Instructions: Choose the best answer from the given choices..
records uncovered the following facts: the beginning of the
Below are the trial balances of CBA Co. and its branch office year balance in Unrealized Profit in Shipments to Branch was
in Cavite City as of December 31, 2018: P7,500; during the period the home office shipped goods to
Debits HOME BRANCH the branch that had cost the main store P75,000, however,
Cash P 50,100 P 1,260 your review of the branch receiving reports revealed that a
Accounts Receivable (net) 350,000 135,660 number of shipments from the home office had been recorded
Inventory - Home Office, Jan 1 64,400 - twice by the branch accountant, the branch is billed a uniform
25% above cost and receives inventory only from the home
Inventory – Branch Office, Jan 1 - 32,340
office; the branch ending inventory was correctly reported by
Fixed Assets (net) 210,000 - the branch at a billed price of P21,750. When reconciling
Branch Current 163,120 - reciprocal accounts, you found that the branch had not
Purchases 532,000 - recorded P2,600 of expenses paid by the home office
Shipments from Home Office - 294,000 chargeable to the branch. All other selling and administrative
Expenses 119,980 83,440 expenses were correctly reported
TOTAL P 1,489,600 P 546,700 5. What is the true net income (loss) of the branch?
a. P64,250 c. P31,650
Credits
b. P64,800 d.P36,900
Account Payable P 30,500 P 10,500 6. What is the cost of goods sold as billed to the branch
Mortgage Payable 67,500 - by the home office?
Home Office Current - 144,200 a. P109,500 b. P65,000
Sales 434,000 392,000 b. P87,600 d. P81,250
Shipments to Branch 308,000 -
Allowance for Overvaluation of - - At December 31, 2018, the following information has been
Branch Inventory 1/1/2016 2,940 - collected by Java company’s office and branch for reconciling
Capital Stock 600,000 - the branch and home office accounts.
Retained Earnings 46,660 - The home office’s branch account balance at
December 31 2018 is P715,000
TOTAL P 1,489,600 P 546,700
On December 30, 2018, the branch sent a check for
Additional information. P60,000 to the home office to settle its account. The
1. All cash receipts of the branch are deposited in check was not delivered to the home office until
Cavite City Bank, for the account of the Home January 3, 2019.
Office. A deposit in the amount of P5,320 made by On December 27, the branch returned P28,000 of
the branch on December 29, 2018 was taken up by limited edition merchandise to the home office for
the Home Office on January 4, 2019. the January anniversary sale. The merchandise was
2. All expenses of the branch are paid from a bank not received by the home office until January 6 of the
account which the Home Office replenishes upon following year.
advice by the Branch. A check for P2,100 mailed by
The home office allocated service department
the Home office on December 31, 2018 was received
expenses of P17,000 to the branch. The branch had
by the Branch on January 3, 2019.
not entered the allocation at the end of the year.
3. On December 26, 2018, the Home Office collected a
Branch warehouse insurance premiums of P6,700
Branch account receivable for P2,500. The Home
were paid by the home office. The branch recorded
Office failed to advise the Branch accordingly.
the amount of P7,600.
4. A shipment of merchandise to the Branch, with a
7. What is the unadjusted balance of the home office
billing value of P14,000, was still in transit as of
account in the books of the branch at December 31,
December 31, 2018. The Home Office bills the
2018?
Branch for merchandise at 10% above cost.
a. P627,000 c. P644,900
5. Beginning inventories are carried at their respective
b. P609,100 d. P610,900
costs to the Home Office and to the Branch. The
Branch gets all its merchandise from the Home
The following transactions pertain to a branch’s first month’s
Office. As of December 31, 2018, the physical
operations:
inventories excluding the shipment in transit were:
Home office P70,000; Branch, at billed price, The home office sent P11,000 cash to the branch
P21,420. The home office shipped inventory costing P36,000
1. What is the adjusted balance of the Home Office to the branch: 25% on cost.
Current in the books of the branch as of December Branch inventory purchased from outside vendors
31, 2018? totaled P14,000.
