A DEPARTMENT OF ACCOUNTING EDUCATION

1st Examination – ACCTG8

Mabini Street, Tagum 1ST
Term/1 Semester , SY 2018-2019 (June 29,2018)
ST

City
Test I-MULTIPLE CHOICE THEORY

1. The freight on shipments to the branch paid by the branch is recorded by the home office as
a. Credit to investment account c. Debit freight in
b. Credit freight in d. Not recorded

2. The net income reported by the branch in its separate income statement is different from the
branch net income reported by the home office in the combined income statement of the company.
In the absence of errors, the mainly difference is due to the
a. Presence of inventory acquired from outsiders in the branch’s beginning and ending
b. Understatement of total goods available for sale reported by the branch in its separate income
statement
c. Overstatement of cost of sales reported by the branch in its separate income with respect to
goods acquired from the home office
d. Overstatement of net income reported by the branch in its separate income statement.

3. Jayhawk Company has numerous branches in the state of Kansas. The home office purchases
merchandise and makes shipments to branches from a central warehouse at the request of branch
managers. Which of the following would be an improper accounting practice?
a. The Investment in Branch ledger account is debited in the accounting records of the home office
when merchandise is shipped to a branch, and the Shipments to Branch account is credited
(assume use of the periodic inventory system).
b. The home office debits Trade Accounts Receivable and credits Sales when merchandise is
shipped to a branch.
c. Cash received from a branch is credited to the Investment in Branch ledger account by the
home office.
d. Only the home office maintains a Common Stock ledger account and a Retained Earnings
account.

4. The Home Office ledger account in the accounting records of the Tahoe Branch had a credit balance
of $12,000 at the end of April, and the Investment in Branch account in the accounting records of
the home office had a debit balance of $15,000. The most likely reason for the discrepancy in the
two ledger account balances is:
a. Merchandise shipped by the home office to the branch had not been recorded by the branch.
b. The home office had not recorded the branch net income for April.
c. The branch had just collected home office trade accounts receivable in the amount of $3,000.
d. The branch had not yet recorded the home office net income for April.

5. Which of the following ledger accounts is displayed in the combined financial statements for a home
office and branch?
a. Shipments to Branch d. Allowance for Overvaluation of
b. Home Office Inventories
c. Dividends Declared

6. The Home Office ledger account in the accounting records of a branch is best described as:
a. A revenue account c. A deferred revenue account
b. An equity account d. None of the foregoing

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 7. The Western Branch of Kepwang Company reported a net income of P60,000 for the month of
January. The appropriate journal entry (explanation omitted) for the home office of Kepwang
Company is:
A. Income Summary 60,000
Income: Western Branch 60,000
B. Income: Western Branch 60,000
Income Summary 60,000
C. Investment in Western Branch 60,000
Income: Western Branch 60,000
D. Investment in Western Branch 60,000
Income Summary 60,000
8. A company transfers supplies costing P3,000 to a newly established agency in Angeles City.
The entry on the home office’s books to record the transfer is
a. Investment in Agency – Angeles Agency 3,000
Supplies on Hand 3,000
b. Supplies Expense 3,000
Supplies on Hand 3,000
c. Supplies Expense 3,000
Home Office 3,000
d. Supplies on Hand – Angeles Agency 3,000
Supplies on Hand 3,000
9. Which of the following statements is correct?
a. A sales agency normally accounts for its operations on its own set of books.
b. Branches normally maintain only minimum accounting records.
c. A sales agency generally operates with a greater degree of autonomy than does a branch.
d. A branch generally operates with a greater degree of autonomy than does a sales agency.

10. In accounting for branch transactions, it is improper for the home office to:
a. Credit cash received from a branch to the Investment in Branch ledger account.
b. Maintain Common Stock and Retained Earnings ledger accounts for only the home office.
c. Debit shipments of merchandise to the branch from the home office to the Investment in
Branch ledger account.
d. Credit shipments of merchandise to the branch to the Sales ledger account.

TEST II- MULTIPLE CHOICE PROBLEM

11. Rocco Corporation has two branches in which merchandise is transferred at cost plus 20% plus
freight charges. On November 30, 2010, Rocco shipped merchandise that cost P150,000 to its
Antipolo branch, and the P4,000 shipping charges were paid by Rocco. On December 15, 2010, the
Taytay branch encountered an inventory shortage, and the Antipolo branch shipped the
merchandise to the Taytay branch at a feight cost of P3,200 paid by Antipolo. Shipping charges
from the home office to the Taytay branch would have been P6,000. As a result of the inter-branch
inventory transfer, the total amount credited to the Home Office account by the Taytay branch.
a. P 152,800 c. P 184,000
b. P 186,000 d. P 182,800

