Home Office and Branch (Special Problems) - Ch9

CHAPTER 9
SUGGESTED ANSWERS
EXERCISES
Exercise 9 - 1
Books of Branch R
Home Office
Cash
15,000
15,000
Books of Branch S
Cash
Home Office
15,000
15,000
Books of the Home Office
Branch S
Branch R
15,000
15,000
Exercise 9 - 2
Books of Branch No. 1
Home Office
Shipments from Home Office
Freight-In
1,950
1,600
350
Books of Branch No. 5

Freight-In
Cash
Home Office
1,600
400
350
1,650
Books of the Home Office
Branch No. 5
Excess Freight
Branch No. 1
Exercise 9 3
1,650
300
1,950
Home Office Books
1.
no entry
2.
Branch
Shipments to Branch
Allowance for Markup in Branch Inventory
120,000/240,000 = 50%
3.
no entry
4.
Branch
Advertising Expense
Depreciation Expense
Utility Expense
360,000
240,000
120,000
134,000
40,000
70,000
24,000
AA1- Chapter 9 (2008 edition)

page 2
5.
no entry
Cash
Branch
6.
no entry
7.
Branch
Branch Income
8.
9.
360,000
360,000
58,000
58,000

Branch Income
P300,000 x 50/150 = P100,000
100,000
Branch Income
Income Summary
158,000
100,000
158,000
Branch Books
1.
2.
3.
4.
5.
6.
7.
Purchases
Accounts Payable
160,000

Home Office
360,000
Accounts Receivable
Sales
652,000
Advertising Expense
Utility Expense
Home Office
40,000
70,000
24,000
160,000
360,000
652,000
134,000
Cash
Accounts Receivable
470,000
Home Office
Cash
360,000
Merchandise Inventory
Sales
Purchases
Advertising Expense
Utility Expense
Income Summary
60,000
652,000
Income Summary
Home Office
470,000
360,000
160,000
360,000
40,000
70,000
24,000
58,000
58,000
58,000

page 3
Exercise 9 - 4
a. Merchandise inventory, beg.
Less Merchandise from home office at billed price
Markup on merchandise shipped to branch
Markup on current shipment (P96,000 P80,000)
Markup on beginning inventory
P150,000
P 36,000
16,000
P 20,000
x 120/20
Merchandise purchased from outsiders

b.
Allowance for Intercompany Inventory Profit

Branch Income
Bal. of allowance before adjustment
Adjusted balance of allowance acct
(P84,000 x 20/120)
Realized markup
120,000
P 30,000
22,000
22,000
P36,000
14,000
P22,000
Exercise 9 5
Home Office Books
1.
Branch
Shipments to Branch
150,000/300,000 = 50%
2.
no entry
3.

Branch Income
Realized markup on beginning inventory
P600,000 x 55% = P330,000 x 25/125*
Realized markup on current shipments
P450,000 x 1/3 = P150,000 x 50/150
Total
*(600,000 480,000) / 480,000 = 25%
450,000
300,000
150,000
116,000
116,000
P 66,000
50,000
P116,000
Branch Books
1.
2.
3.

Home Office
450,000
Accounts Receivable
Sales
P590,000 + P280,000 = P870,000
870,000
450,000
870,000
no entry
Exercise 9 6
1.
Branch
Cash
Shipments to Branch
820,000
80,000
240,000

page 4
Land
Allowance on Transfer of Land
120,000/240,000 = 50%
2.
3.
4.
5.
6.
300,000
120,000
80,000
Branch
Shipments to Branch
160,000/400,000 = 40%
560,000
Branch
Branch Income
130,000

Branch Income
Realized markup on 1st inventory transfer
Realized markup on 2nd inventory transfer
(P640,000 P360,000) x 40/140
Total
200,000
400,000
160,000
130,000
200,000
P120,000
80,000
P200,000
Allowance on Transfer of Land

Branch Income
80,000
80,000
Branch Income
Income Summary
410,000
410,000
Exercise 9 - 7
Required balance of allowance (markup on branch ending inventory)
P9,600 x 20/120
Adjustment for realized markup
Balance of allowance before adjustment
Allowance on current shipment (P160,000 x 20%)
Allowance on branch beginning inventory
Markup rate
Branch beginning inventory, at cost
P 1,600
36,400
P38,000
32,000
P 6,000
20%
P30,000
Exercise 9 - 8
a. Merchandise available for sale at billed price (P16,200 + P20,250)
Merchandise available for sale at cost (P36,450/135%)
Unrealized intercompany inventory profit balance before adjustment
b.
Unrealized Intercompany Inventory Profit

