 41,700 10,000
Purchases 28,500
Shipments from home office 10,450
Operating expenses 15,000 2,250
Dividends 6,000 ______
Total debits P115,000 P28,000
Credits
Accounts payable P 9,300 P 5,500
Loadings in branch inventory 250
Common stock, P10 par 37,500
Retained earnings 12,500
Home office 7,500
 Sales 45,000 15,000
Shipments to branch 10,450 ______
Total credits P115,000 P28,000

Additional information:
- Jean branch acquires all of its inventory items from the home office at a 10% markup on cost.
- Ending inventories for the home office and Jean branch December 31, 2023 are P13,000 for the home
office and P3,300 at the transfer price for Jean branch.

The combined cost of goods sold for the home office and the branch is:

21. Refer to no. 20, how much is the combined net profit?

22. On November 1, 2024, the Jerwin Co. established a sales agency in Digos hence, sent merchandise samples
costing P8,000 and a cash working fund of P3,000 to be maintained on the imprest basis. During the month
of November, the sales agency transmitted to the home office sales orders. These were billed at P70,000
of which P40,000 were collected. The sales agency paid expenses of P2,800 but was reimbursed by the
home office. On November 30, 2023, the sales agency samples were valued at P6,000, it was estimated
that the gross profit on goods shipped to fill agency sales orders averaged 40% of cost. The balance of the
accounts receivable on the books of the agency is:

23. Ritchee Co. has two merchandise outlets, its main store and its Toril branch. All purchases are made by the
home office and shipped to Toril branch at cost plus 10 percent. On January 1, 2023, the home office and
Toril inventories were P17,000 and P4,950, respectively. During 2023 the home office purchased
merchandise costing P50,000 and shipped 40% of it to Toril. At December 31, 2023 Toril made the following
closing entry:
Sales 40,000
Merchandise inventory 6,050
Merchandise inventory 4,950
Shipments from home office 22,000
Expenses 13,100
Home office 6,000

If the home office inventory at December 31, 2023 is P14,000, the combined cost of goods sold that should
appear in Ritchee Co.'s income statement for the year 2023 is:

24. On May 1, 2024, the home office of Tria Company recorded a shipment of merchandise to its Manila Branch
as follows:
Investment in Branch – Manila 48,000
Shipments to Branch 40,000
Allowance for overvaluation of
Branch inventory 6,000
Cash 2,000
The credit to cash pertains to the freight charges. Manila Branch was able to sell 30% of the merchandise to
customers for the rest of the month of May. However, on June 1, 2024, Manila Branch transferred half of the
unsold merchandise to Bulacan Branch and Manila pays P700 freight for the shipment. If the shipment had been
made directly from the home office to Bulacan branch, the freight charges would have been P800. In the entry
in the books of Bulacan branch, how much will be credited to home office account as a result of the
transfer on June 1, 2024?

25. What is the journal entry to be made in the home office books to record the transfer of merchandise from
Manila Branch to Bulacan Branch?
26. What is the journal entry in the book of Manila branch to record the transfer of merchandise to Bulacan
Branch
27. What is the journal entry in the book of Bulacan branch to record the receipt of merchandise from Manila
Branch?
28. How much is the realized profit from the allowance for overvaluation of Manila Branch inventory in the
home office books.
29. Assuming Bulacan branch sold 60% of merchandise purchased from home office, how much is the realized
profit from the allowance for overvaluation of Bulacan Branh inventory in the home office books. Bulacan
branch use the same gross profit rate with that of Manila Branch.
30. What is the journal entry in the books of the home office to record the realized profit from the allowance for
overvaluation of Bulacan Branch inventory.