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HOME OFFICE

AND BRANCHES
Suggested Solutions
DE LEON/ DE LEON/ DE LEON
STRAIGHT PROBLEMS
Problem 1. Branch was billed at cost by Home Office
1.1 JEs: HOME OFFICE BOOKS BRANCH OFFICE BOOKS

1. Branch 17,920 Cash 17,920


Cash 17,920 Home Office 17,920

2. Branch 38,400 Shipment from HO 38,400


Shipment to Branch 38,400 Home Office 38,400

3. Fixed Asset-Branch 7,680 Home Office 7,680


Branch 7,680 Cash 7,680

4. No entry. Purchases 27,520


A/P 27,520

5. No entry Cash 22,400


A/R 54,400
Sales 76,800
6. No entry
Cash 28,160
A/R 28,160
STRAIGHT PROBLEMS
1.1 JEs: HOME OFFICE BOOKS BRANCH OFFICE BOOKS
7. No entry
A/P 17,920
Cash 17,920
8. No entry
SE 9,600
GAE 7,680
Cash 17,280
9. Branch 1,280
Insurance expense 1.280
Home Office 1,280
Insurance expense 1,280
Depreciation exp 640
10. Branch 640
Home Office 640
Accum Depn 640
Home Office 6,400
11. Cash 6,400
Cash 6,400
Branch 6,400
STRAIGHT PROBLEMS
HOME OFFICE BOOKS BRANCH OFFICE BOOKS

1.3 Adjusting Entries Adjusting Entries - (Not Applicable)

Branch 12,800
BIS (RBNI) 12,800
1.2 Closing Entries
Sales 76,800
MI, end 21,120
Sh from HO 38,400
Purchases 27,520
SE 9,600
GAE 7,680
Insurance exp 1,280
Depreciation exp 640
Income Summary 12,800

Income Summary 25,600


Home Office 25,600
STRAIGHT PROBLEMS
Problem 2. Branch was billed at more than cost by Home Office.
2.1 JEs HOME OFFICE BOOKS BRANCH OFFICE BOOKS

1. Branch 36,000 Cash 36,000


Cash 36,000 Home Office 36,000

2. Branch 200,000 Sh from HO 200,000


Sh to Branch 160,000 Home Office 200,000
AFOVOBI 40,000

3. No entry Purchases 120,000


A/P 120,000

4. No entry A/R 320,000


Sales 320,000

5. Branch 8,000 Advertising exp 8,000


Advertising exp 8,000 Home Office 8,000
STRAIGHT PROBLEMS
2.1 JEs HOME OFFICE BOOKS BRANCH OFFICE BOOKS

6 . No entry Cash 180,000


A/R 180,000

7 . No entry Operating exp 70,000


A/P 70,000

Home Office 56,000


8. Cash 56,000
Cash 56,000
Branch 56,000
HOME OFFICE BOOKS BRANCH OFFICE BOOKS
Adjusting entries (Not applicable)
2.3 Adjusting entries
2.2 Closing Entries
Branch 50,000
Sales 320,000
BIS (RBNI) 50,000 MI, end 128,000
Sh from HO 200,000
AFOVOBI 24,000
Purchases 120,000
BIS (R/A) 24,000 Advertising exp 8,000
Operating exp 70,000
Income Summary 50,000
Inventory BP Cost Mark-up
MI, beg (HO) - - - I/S (RBNI) 50,000
Home Office 50,000
(OV) - - -
Shpmnt (HO) 200,000 160,000 40,000
Purchases 120,000 120,000 -
TGAS 320,000 280,000 40,000
MI, end (HO) (80,000) (64,000) (16,000)
(OV) (48,000) (48,000) -
COGS 192,000 168,000 24,000
STRAIGHT PROBLEMS
Problem 3. Accounting Procedures at Year-end
3.1 Basic reconciliation for reciprocal balances
HOME OFFICE BOOKS BRANCH OFFICE BOOKS

Cash 32,000 Sh from HO 19,200


Branch 32,000 Home Office 19,200

3.2 Analysis of Branch Merchandise Balances

Transfers Transfers
above Cost @ cost Mark-up
BI: from OV 64,000 64,000 -
HO 25,600 20,480 5,120
Add: Purchases from OV 153,600 153,600 -
Shipments from HO 134,400 107,520 26,880
Total goods available 377,600 345,600 32,000
EI: from OV (25,600) (25,600) -
HO (57,600) (46,080) (11,520)
COGS 294,400 273,920 20,480
STRAIGHT PROBLEMS
3.3 Working Paper Elimination Entries (WPEE)