Branch Income
Balance before adjustment
Adjusted balance (P18,900 x 35/135)
Realized markup
P36,450
27,000
P 9,450
4,550
4,550
P 9,450
4,900
P 4,550

page 5
c.
Home Office Books

Shipments to Branch
Unrealized Intercompany Inventory Profit
Branch
400
140
540
Branch Books
Home Office
540
540
Exercise 9 9
1. P20,000 25/125 = P100,000
2.

Branch Income
P100,000 + P350,000 P80,000 = P370,000 x 25/125 = P74,000
Exercise 9 - 10
Separate cost of goods sold of the home office:
Inventory, beginning
Purchases
Shipments to branch
Cost of goods available for sale
Less Inventory, end
Separate cost of goods sold of the branch:
From outside purchases
From home office (P36,000 / 120%)
Total
Purchases
Shipments from home office (P720,000 / 120%)
Less Inventory, end:
From outside purchases
From home office (P42,000 / 120%)
Combined cost of goods sold
Exercise 9 11
1.
Shipments from home office
Shipments to branch
Markup
74,000
74,000
P 252,000
2,800,000
( 600,000)
P2,452,000
240,000
P2,212,000
12,000
30,000
P 42,000
96,000
600,000
P 738,000
P10,000
35,000
Total
P450,000
375,000
P 75,000
45,000
Resold
P360,000
300,000*
P 60,000
693,000
P2,905,000
On Hand
P90,000
75,000**
P15,000
* 75,000 / 375,000 = 20%

** 90,000 / 120% = P75,000
2.
Cost of Goods Sold

Inventory
P60,000 + P450,000 P90,000 = P420,000
420,000
420,000

page 6
3.
Billed Price
P 60,000
450,000
P510,000
90,000
P420,000
Shipments
Total
Inventory, end
Cost of goods sold
Cost
P 50,000
375,000
P425,000
75,000
P350,000
Exercise 9 - 12
a. Merchandise Inventory, January 1
Add Shipments from Home Office
Cost of Goods Available for Sale
Cost of Goods Sold
Sales, net of Sales Returns (P15,000 - P2,000)
Sales rate
Merchandise destroyed by fire at billed price
Markup
P 10,000
75,000
P 85,000
15,000
P 70,000
P26,400
20,000
P46,400
P13,000
125%
Merchandise destroyed by fire at cost

b.
Home Office Books

Branch Loss from Fire
Branch
Branch Books
Home Office
Exercise 9 13
1. Branch Income
Cost of Goods Sold P230,000 x 15/115
Branch
2.
3.
10,400
P36,000
120%
P30,000
30,000
6,000
36,000
36,000
36,000
50,000
30,000
20,000
Home Office
Branch
520,000
520,000

Inventory
9,000
9,000
PROBLEMS
Problem 9 1
Billed Price
Beginning inventory:
Acquired from vendors
Acquired from home office
Purchases from vendors
Shipments from Home Office P180,000 + P30,000
Total inventory available for sale
Less Ending inventory:
Acquired from vendors
Acquired from home office P60,000 + P30,000
Cost of goods sold
Cost
Markup
P100,000
40,000
240,000
210,000
P590,000
P100,000
32,000
240,000
168,000
P540,000
P 8,000
42,000
P50,000
40,000
90,000
P460,000
40,000
72,000
P428,000
18,000
P32,000

page 7
Problem 9 2
Home Office Books
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
Dagupan Branch
Cash
10,000
Dagupan Branch
Baguio Branch
Shipments to Branch
25,000
40,000
Furniture and Fixtures

Cash
17,500
10,000
65,000
17,500
Expenses
Dagupan Branch
800
800
Baguio Branch
Sales Discounts
Accounts Receivable
29,400
600
Baguio Branch
Dagupan Branch
15,000
Shipments to Branch
Dagupan Branch
2,500
Dagupan Branch
Baguio Branch
1,800
30,000
15,000
2,500
1,800
Dagupan Branch
Shipments to Branch
Cash
20,100
Baguio Branch
Excess Freight
Dagupan Branch
20,110
35
20,000
100
20,145
Dagupan Branch Books
a.
b.
Cash
Home Office
10,000

Home Office
25,000
c.
no entry
d.
Home Office
Cash
e.
no entry
10,000
25,000
800
800

page 8
f.
g.
h.
i.
j.
Home Office
Cash
15,000
15,000
Home Office
2,500
Expenses
Home Office
1,800
2,500
1,800

Freight-In
Home Office
20,000
100
Home Office
Freight-In
Cash
20,145
20,100
20,000
100
45
Baguio Branch Books
a.
no entry
b.

