UNIVERSITY OF CALOOCAN CITY

BACHELOR OF SCIENCE IN ACCOUNTANCY

Name: Date:
Year & Section:

Problem No. 1
On July 1, 2021, Champagne Wine Inc. established a branch in a nearby neighboring city. After half a year of
operations, the reciprocal accounts of the home office and the branch were as follows:
Investment in branch Home office current
7/1 150,000 8/11 25,000 9/9 50,000 7/1 150,000
7/2 300,000 9/9 50,000 9/30 60,000 7/2 300,000
9/30 60,000 12/10 5,000 9/30 60,000 7/3 1,000,000
10/15 11/03 70,000 8/11 25,000
75,000
12/10 50,000 10/15 100,000
12/31 505,000 12/31 1,285,000

The following transactions between the home office and the branch transpired during the first 6 months of
operations:
7/1 Home office sent P150,000 cash to the branch.
7/2 Home office shipped goods costing P300,000 to the branch at cost.
7/3 Home office bought an equipment on behalf of the branch. It is the company policy to record all the
property, plant, and equipment in the books of the home office. Purchase price is P1,000,000 and has an
estimated useful life of 5 years.
8/11 Home office collected P25,000 from a customer of the branch. Home office sent a credit memo to the
branch accordingly.
9/9 Branch remitted P50,000 cash to the home office.
9/30 Home office sent a P60,000 debit memo to the branch for its allocated share in the general expenses of
the company for the quarter.
10/15 Home office shipped goods costing P75,000 to the branch at billed price of P100,000
11/03 Branch paid an outstanding account of the home office amounting to P70,000
12/10 Branch paid an outstanding account of the home office amounting to P50,000, and notified the latter
through a debit memo.

How much is the correct balance of the reciprocal accounts as of December 31, 2021?
a. 515,000 c. 505,000
b. 415,000 d. 1,285,000
Problem No. 2
On December 31, 2023, the branch manager of Beta Company in the Ilocos region submitted the following data
to the home office in Manila. All cash collected on accounts receivable are remitted to the home office.
Petty cash fund P 3,000
Sales 195,000
Shipments from home office 135,000
Accounts receivable – January 1, 2023 43,000
Accounts receivable – December 31, 2023 49,000
Accounts receivable written off 1,500
Inventory - January 1, 2023 37,000
Inventory – December 31, 2023 41,000
Expenses (charged by Home Office) 50,000
Required:
1. The balance of the Home Office Current account on January 1, 2023 is:
a. P 72,800 c. P83,000
b. P 84,500 d. None of the above.

2. The net income of the Ilocos Branch for the year ending December 31, 2023 is:
a. P 10,000 c. P104,000
b. P 64,000 d. None of the above.

3. The total remittance for the year 2023 is:

a. P187,500 c. P190,500
b. P189,000 d. P193,500

4. On December 31, 2023, the Branch Current account on the home office books would show a balance of:
a. P 93,000 c. P 95,500
b. P 43,000 d. None of the above.
Problem No. 3
Ryder Corporation has one branch operation located 500 miles away from the home office. The branch office
sells merchandise which is shipped to it from the home office. The merchandise is transferred at cost but the
branch pays reasonable freight charges. The branch office makes sales and incurs and pays operating
expenses. At the end of the current accounting period the true adjusted balance for the home office account on
the branch’s books and the branch office account on the home office’s books is P500,000. The following items
may or may not be reconciling items.
The current year is 2023.
• The home office has shipped merchandise to the branch office which cost P10,000 and which incurs
P500 freight charges paid by the home office but charged to the branch. This merchandise is received
by the branch on January 5, 2024.
• The branch has transmitted P17,000 in cash back to the home office as a partial payment on such
purchased merchandise. This cash is received by the home office on January 6th, 2024.
• The branch office returns some defective merchandise to the home office. The cost of the returned
merchandise is P750. The branch office pays P25 of freight costs which will be charged back to the home
office.
• On December 1, 2023, the home office sends a check for P25,000 to replenish the branch’s working
capital. The check is received on January 4, 2024.
• The branch pays an advertising expense of P800 that should have been paid by the home office since it
applied to advertising fees incurred by the home office for its own benefit.
• The home office allocated P12,000 of general and administrative expenses to the branch. The branch
had not entered the allocation as of the end of the year.
• The home office pays insurance premiums on the branch store. The amount paid by the home office is
P1,000 but the branch erroneously records it as P776.00
Compute the unadjusted balances for the branch and home office accounts as of December 31, 2023.
Home Office Current Branch Current
a. P481,425 P433,701
b. P500,000 P500,000
c. P452,276 P518,575
d. P518,575 P452,276
Problem No. 4
Tagum Supply Company is engaged in merchandising both at Home Office in Makati, Metro Manila and a branch
in Davao. Selected accounts in the trial balances of the Home Office and the branch at December 31, 2023
follow:
Debits Home Office Branch
Inventory, January 1, 2023 P 23,000 P 11,550
Davao Branch 58,300
Purchases 190,000 105,000
Freight-in from home office 5,500
Sundry expenses 52,000 28,000
Credits
Home office P 53,300
Sales P155,000 140,000
Sales to Branch 110,000
Allowance for branch inventory, January 1, 2023 1,000

Additional information:
• Davao branch receives all its merchandise from the home office. The Home Office bills the goods at cost
plus 10% mark-up. At December 31, 2023, a shipment with a billing value of P5,000 was in transit to the
branch. Freight on this shipment was P250 which is to be treated as part of inventory.
• December 31, 2023 inventories excluding the shipment in transit, are:
Home office, at cost P 30,000
Davao branch, at billed value (excluding freight of P520) 10,400