WPEE #1 WPEE #3

Home Office 166,400 DP 26,880


Branch 166,400 Sh to Branch 107,520
Sh from HO 134,400
WPEE #2
DP 5,120 WPEE #4
Branch BI 5,120 Branch EI (IS) 11,520
Branch EI (BS) 11,520

3.4 Adjusting Entries to take-up HO share in net income of Branch (Equity Method)
STRAIGHT PROBLEMS
3.5 Closing Entries in Individual Books of Home Office and Branch Office
BRANCH OFFICE BOOKS

Sales 409,600
MI, end 83,200
IS (RBNI) 51,200
MI, beg 89,600
Purchases 153,600
Sh from HO 134,400
OE 64,000

IS (RBNI) 51,200
Home Office 51,200
STRAIGHT PROBLEMS
3.3 Working Paper Elimination Entries (WPEE)

WPEE #1 WPEE #3

Home Office 166,400 DP 26,880


Branch 166,400 Sh to Branch 107,520
Sh from HO 134,400
WPEE #2
DP 5,120 WPEE #4
Branch BI 5,120 Branch EI (IS) 11,520
Branch EI (BS) 11,520

3.4 Adjusting Entries to take-up HO share in NI of Branch(Equity Method)

HO Books: Branch 51,200


BIS (RBNI) 51,200

Deferred Profit 20,480


BIS (Realized DP) 20,480
STRAIGHT PROBLEMS
3.5 Closing
HOMEEntries in BOOKS
OFFICE Individual Books of Home Office and Branch Office
BRANCH OFFICE BOOKS
BIS 71,680
IS (TBNI) 71,680 Sales 409,600
MI, end 83,200
Sales 1,228,800 IS (RBNI) 51,200
MI, end 230,400 MI, beg 89,600
Sh to Branch 107,520 Purchases 153,600
IS (HONI) 30,720 Sh from HO 134,400
MI, beg 294,400 OE 64,000
Purchases 1,024,000
IS (RBNI) 51,200
OE 217,600 Home Office 51,200

IS (CNI) 102,400
Retained Earnings 102,400
STRAIGHT PROBLEMS
3.6 Income Statements for HO, Branch, and Combined
HO BO
HO BO 1,638,400
Sales 1,228,800 409,600
MI, beg 294,400 89,600
Purchases 1,024,000 153,600 378,880
Shipments ( 107,520) 134,400 1,177,600
MI, end ( 230,400) (83,200) -
Cost of sales 980,480 294,400 (302,080)
Gross Profit 248,320 115,200 1,254,400
OE (217,600) ( 64,000) 384,000
Net Income 30,720 51,200 (281,600)
102,400
BO
STRAIGHT PROBLEMS
12,800
3.7 Balance Sheets for HO, Branch, and Combined
HO 64,000 HO BO
Cash 76,800 83,200 89,600
A/R 102,400 166,400
MI, end 230,400 115,200 302,080
Fixed Asset 1,113,600 1,228,800
Branch 217,600
DP ( 11,520) 206,080 - -
Totals 1,729,280 275,200 1,786,880

A/P 282,880 57,600 340,480


LTD 512,000 512,000
Capital Stock 384,000 - 384,000
Retained Earnings 550,400 550,400
Home Office - -
-Totals 1,729,280 - 1,786,880

217,600
275,200
STRAIGHT PROBLEMSV
Problem 4. Reconciliation of reciprocal balances.

HO Books Branch Books


Branch A/C HO Account
UBs 240,000 235,040
(1) 8,000
(2) 3,200
(3) 16,000 16,000
(4) 1,440
(5) (1,600)

ABs 259,040 259,040


STRAIGHT PROBLEMS
Problem 5. Reconciliation, comprehensive illustration.