Home Office
40,000
40,000
c.
no entry
d.
no entry
e.
Cash
Home Office
29,400
Cash
Home Office
15,000
f.
g.
no entry
h.
Home Office
Cash
i.
no entry
j.

Freight-In
Home Office
29,400
15,000
1,800
1,800
20,000
110
20,110
Problem 9 3
Requirement 1
Home Office Books
1.
Baguio Branch
Cash
20,000
20,000

page 9
2.
3.
4.
Baguio Branch
Shipments to Branch
259,000
Cash
Baguio Branch
245,000
185,000
74,000
245,000
Baguio Branch
Cash
7,000
7,000
5 7 - no entry
Baguio Branch Books
1.
2.
3.
4.
5.
6.
7.
Cash
Home Office
18,000
18,000

Home Office
257,600
Home Office
Cash
247,400
257,600
247,400
Accounts Receivable
Home Office
2,400
Expenses
Home Office
7,000
Cash
Accounts Receivable
Sales
Expenses
Cash
Merchandise Inventory, end P30,100 + P1,400
Sales
Income Summary
Merchandise Inventory, beginning P257,600 + P1,400
Expenses
Income Summary
Home Office
Requirement 2
Baguio Branch
Branch Income
Branch Income
(P17,500 + P259,000 P31,500) x 40/140
2,400
7,000
247,400
40,600
288,000
21,000
21,000
31,500
288,000
15,000
17,500
259,000
28,000
15,000
15,000
15,000
15,000
70,000
70,000

page 10
Branch Income
Income Summary
85,000
85,000
Requirement 3
Home Office
1,400
Cash
Home Office
2,000
1,400
2,000
Problem 9 - 4
Requirement 1
Triple D Bookstore
Statement of Recognized Income and Expenses - Quezon City Branch
For the Year Ended December 31, 2008
Sales
Cost of Goods Sold:
Merchandise Inventory, beginning
Cost of Goods Available for Sale
Less Merchandise Inventory, end
Gross Profit
Operating Expenses:
Advertising and Promotion
Depreciation
Uncollectible Accounts Expense
Others
Net income
P192,690
P 31,500
128,000
P159,500
22,750
P 6,400
2,400
1,250
36,600
Requirement 2
Branch
Branch Income
136,750
P 55,940
46,680
P 9,260
9,260
9,260

Branch Income
P136,750 x 25/125
27,350
Branch Income
Income Summary
36,610
27,350
36,610
Problem 9 - 5
Branch Books
a.
Sales
Merchandise Inventory, end
Income Summary
Selling Expenses
Administrative Expenses
78,000
12,000
10,000
10,000
80,000
4,000
6,000

page 11
b.
a.
b.
c.
d.
e.
f.
g.
Home Office
Income Summary
10,000
10,000
Home Office Books

Sales
Shipments to Branch
Purchases
Selling Expenses
Administrative Expenses
Income Summary
310,000
64,000
30,000
25,000
300,000
20,000
30,000
29,000
Branch Income
Branch
10,000
Allowance for Overvaluation in Branch Inventory

Branch Income
P18,000 - (P12,000 x 25/125) = P15,600
15,600
10,000
15,600
Branch Income
Income Summary
5,600
5,600
Income Tax
Income Tax Payable
12,110
Income Summary
Income Tax
12,110
Income Summary
Retained Earnings
22,490
12,110
12,110
22,490
Problem 9 - 6
Requirement 1
Triple F Products Inc. - Branch
Trial Balance
December 31, 2008
Cash
Accounts Receivable
Accounts Payable
Home Office
Sales
Cost of Sales
Operating Expenses
Debit
12,800
48,160
27,280
Credit
2,040
68,900
256,000
191,620
47,080
326,940
_______
326,940

page 12
Requirement 2
Home Office Books
a.
b.
c.
d.
e.
f.
g.
a.
b.
Sales
Income Summary
Cost of Sales
Operating Expenses
640,600
41,360
452,840
146,400
Branch
Branch Income
17,300
Allowance for Overvaluation of Branch Inventory