Required:
1. The net income of the Home Office from own operations:
a. P10,000 c. P20,000
b. P15,000 d. P30,000

2. The net income (loss) of Davao branch in so far as home office is concerned:
a. P (870) c. P12,470
b. P10,470 d. P13,470

3. The combined net income:

a. P19,130 c. P30,470
b. P29,950 d. P40,470
Problem No. 5
Sharron Company operates a branch in Legazpi City. There are shipments in transit from home office to the
branch. The home office ship merchandise to the branch at 125% of cost in the year 20x8, operating data for the
home office and the branch is as follow:

Home Office Branch

Sales P250,000 P 75,000
Purchases from outsiders 200,000 15,000
Shipments to branch:
Cost to home office
30,000
Billing price to branch 32,500
Expenses 40,000 10,000
Inventories, January 1, 20x8
Home office acquired from outsiders, at cost 80,000
Branch:
Acquired from outsiders, at cost 7,500
Acquired from home office, at billed price, which average 20% above
cost 24,000
Inventories, December 31, 20x8
Home office, acquired from outsiders, at cost 55,000
Branch:
Acquired from outsiders, at cost 5,500
Acquired from home office, at 20x8 billed price (physical count) 21,000

Required:
1. The amount of merchandise in transit:
a. P3,500 c. P 7,500
b. P5,000 d. P10,500

2. The combined cost of goods sold:

a. P240,000 c. P242,500
b. P241,200 d. P245,200

3. The combined net income:

a. P30,000 c. P32,500
b. P32,400 d. P33,800
Problem No. 6
YY Corporation has two branches to which merchandise is transferred at cost plus 20%, plus freight charges.
On November 30, 2014, YY Corporation shipped merchandise that cost P5,500 to its CC Branch, and the P200
shipping charges were paid by YY Corporation. On December 15, 2014, the DD Branch encountered an
inventory shortage, and the CC Branch shipped the merchandise to the DD Branch at a freight cost of P160 paid
by the CC Branch. Shipping charges from the home office to the DD Branch would have been P175.
1. YY Corporation will record the P5,500 shipment to the CC Branch, together with the P200 shipping charge,
in a journal entry that includes the following:
a. Shipments from home office, P6,600
b. Shipments to CC Branch, P5,700
c. Unrealized profit – branch inventory, P1,100.
d. Investment in CC Branch, P5,700.

2. CC Branch should record the transfer of merchandise to the DD Branch by either a debit or credit entry that
includes the following:
a. Shipments from home office, P5,500.
b. DD Branch, P6,975.
c. Home Office, P6,960
d. Inventory, P5,660

3. If the merchandise is unsold at year-end, the DD Branch will inventory the merchandise at:
a. P6,000 c. P6,760
b. P6,975 d. P6,775

4. If the merchandise is unsold at year-end, YY Corporation will include it as an asset in its Annual Report to
Stockholders in the amount of:
a. P5,500 c. P5,675
b. P5,660 d. P5,875
5. The loss on excessive freight charges on the inter-branch transfer amounted to:
a. P200 c. P175
b. P160 d. P185
Theories
1. Which of the following statements is true?
a. An income reported by the branch is recorded by the home office as a debit to Income Summary - Branch.
b. The elimination entries on the books of either the home office or the branch are made only for the purpose
of preparing financial statements for external users.
c. The transfer of branch net income to the Home Office account represents a branch closing entry.
d. Upon instruction by the home office, Palawan branch sends cash to Bohol branch. The entry to record
this transfer in the home office books is a debit to Investment in Palawan Branch and a credit to
Investment in Bohol Branch.

2. Which of the following statements is true?

a. Upon write-off of the uncollectible account, the Uncollectible Accounts Expense is debited and the
Installment Accounts Receivable account is credited.
b. The branches involved in an interbranch transfer generally account for the transfers as if they are dealing
with the home office rather than with another branch.
c. The account Shipments from Home Office is the counterpart of two accounts in the home office books,
namely, the Branch Current account and the Shipments to Branch account.
d. The franchisor may receive initial franchise fees from the franchisee for the continuing rights granted by
the franchise agreement and for general and specific services during the life of the franchise agreement.

3. Which of the following statements is false?

a. The procedures in reconciling the home office and branch accounts are essentially the same as that of
the bank reconciliation statement.
b. While the branch financial statements may be prepared for internal reporting purposes, external
accounting reports reflect the activities and practices of the company as a whole.
c. The preparation of combined statements necessitates the elimination of reciprocal accounts.
d. The recording of reported branch net income on the home office books represents a home office closing
entry.

4. Which of the following statements is false?

a. Only the home office can debit or credit the Branch Current account in its books.
b. When a transaction affects a reciprocal account, entries are required on both home office and branch
books.
c. The scope of activity of an agency is essentially the same as that of the branch.
d. The transactions of the agency may be merged with the transactions of the home office or they may be
accounted for separately.

5. An enterprise uses a branch accounting system in which it establishes separate formal accounting systems
for its home office operations and its branch office operations. Which of the following statements about this
arrangement is false?
a. The home office account on the books of a branch office represents the equity interest of the home office
in the net assets of the branch.
b. The branch office account on the books of the home office represents the equity interest of the branch
office in the net assets of the home office.
c. The home office and branch office accounts are reciprocal accounts that must be eliminated in the
preparation of the enterprise’s financial statements that are presented in accordance with GAAP.
d. Unrealized profit from internal transfers between the home office and a branch must be eliminated in the
preparation of the enterprise’s financial statements that are presented in accordance with GAAP.