a. P155,300 c. P157,800 Branch sales on account were P73,000; cash sales
amounted to P9,000.
b. P160,300 d. P163,120 The home office allocated P5,000 advertising
2. What is the net income of the home office from its expense.
own operation for 2018? The home office received defective merchandise
a. P81,620 c. P67,600 costing P7,000 from the branch.
b. P31,360 d. P95,620 Branch collection on accounts receivable were
3. What is the combined net income for 2018? P32,000.
a. P84,980 c. P97,710 The home office collected P2,000 from the customer
b. P70,980 d. P98,900 of the branch.
4. What is the understatement in the net income of the Branch operating expense of P10,500 were incurred
branch due to cost of sales overvaluation for 2018? none of this were paid at month end.
a. P27,750 c. P26,000 The branch remitted P13,000 to the home office.
b. P24,330 d. P28,000 The branch’s ending inventory (as reported in its
balance sheet) is composed of
The Charles David Company was organized in 2018 to sell o Acquired from outside vendor P9,000
fine clothing line for men. Shortly after opening its doors to o From home office at billed price P12,000
the public at the main store. Charles David Company 8. What is the adjusted balance of the Home Office
established a branch in another city. At the end of the second account in the books of the branch based from all
year of operations, the home office received the following transactions above?
condensed income statement from the branch. Sales P180,000, a. P67,250 c. P74,500
Cost of Sales P140,000, Selling & Administrative Expenses b. P79,500 d. P37,250
P25,000, Net Income P15,000. The management at the home
office questioned the accuracy of these figures and assigned
you the task of verifying the branch data. Your review of the
The hone office in Nayong Pilipino shipped merchandise The ending inventory of the branch includes items costing
costing P74,780 to Camiguin branch and paid for the freight P4,350 which were acquired from suppliers other than the
charges of P12,175. Camiguin branch was subsequently home office.
instructed to transfer the merchandise to Surigao branch 12. As far as the home office is concerned, the cost of
wherein Camiguin branch paid for P6,950 freight. If the sales of the Ilocos Sur branch was?
shipment was made directly from Westside to Surigao, the a. P97,120 c. P102,800
freight cost would have been P16,450. b. P121,400 d. P131,850
9. How much is the amount of Branch Current to be
credited in the books of the home office as result of The Lola Meng Co. established its San Sebastian Branch in
the interbranch transfer of merchandise? June 2018. During the first year of operations, the home office
a. P2,675 c. P86,955 shipped to the branch merchandise which had cost P120,000.
b. P93,905 d. P91230 ¾ of these merchandise was sold by the branch for 141,000.
Operating expenses of the branch amounted to P27,000. The
The Poon & Puen Corporation operate a branch in GMA Home Office billed the branch at 25% above cost.
Cavite. The trial balance of the home office and the GMA 13. What is the reported net income of the branch for
branch, as of December 31, 2018 are reproduced below: December 31, 2018?
Home a. P800 c. P1,200
Office Branch b. P1,500 d. P8,000
Cash 12,000.00 3,400.00
Accounts Receivable 28,000.00 7,000.00 A branch store in Baste was established by Potato Giant on
Inventory Jan 1 16,000.00 5,000.00 March 1. Shipments of merchandise, billed to this branch
Branch Current 8,000.00
at125% of cost, were as follows: March 5, P120,000; March
10, P50,000; March 20, P35,000. On March 24, the branch
Allowance for overvaluation (2,800.00) returned defective merchandise worth P3,050 and on March
Fixed Assets net 89,800.00 31, it reported a net loss of P6,200 and merchandise inventory
of P85,000.
Accounts Payable (2,000.00) (1,400.00) 14. In the books of the home office, the branch net
income (loss) is?
Home Office Current (8,000.00) a. (P6,200) c. P17,190
b. P20,240 d. P23,390
(100,000.00 15. In the home office books, the branch cost of sale is?