Branch Income
P191,620 x 10/110
P21,100 (P202,400 + P29,700 P21,100) = 10%
17,420
Branch Income
Income Summary
34,720
Income Tax
Income Tax Payable
26,628
Income Summary
Income Tax
26,628
Income Summary
Retained Earnings
76,080
Branch Books
Merchandise Inventory P202,400 P189,200
Home Office
Sales
Income Summary
Cost of Sales
Operating Expenses
c.
Income Summary
Home Office
Requirement 3
17,300
17,420
34,720
26,628
26,628
76,080
13,200
13,200
256,000
17,300
191,620
47,080
17,300
17,300
Combined net income (P41,360 + P34,720 P26,628)

Combined Merchandise Inventory:
Home Office
Branch [ P27,280 + P13,200) 110%
P49,452
P156,640
36,800
P193,440

page 13
Problem 9 - 7
Triple G Company
Combined Statement of Recognized Income and Expenses
for Home Office and Branch
Sales
Cost of goods sold:
Merchandise inventory, beginning
Purchases
Less Merchandise inventory, end
Gross profit
Operating expenses
Net income before Income Tax
Income Tax
Net Income
P325,000
P107,500
215,000
P322,500
81,300
241,200
P 83,800
50,000
P 33,800
11,830
P 21,970
Inventory:
Beginning
Ending
Home Office
P 80,000
Branch
P7,500 + (P24,000/120%)
27,500
P5,500 + (P26,000/125%)
Total
P107,500
** P37,500 P30,000 = P7,500/ P30,000 = 25%
Requirement 2
Davao Branch Books
a. Sales
75,000
31,500
Income Summary
Purchases
Expenses
b.
Income Summary
Home Office
Requirement 3
P55,000
26,300
P81,300
12,500
37,500
15,000
10,000
31,500
12,500
12,500
Home Office Books
a.
b.
Davao Branch
Branch Income
Branch Income
Markup on branch beginning inventory
(P24,000 x 20/120)
Markup on shipments
Allowance balance before adjustments
Markup on branch ending inventory
(P26,000 x 25/125)
Realized markup
12,500
12,500
6,300
6,300
P 4,000
7,500
P11,500
5,200
P 6,300

page 14
c.
d.
e.
f.
g.
Sales
Shipments to Branch
Income Summary
Purchases
Expenses
250,000
30,000
55,000
15,000
200,000
40,000
80,000
Branch Income
Income Summary
18,800
Income Tax
Income Tax Payable
11,830
Income Summary
Income Tax
11,830
Income Summary
Retained Earnings
21,970
18,800
11,830
11,830
21,970
Problem 9 8
Requirement 2
a. Plant Assets
Branch
4,000
b.
Home Office
Accounts Receivable
2,000
Cash
Branch
5,000
Expenses
Home Office
1,000

Home Office
3,000
Retained Earnings
Inventory
P15,000 x 20/120
2,500
c.
d.
e.
f.
g.
h.
4,000
2,000
5,000
1,000
3,000
2,500
Home Office
Branch
11,000
Sales
48,000
11,000
48,000

page 15
Problem 9 8
Triple J Wholesale Company
Work Sheet for Combined Financial Statements
Adjustments and
Eliminations
Trial Balance
Home Office
Branch
Cash
36,000
8,000
Accounts Receivable
35,000
12,000
(b)
2,000
Inventory
70,000
15,000
(f)
2,500
Plant Assets, net
90,000
Branch
20,000
Debits
Debit
Credit
Income Statement
Debit
Credit
(c ) 5,000
Balance Sheet
Debit
Credit
49,000
45,000
82,500
74,500
(a) 4,000
74,500
94,000
(a)
4,000
(c ) 5,000
(g) 11,000
Purchases
290,000
24,000
314,000
45,000
(e)
3,000
44,000
16,000
(d)
1,000
61,000
(i) 36,400
36,400
585,000
120,000
Accounts Payable
36,000
13,500
49,500
Accrued Expenses
14,000
2,500
16,500
Expenses
Income Tax
(h) 48,000
Credits
Income Tax Payable
(i) 36,400
Home Office
9,000
Ordinary Share Capital
50,000
Retained Earnings
45,000
Sales
(b)
2,000
(d)
1,000
(g) 11,000
(e)
3,000
50,000
(f)
2,500
440,000
95,000
(h) 48,000
585,000
120,000
112,900
42,500
487,000
112,900
Net income
Inventory, beg:
Home Office
Branch P2,000 + P21,000/120%
36,400
P55,000
19,500
P74,500
Invent ory, end:

