UM Tagum College

Arellano Street, Tagum City, 8100 Philippines

HOME OFFICE AND BRANCH ACCOUNTING

SALES AGENCY

1. Papa, Inc of Makati opens a sales agency in Bacolod City and a working fund of P50,000 is established on imprest basis.
The first payment from the fund is P2,000 for rent of the store supplies. What is the entry in the books of the home office to
record this transaction?
a. Rent Expense – Bacolod Agency 2,000
Cash 2,000
b. Bacolod Agency 2,000
Cash 2,000
c. Rent Expense – Bacolod Agency 2,000
Working Fund 2,000
d. No Entry

On February 14, 2012, Therese Company established a sales agency in Tagbilaran. Upon establishment
of the sales agency, the home office sent samples costing P8,000 and a working fund of P3,000 to be
maintained on the imprest basis. During the six months period, the sales agency reported to the home
office sales orders. These were billed at P70,000 of which of P40,000 was collected) the sales agency
paid expenses of P5,800 but was reimbursed by the home office.
On August 15, 2012,the sales agency samples were valued at P2,000. It was estimated that the gross
profit on goods shipped to fill sales order averaged 40% of cost.
2. The cost of sales of the sales agency for the six months period is
a. P42,000 c. P48,000
b. P44,000 d. P50,000
3. The net income of the sales agency for the six months period is
a. P16,200 c. P10,200
b. P14,200 d. P8,200

4. During May 1, 2016, the home office in Manila establishes a branch in Cebu to act as a sales
agency. The following assets are sent to the sales agency on that date.
Cash (for the working fund to be operated under the imprest system P 100,000
Samples from the merchandise stock 240,000

During May, the sales agency submits sales on account of P1,500,000 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 sales agency are as follows: Furniture and
fixtures, P150,000: manager’s and salesmen’s salaries, P 88,000: and rent for two months, P 70,000.
On May 1, the sales agency working fund is replenished; paid vouchers submitted by the sales agency
amounted to P 42,000. Sales agency samples are useful until December 31, 2016, which at this time,
are believed to have a salvage value of 15% of cost. Furniture and fixtures are depreciated at 30%
per annum.
What is the net profit of the sales agency for the month of May?
a. P505,750 c. P 327,250
b. P 470,750 d. P 292,250