Capital Stock )
a. P93,500 c. P116,950
Retained Earnings (5,000.00) b. P161,560 d. P161,950
(110,000.00 The Eastwood head office opened its Magallanes branch on
Sales ) (37,400.00) August 1. Merchandise shipments to the branch during the
Purchases 80,000.00 2,000.00 month, billed at 125% of cost, is P1,680,000. Branch returned
Shipment from Home Office 26,400.00 damaged merchandise worth P189,000. On August 30, the
branch reported a net loss of P120,855 and an inventory of
Shipment to Branch (24,000.00) P336,000.
Operating Expenses 10,000.00 3,000.00 16. How much is the true income (loss) of the branch?
a. P231,000 c. P351,855
Composition of branch From
inventory from H. O. Outsider b. P110,145 d. P147,945
Merchandise Jan 1 4,400.00 600.00 5,000.00
The allowance for over valuation account in the combined
financial statements of the home office and branch is a contra
Merchandise Dec 31 3,960.00 540.00 4,500.00
asset account as a deduction to the merchandise inventory
account.
Shipments to the branch are billed at 10% mark-up The total allowance for overvaluation account is closed
The home office inventory at December 31, 2018 was P20,000 against the income and expense summary account of the
10. The combined profit of the home office and branch home office.
for the year ended December 31, 2018? 17. Which combination describe the two statements?
a. P48,000 c. P53,140 a. True, True c. False, False
b. P53,500 d. P55,940 b. True, False, d. False, True
11. The true profit of the GMA branch for the year ended
December 31, 2018? Mahiyain Co. operates a branch in Ilocos Sur. Selected
a. P3,100 c. P5,500 accounts taken from the books of Mahiyain and its branch
b. P8,000 d. P8,300 show balances as of December 31, 2018 as follows:
Home Office Branch
May Kapal Co. operates a branch in Ilocos Sur. Selected
accounts taken from the books of Mahiyain and its branch
Merchandise Inventory Jan 1 12,000.00 8,000.00
show balances as of December 31, 2018 as follows:
Home Purchases 150,000.00 30,000.00
Office Branch Shipments from Home Office 93,750.00
Shipments to Branch 75,000.00
Merchandise Inventory Jan Branch Inventory Allowance 19,750.00
1 12,000.00 8,000.00 Sales 115,000.00 176,500.00
Merchandise Inventory Dec
Purchases 150,000.00 30,000.00 31 14,000.00 10,350.00
Shipments from Home The ending inventory of the branch includes items costing
Office 93,750.00 P4,350 which were acquired from suppliers other than the
Shipments to Branch 75,000.00 home office.
Branch Inventory 18. As far as the home office is concerned, the cost of
Allowance 19,750.00 sales of the Ilocos Sur branch was?
a. P97,120 c. P102,800
176,500.0 b. P121,400 d. P131,850
Sales 115,000.00 0
Merchandise Inventory Dec The JPIA company of Cavite City opened a branch in Tanza
31 14,000.00 10,350.00 on January 3, 2018 to expend the market of its product.
Merchandise shipped during 2018 to Tanza branch totaled
P104,000 which included a profit of 20% based on billed
price. At year end, the inventory at billed price was P12,500.
Other transactions affecting the branch are as follows: Sales
on account, P117,000, cash collections, P84,000 after allowing
cash discounts of P1,480; Expenses P20,000 including unpaid
of P1,300, cash remittance to home office, P65,000.
19. The true net income of the branch after adjustment
made by the H.O. was?
a. P24,300 c. P22,320
b. P21,020 d. P24,320
The Eastwood head office opened its Magallanes branch on
August 1. Merchandise shipments to the branch during the
month, billed at 125% of cost, is P1,680,000. Branch returned
damaged merchandise worth P189,000. On August 30, the
branch reported a net loss of P120,855 and an inventory of
P336,000.
20. How much is the true income (loss) of the branch?
a. P231,000 c. P351,855
b. P110,145 d. P147,945