HO Books Branch Books HO Books Branch Books


Branch A/C HO Account Branch A/C HO Account

ABs, 1/1 291,000 291,000 UBs, 12/31 730,920 684,200

Transactions Adjustments
(a) TD (254,000) (284,400) (a) (30,400)
(b) TD 752,000 681,600 (b) 70,400
© TD 24,000 © 24,000
(d) TD (46,080) (d) (46,080)
(e) Error (16,000) (e) 16,000
(f) Error 16,000 (f) (16,000)
(g) NRI (20,000) ( 20,000) (g) -

UBs 730,920 684,200 ABs 716,520 716,520


STRAIGHT PROBLEMS
Problem 6.0 Additional Year-end Illustrations

6.1

Total shipment @ billed price (360,000 x 125%) P450,000


Amount recorded in the branch books 420,000
Shipments in transit @ billed price P 30,000
Divide by 125%
Shipments in transit @ cost P 24,000
STRAIGHT PROBLEMS
BP Cost DP
Beg Inv
OV 27,000 27,000 -
HO 45,000 36,000 9,000
Purchases 450,000 450,000 -
Shipments 450,000 360,000 90,000
TGAS 972,000 873,000 99,000
End Inv
OV (24,000) (24,000) -
HO (114,000) (91,200) (22,800)
COGS 834,000 757,800 76,200

BI: 72,000- 45,000= 27,000

EI: 108,000 + 30,000= 138,000


138,000 - 24,000= 114,000
STRAIGHT PROBLEMS

6.2
Overstatement of branch cost of sales:
AFOVOBI ( before adjustment for realized allowance) P 99,000
Less required allowance on BEI from HO (114,000/125%)x25% 22,800

Realized allowance arising from branch sales to outsiders P 76,200


STRAIGHT PROBLEMS
HO: Branch
Sales 1,800,000 Sales 1,080,000
COGS: BI 45,000 COGS: BI 72,000
Purch 1,350,000 Purch 450,000
Shpmnt (360,000) Shpmnt 450,000
EI (225,000) (810,000) EI (138,000) (834,000)
Gross Profit 990,000 Gross Profit 246,000
OPEX (435,000) OPEX (165,000)
HONI 555,000 RBNI 81,000

HONI 555,000
RBNI 81,000
Realized Allowance 76,200
Combined NI 712,200
STRAIGHT PROBLEMS
Branch
Sales 1,080,000
COGS: BI 63,000
Purch 450,000
Shpmnt 360,000
EI (115,200) (757,800)
Gross Profit 322,200
OPEX (165,000)
TBNI 157,200

HONI 555,000
TBNI 157,200
Combined NI 712,200
STRAIGHT PROBLEMS

6.3

OR Prepare a Combined Income Statement

Sales (1,800,000 + 1,080,000) P 2,880,000


Cost of Sales: MI, beg (45,000+ 63,000) P 108,000
Purchases (1,350,000 + 450,000) 1,800,000
MI, end ( 225,000 + 115,200) ( 340,200) 1,567,800
Gross profit P 1,312,200
Operating expenses (435,000 + 165,000) 600,000
CNI P 712,200
STRAIGHT PROBLEMS
Problem 7. Inter-branch transfer of cash
Books of Branch A Books of Branch B Books of Home Office
HO 2,400 Cash 2,400 Branch B 2,400
Cash 2,400 HO 2,400 Branch A 2,400

Problem
Books of8,Home
Inter-branch
Office transfer of merchandise.
Balgan Br 16,000 Books of Balgan Br Books of Flores Branch
Sh fr HO 16,000
Sh to balgan Br 16,000 F-in 500
Cash 500
HO 16,000

Flores Br 16,320 HO 16,500 Sh fr HO 16,000


F-in 500 F-in 560
Exc freight 180 Sh fr HO 16,000 Cash 240
Balgan Br 16,500 HO 16,320

Sh to Blgan Br 16,000
Sh to Flres Br 16,000
Suggested Solutions: Multiple Choice Items

1. B HO Corp BRA Branch


Branch A/C HO A/C
UBs 412,000 396,600
Adjustments:
(a) ( 600)
(b) ( 8,800)
© ( 3,200)
(d) 4,000
ABs 400,000 400,000
Suggested Solutions: Multiple Choice Items
2. D

Branch EI @ cost:
Total BV P 40,000
Less Branch EI from OV 5,280 x 100% = P 5,280
Branch EI from HO P 34,720 / 140% = 24,800
Amount P 30,080

True Branch NI
RBNI (P4,000 - P2,000) P 2,000
Plus Realized allowance:
[(224,000 - 34,720) / 140%] x 40% 54,080
TBNI P56,080
Suggested Solutions: Multiple Choice Items
3. A
BP Cost Mark-up
MI, beg (HO) 12,000 2,400

C/S (HO) 64,000 12,800

TGAS (H0) 15,200


COGS (HO) (14,560)

MI, end (HO) 3,840 3,200 640

Realized allowance (given) P14,560


Add allowance on Branch EI (3,840/120%) x 20% 640
Allowance before adjustment P15,200
Less allowance on current shipment (64,000 x 20%) 12,800
Allowance on Branch BI from HO P 2,400
Divide by 20%
Branch BI @ cost P 12,000
Suggested Solutions: Multiple Choice Items