12. The home office shipped merchandise costing P 47,100 to Branch A and paid for the freight charge
of P 7,500. Branch A was subsequently instructed to transfer the merchandise to Branch B wherein
Branch A paid P6,000 freight. If the shipment were made directly from Home office to Branch B,
the freight cost would have been P 11,250.
Which of the following is incorrect?
a. Upon receipt of merchandise by branch B from A, B credits home office account by P 58,350.
b. Upon receipt of merchandise by A to B , home office debits Investment in Branch A account
by P 58,350.
c. Upon receipt of merchandise by home office to A, home office debits by investment in Branch
A account by P 54,600.
d. Upon transfer of merchandise by A to B, A debits home office account by P 50,600.
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 13. TMOSSIY Inc. opened an agency in Marikina. The following are transactions fort July 2013. Samples
worth P 10,000, advertising materials of P 5,000 and checks for P 50,000 were sent to the agency.
Agency sales amounted to P 220,000 ( cost P 150,000). The collection for agency amounted to P
176,40 net of 2% discount. The agency’s working fund was replenished for the following expenses
incurred; rent for two months P 10,000; delivery expenses P 2,500 and miscellaneous expenses of P
2,000. Home office charges the following to the agency, after analysis of accounts recorded on the
books for the month of July; salaries and wages P 15,000 and commission which is 5% of sales.
The agency sample inventory at the end of the month was 25% of the quantity shipped. The
agency had used 20% of the advertising materials sent by the home office.
The agency net income for the month is:
e. P 17,400 g. P 23,650
f. P 22,400 h. P 28.650

14. The Red Inc. opened an agency in Makati in 2016. The following is a summary of the transactions
of the agency :
Sales orders sent to home office P 55,000
Sales ordered filled by the home office in 2016 46,500
Freight on shipments to agency 1,100
Collections net of 2% discount 39,690
Selling expenses paid from the agency working fund 2,820
Administrative expenses 5% of sales
Samples shipped to agency:
Cost P 3,000
Inventory, December 31,2016 1,100
The company maintains its gross margin on agency sales at 30% excluding freight cost on shipments to
agency:The agency’s net income must be:
a.P 6,100 b.P 6,390 c.P 4,995 d.P 1,100

ABC Co. established a branch in Lipa City, On December 31, 2009 the reciprocal accounts are balanced.
On December 31, 2010, the home office account has an unadjusted balance of P 100,000. The following
reconciling items are discovered by the home ABC Co:
a. Lipa branch collected the receivables of Ibaan Branch worth P 20,000 but failed to inform the
home office.
b. The home office paid Lipa’s payable worth P 10,000 but failed to inform the branch.
c. Inventory worth P 30,000 intended to be delivered to San Jose Branch was delivered to Lipa
branch which was retained by the latter.
d. Inventory worth P 40,000 intended to be delivered to Lipa Branch was delivered to Ibaan
branch which was retained by the latter.
e. The branch received a credit memo from the home office amounting to P 10,000 which was
credited twice by the branch.
f. The branch net loss amounting to P 20,000 was debited by the Home office to Investment in
Branch.
15. What is the adjusted balance of reciprocal account on December 31,2010?
a. P 80,000 c. P 110,000
b. P 90,000 d. P 120,000
16. Using the same data in 5, what is the unadjusted balance of the Investment in Branch (Lipa) on
December 31, 2010?
a. P 70,000 c. P 110,000
b. P 90,000 d. P 120,000

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Aling Taleng has three all-night grocery stores located in Manila. Each store has branch manager with
authority to accept inventory items at home office cost plus mark-up or to purchase from outside
wholesalers, at his discretion. Inventories at December 31, 2017 were as follows:

Home office P 1,109,000 cost

Intramuros branch 264,000 transfer price
Malate branch 297,000 transfer price
Tondo branch 462,000 transfer price
Partial trial balance information for Aling Taleng and its branches at December 31, 2017 includes the
following accounts and amounts:
Home Office Intramuros Malate Tondo branch
branch branch
Inventories, January 1, 2017 P 609,0000 P 374,000 P 330,000 P 187,000
Purchases 10,000,000
Shipments from home office 3,300,000 2,750,000 4,400,000
Unrealized profit in branch 1,031,000
inventories
Shipments to intramuros branch 3,000,000
Shipments to malate branch 2,500,000
Shipments to Tondo branch 4,000,000

17. Determine the total realized profit in branch inventories for 2017
a. P 938,000 c. P 1,031,000
b. P 93,000 d. P 838,000

18. Determine the correct value of Aling Taleng inventory at December 31, 2017
a. P 930,000 c. P 1,938,000
b. P 2,039,000 d. P 1,419,000

MOSPHERE ENTERPRISES bills its branch for merchandise shipments at 25% above cost. The following are
some of the account balances appearing on the books of the HOME OFFICE and its branch as of December 31,
2014.

HO Books BO Books
Inventory, January 1 P36,000 P63,000
Shipments from Home Office 360,000
Purchases 1,080,000 360,000
Shipments to Branch 288,000
Allowance for overvaluation 84,600
Sales 1,440,000 864,000
Operating expenses 348,000 132,000
Inventory, December 31 180,000 110,400
There were no purchases from outside vendors in the year 2013; the ending inventory in the branch includes
goods from outside purchases of P19,200.
19. Calculate the overstatement of the branch cost of sales from the standpoint of the home office.
A. P60,060 C. P66,360
B. P63,660 D. P66,630

20. Calculate the combined net income for the year-ended December 31, 2014.
A. P569,760 C. P596,760
B. P569,960 D. P 657,960

= End of the Examination =

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