Home Office
Branch
493,900
561,500
67,600
561,500
561,500
P70,000
12,500
P82,50
262,500
67,600
262,500

page 16
Problem 9 9
Triple M Company
Adjustments and
Eliminations
Trial Balance
Debits
Cash
Inventory
Sundry Assets
Investment in Branch
Purchases
Shipment from
Office
Freight-in from
Office
Sundry Expenses
HO
17,000
Branch
200
23,000
200,000
11,550
48,450
a.
Debit
1,700
b.
1,800
e.
60,000
Credit
Debit
Credit
1,000
33,550
44,770
Debit
Credit
Combined
Balance Sheet
Debit
20,700
105,000
c.
5,000
Home
5,500
d.
250
42,000
24,300
532,000
195,000
35,000
3,500
Income Tax
44,770
248,450
f. 110,000
5,750
h. 15,460
15,460
66,300
d.
250
h. 15,460
38,750
15,460
200,000
200,000
Retained Earnings
Home Office Equity
31,000
Sales
Shipments to Branch
155,000
110,000
31,000
51,500
g. 58,300
b. 1,800
c. 5,000
140,000
295,000
f. 110,000
1,000
532,000
e.
195,000
1,000
193,510
193,510
229,300
44,770
229,300
184,530
229,300
Cost of Goods Sold

Net income
Merchandise inventory, end:

Home office
Branch [((P15,400 / 110%) + (P15,400 x 5%)] = P14,000 + P770
Total
Cred8t
190,000
Home
Allowance for Markup in

BI
Income Statement
a. 1,700
g. 58,300
190,000
Credits
Sundry Liabilities
Income Tax Payable
Cost of Goods Sold
184,530
266,290
295,000
28,710
295,000
295,000
P30,000
14,770
P44,770
313,920
28,710
313,920

page 17
Problem 9 10
Triple N Commercial
Working Paper for Combined Financial Statements for Home Office and Branch
Trial Balance
Debits
HO
Cash
Adjustments
Branch
50,100
1,260
350,000
135,660
HO
a.
5,320
b.
Adjusted
Trial Balance
Eliminations
Branch
HO
2,100
55,420
Branch
3,360
350,000
133,160
Debit
Credit
Branch
Income Statement
Home Office
Income Statement
Debit
Debit
Credit
Credit
Combined
Balance Sheet
Debit
Credit
58,780
Accounts Receivable (net)
c. ( 2,500)
483,160
Inventory Home office
64,400
64,400
64,400
70,000
Branch
32,340
Fixed Assets (net)
210,000
Branch Current
163,120
32,340
a.
2,940
29,400
32,200
102,200
210,000
210,000
Purchases
a. (5,320)
157,800
532,000
Shipments from
Office
Sundry Expenses
Home
532,000
294,000
119,980
c.
157,800
d. 14,000
83,440
Income Tax
1,489,600
546,700
Accounts Payable
30,500
10,500
Mortgage Payable
67,500
532,000
308,000
119,980
b.
28,000
280,000
83,440
f. 23,667
e. 10,976
23,667
10,976
23,667
24,576
1,513,267
571,276
30,500
10,500
119,980
83,440
10,976
23,667
Credits
41,000
67,500
67,500
Income Tax Payable
f. 23,667
e. 10,976
23,667
10,976
34,643
Home Office Current
144,200
b.
2,100
c. ( 2,500)
d. 14,000
392,000
157,800
434,000
c. 157,800
Sales
434,000
392,000
Shipments to Branch
308,000
308,000
b.
28,000
2,940
2,940
a.
2,940
600,000
600,000
46,660
46,660
392,000
434,000
280,000
Allowance
for
Overvaluation
600,000
Retained Earnings
46,660
1,489,600
546,700
23,667
24,576
1,513,267
571,276
188,740
740,047
188,740
403,816
424,200
784,000
854,140
789,803
Branch net income

