ASTATIC UNSTABLE Co. is currently preparing its combined financial statements.

At December 31, 20x1, the home office

shows a ₱728,000 balance in its “Investment in branch” account. The following information has been gathered during the
reconciliation process:
a. A credit memo sent by the home office to the branch amounting to ₱48,000 was not recorded by the branch.
b. A debit memo sent by the home office to the branch amounting to ₱36,000 was not recorded by the branch.
c. A credit memo sent by the branch to the home office amounting to ₱80,000 was recorded by the home office twice.
d. A debit memo sent by the branch to the home office amounting to ₱120,000 was recorded by the home office as
₱12,000.
e. The branch sent by mistake a credit memo amounting to ₱28,000 to the home office. The home office did not record
it.
1. How much is the unadjusted balance of the “Home office” account?

ABET ENCOURAGE Co. has several branches. On December 31, 20x1, the “Home office” account maintained by Alpha
Branch shows a balance of ₱580,000. The following information was determined:
a. The home office charged Alpha Branch for a ₱60,000 shipment which was actually sent to Beta Branch and retained
by the latter. Alpha Branch was not notified of the intended shipment.
b. The home office charged Charlie Branch for a ₱64,000 shipment which was actually sent to Alpha Branch. Alpha
Branch retained the shipment.
c. The home office erroneously recorded a remittance for ₱20,000 from its Delta Branch as coming from Alpha Branch.
d. Utilities expense of ₱16,000 that is allocable to Echo Branch was recorded by the home office in Alpha Branch’s
account. Alpha Branch has inappropriately recorded the related debit memo from the home office.
2. How much is the unadjusted balance of the “Investment in Alpha Branch” account in the home office books?

The following information was taken from the books of the home office and its branch. Shipments to branch are billed at
120% above cost.
Home office Branch
Dr. (Cr.) Dr. (Cr.)
Cash 4,400,000 264,000
Accounts receivable 720,000 400,000
Inventory, beg. 1,200,000 -
Shipments from home office 1,824,000
Purchases 4,800,000 160,000
Freight-in 128,000 72,000
Shipments to branch (1,520,000)
Investment in branch 2,400,000
Allowance for markup (304,000)
Equipment 2,880,000 1,600,000
Accumulated depreciation - equipment (288,000) (160,000)
Accounts payable (288,000) (160,000)
Share capital (8,000,000)
Retained earnings - beg. (608,000)
Home office (2,400,000)
Sales (6,400,000) (2,000,000)
Operating expenses 880,000 400,000
Totals - -

Inventory, end.
- From outside purchases 1,840,000 40,000
- From home office 960,000

3. How much is the combined profit?

ABC Co. decided to open a branch in Manila. Shipments of merchandise to the branch totaled ₱54,000 which included a
20% mark-up on cost. All accounting records are to be kept at the home office. The branch submitted the following report
summarizing its operations for the period ended December 31, 20x1.
Sales on account 74,000
Sales on cash basis 22,000
Collection of account 60,000
Expenses paid 38,000
Expenses unpaid 12,000
Purchase of merchandise for cash 26,000
Inventory on hand, Dec. 31; 80% from home office 30,000
Remittance to home office 55,000
4. How much is the branch inventory at cost?
5. How much is the profit (loss) of the branch as far as the home office is concerned?

ABC Co. operates a branch in Davao. There are shipments in transit from home office to the branch. The home office ships
merchandise to the branch at 125% of cost in year 20x1. Profit and loss data for the home office and branch for 20x1 follows:
Home Office Branch
Sales 250,000 75,000
Purchase 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, Jan. 1, 20x1:
Home Office, acquired from outsiders, at cost 80,000
Branch: Acquired from outsiders at cost 7,500
Acquired from home office at billing price
which averaged 20% above cost 24,000
Inventories, Dec. 31, 20x1:
Home Office, acquired from outsiders at cost 55,000
Branch: Acquired from outsiders at cost 5,500
Acquired from Home Office, in 20x1, at billed
price (physical count) 21,000

6. How much is the amount of merchandise in transit at billed price?

7. How much is the combined cost of goods sold?

Shipments received from the home office are billed at 120% above cost. During the year, the branch received shipments
billed at ₱480,000 and returned damaged goods with billed price of ₱72,000. The branch has an ending inventory of ₱120,000,
at billed price. The branch reported loss of ₱40,000 in its individual financial statements.
8. How much is the balance of the “allowance for markup” account before year-end adjustments?
9. How much is the true profit of the branch to be taken up in the home office books?

The home office bills shipments of merchandise to its branch at a markup of 20% on the billed price. At the beginning of
the period, the “Allowance for markup” account has a credit balance of ₱16,000. During the period, the home office made
shipments of goods worth ₱960,000 at cost. The branch reported an ending inventory of ₱480,000 at billed price.

10. How much is the realized markup?