4. A

HO: Branch
Sales 480,000 Sales 168,000
COGS: BI 96,000 COGS: BI 48,000
Purch 400,000 Shpmnt 124,800
Shpmnt (104,000) EI (38,400)
EI ( 78,400) (313,600) 134,400
Gross Profit 166,400 Divide by 120% (112,000)
OPEX (57,600) Gross Profit 56,000
HONI 108,800 OPEX (28,800)
TBNI 27,200
HONI 108,800
TBNI 27,200
Combined NI 136,000
Suggested Solutions: Multiple Choice Items

5. D

Sales P124,000
Less Cost of Sales
Inventory, beg P 18,400
Purchases 152,000
Shipment to Branch ( 80,000)
Inventory, end ( 24,000) 66,400
Gross Profit P 57,600
Sundry expenses 40,000
Net income P 17,600
Suggested Solutions: Multiple Choice Items
6. D

Sales P 112,000
Less Cost of sales
Inventory, beginning P 8,440
Shipment from HO (P80,000 + 4,400 + 200) 84,600
Inventory, end (P11,200 + 416 + 200) (11,816) 81,224
Gross profit P 30,776
Sundry expenses 20,000
Net income P 10,776
AFOVBI 8,800:
Shipments 80,000* 10%= 8000
Beg Inv 800

Beg Inv (including freight):


At billed price 9,240
Less: AFOVBI 800
At cost 8,440
End Inv: (8,320 + 4,000)/ 1.1 = 11,200
Suggested Solutions: Multiple Choice Items

7. D
Sales (424,000 + 126,000) P550,000
Less Cost of Sales
MI, beg (46,000+ 14,240) P 60,240
Purchases 328,000
MI, end (57,000 + 19,500) ( 76,500) 311,740
Gross profit P238,260
Less Operating expenses (152,800 + 40,600) 193,400
CNI P 44,860
Suggested Solutions: Multiple Choice Items

8. D
RBNI P 12,000
Plus Realized allowance 14,400
TBNI P 26,400

Sales 160,000
COS 72,000
Gross Profit 88,000
OPEX 76,000
Net Income 12,000

Realized Allowance: 72,000/ 1.25 * .25 = 14,400


Suggested Solutions: Multiple Choice Items

9. B
HO Books Branch Books
Branch A/C HO Account
UBs 20,440 21,880
Adjustments (1) (9,600)
(2) 12,000
(3) - -
(4) (2,880)
(5) ( 960)
(6) (2,880)
ABs 19,000 19,000
Suggested Solutions: Multiple Choice Items
10. B

Branch EI from HO @ cost (P6,000/20%) 30,000


Plus Branch EI from OV @ cost (48,000 – 36,000) 12,000
Branch EI @ cost 42,000

Branch
Sales 234,000
COGS:
Purch 36,000
Shpmnt 120,000
EI (42,000) (114,000)
Gross Profit 120,000
OPEX (57,600)
TBNI 62,400

Shipments: 144,000/1.20 = 120,000


On May 1, 2016, the Home Office in BACOLOD CITY establishe a sales agency in SILAY
CITY. The following assets are sent to the sales agency on that date:

Cash for the working fund to be operated under Imprest system P100,000
Merchandise Samples 240,000
During the month, the sales agency submits sales on account of P1,500,000 which was duly
approved by the home office. Cost of merchandise shipped to fill the orders from customers
obtained by the sales agency is P800,000. Home office disbursements chargeable to the
agency are as follows: Furniture and fixtures, P150,000; manager’s and salesmen’s
salaries, P88,000;and rent, P35,000. On May 31, the sales agency working fund is
replenished: paid vouchers submitted by the sales agency amounted to P42,000. Sales
agency samples are useful until December 31, 2016, which at that time, are believed to
have a salvage value of 15% of cost. Furniture are depreciated at 30% per annum.
1.What is the net profit of the SILAY CITY AGENCY for the month of May, 2016?
a. P327,250 c. P463,750
b. P315,250 d. P505,750

Sales 1,500,000
Less: Cost 800,000
GP 700,000
Less: Salaries and Wages 88,000
Rent Expense 35,000
Misc Expense 42,000
Supplies Expense(P240,000 x 85%) /8 25,500
Dep. Expense (P150,000 x 30%)/12 3,750 194,250
Net Profit 505,750