20,384
20,384
Home Office net income
43,953
43,953
424,200
Inventory, end:
Home Office
Branch [(P21,420 + P14,000) / 110%]
Total
P 70,000
32,200
P102,200
424,200
784,000
784,000
854,140
854,140

page 18
MULTIPLE CHOICE
1.
2.
B
B
3. C
4. D
5. D
6. B
10
11
12
13
C
C
D
C
P13,200 + P350 = P13,550

P11,000 + P350 = P11,350
14
P12,000 x 20/120 = P2,000
15
Inventory, beginning (P165,000 / 125%)

Shipments (P110,000 / 125%)
Merchandise available for sale from home office at cost
Cost of merchandise sold from home at cost
Sales, net of returns and allowances
Less Sales from merchandise purchased from
outsiders (P7,500 x 120%)
Sales from merchandise from home office
Cost of sales at billed price
Billed price rate
Inventory destroyed by fire
7. D
8. D
P132,000
88,000
P220,000
P165,250
9,000
P156,250
125%
P125,000
125%
100,000
P120,000
16
Balance of allowance before adjustment

Required balance of allowance (P1,170,000 x 20/120)
Realized markup
P370,000
195,000
P175,000
17
Sales
Cost of goods sold (P120,000 x 3/4 x 125%)
Gross profit
Operating expenses
Net income reported by the branch
P141,000
112.500
P 28,500
27,000
P 1,500
18
P50,400/120%
P42,000
19
P90,000 + P36,000 P2,520 P50,400/120% = P60,900
20
Net income (loss) reported by branch

Realized markup
(P90,000 + P36,000 P2,520 - P50,400 = P73,080) x 20/120
True net income of the branch
(P 7,800)
Net income reported by branch

Realized markup [(P3,960 + P17,600 P4,840) x 10/110]
P 4,800
1,520
21
12,180
P 4,380

page 19
Actual branch income
P 6,320
22
Branch ending inventory, at cost (P4,840 / 110%)

Home office ending inventory
Ending inventory to be reported in the combined balance sheet
P 4,400
11,200
P15,600
23
Net income reported by the branch

Realized markup[P280,000 - (P50,000 P6,600)] x 40/140
P 5,000
67,600
P 72,600
24
Branch inventory from home office (P43,400 /140%)

Branch inventory from outside purchases
Total cost of branch inventory, end
P31,000
6,600
P37,600
25
P60,000 - P7,500
P52,500
26
P60,000 - (P7,500 x 120/20)
P15,000
27
Sales
Cost of goods sold (P180,000 + P45,000 - P60,000)
Operating expenses
Realized markup [(P180,000 x 20/120) - P7,500
P 292,500
(165,000)
( 72,000)
22,500
P 78,000
28
Unadjusted balance of allowance account

Markup on 2008shipments from home office
(P390,000 P300,000)
Total merchandise inventory beg
Merchandise from outside purchases
29
Sales
Cost of goods sold
(P54,600 + P390,000 + P144,600 - P48,750)
Operating expenses
Realized markup [P99,900 - (P39,000 x 30/130)]
P99,900
90,000
P 9,900
x 130/30
P 42,900
54,600
P 11,700
P540,000
(540,450)
( 51,000)
90,900
P 39,450
30
P39,000 x 30/130 = P9,000
31
Sales (net of discount of P1,480)

Cost of goods sold (P104,000 - P12,500)
Operating expenses
P115,520
( 91,500)
( 20,000)
P 4,020
32

Realized markup (P91,500 x 25/125)
P 4,020
18,300
P 22,320

page 20
33
34
35
36
Sales
Cost of goods sold (P5,000 + P2,000 + P26,400 P4,500)
Operating expenses
Realized markup [P2,800 (P3,960 x 10/110)]
True profit of Cebu branch
P 37,400
( 28,900)
( 3,000)
2,440
P 7,940
Sales
Cost of goods sold
(P16,000 + P80,000 P24,000 P20,000)
Operating expenses
Net income of the home office
Net income of the branch
Combined net income of the home office and branch
P110,000
Sales
Cost of sales:
Purchases
Goods available for sale
Shipments to branch (P110,000/110%)
Goods available for own sale
Less Inventory, end
Gross profit
Expenses
Net income
P155,000
Sales
Cost of sales:
Inventory, beginning (P11,550 P1,000)
Shipments from HO, including freight-in
Goods available for sale
Less Inventory, end
[(P10,400 + P5,000)/110%] + P520 + P250
Gross profit
Expenses
True branch net income
( 52,000)
( 10,000)
P 48,000
7,940
P 55,940
P 23,000
190,000
P213,000
100,000
P113,000
30,000
83,000
P 72,000
52,000
P 20,000
P140,000
P 10,550
105,750
P116,300
14,770
101,530
P 38,470
28,400
P 10,470
37
(P10,400 + P5,000) x 10/110
P1,400
38
Unadjusted balance of allowance account

Markup on 2008 shipments (P200,000 x 25%)
P 57,500
50,000
P 7,500
x 125/25
P 37,500
Branch beginning inventory at billed price

page 21
39
Sales
Operating expenses
P400,000
(247,500)
(100,000)
P 52,500
40

Realized markup (P247,500 x 25/125)
P 52,500
49,500
P102,000
41
Beginning inventory
Purchases
Shipments from home office
Ending inventory
Cost of goods sold reported by branch
Realized markup [P19,750 - (P6,000 x 25/125)*
Cost of goods sold at cost
P 8,000
30,000
93,750
( 10,350)
P 121,400
( 18,550)
P 102,850
*P93,750 P75,000 = P18,750/P75,000 = 25%

42
The amount of the realized markup of P18,550
43
Adjusted net income

Reported net income
Realized markup
Cost of sales at cost
(P70,000 + P350,000 P84,000) P96,000
P156,000
60,000
P 96,000
P240,000
140%
44
P84,000 x 40/140
P24,000
45
72,500 (75,000 + 444,000 -84,000 72,500)
20%
46
P444,000 / 120%
P370,000
47
Sales
Operating expenses
Realized markup [P72,500 - (P84,000 x 20/120)]
Adjusted profit of the branch
P 600,000
(435,000)
(200,000)
58,500
P 23,500
48
P84,000 x 20/120 = P14,000
49
P84,000 P14,000 = P70,000
50
Home office inventory (P160,500 - P10,500)

Branch inventory (P108,000/120%)
Inventories reported in the combined balance sheet
P 150,000
90,000
P 240,000

page 22
Problem 9 8
Triple J Wholesale Company
Adjustments and
Eliminations
Trial Balance
Home Office
Branch
Cash
36,000
8,000
Accounts Receivable
35,000
12,000
(b)
2,000
Inventory
70,000
15,000
(f)
2,500
Plant Assets, net
90,000
Branch
20,000
Debits
Debit
Credit
Income Statement
Debit
Credit
(c ) 5,000
Balance Sheet
Debit
Credit
49,000
45,000
82,500
74,500
(a) 4,000
74,500
94,000
(a)
4,000
(c ) 5,000
(g) 11,000
Purchases
290,000
24,000
314,000
45,000
(e)
3,000
44,000
16,000
(d)
1,000
61,000
(i) 36,400
36,400
585,000
120,000
Accounts Payable
36,000
13,500
49,500
Accrued Expenses
14,000
2,500
16,500
Expenses
Income Tax
(h) 48,000
Credits
Income Tax Payable
(i) 36,400
Home Office
9,000
50,000
Retained Earnings
45,000
Sales
(b)
2,000
(d)
1,000
(g) 11,000
(e)
3,000
36,400
50,000
(f)
2,500
440,000
95,000
(h) 48,000
585,000
120,000
112,900
42,500
487,000
112,900
Net income
493,900
561,500
67,600
561,500
561,500
262,500
67,600
262,500

page 23
Problem 9 9
Triple M Company
Adjustments and
Eliminations
Trial Balance
Debits
Cash
Inventory
Sundry Assets
Investment in Branch
Purchases
Shipment from
Office
Freight-in from
Office
Sundry Expenses
HO
17,000
Branch
200
23,000
200,000
11,550
48,450
a.
Debit
1,700
b.
1,800
e.
60,000
Credit
Debit
Credit
1,000
33,550
44,770
190,000
Debit
Credit
Combined
Balance Sheet
Debit
20,700
c.
5,000
Home
5,500
d.
250
42,000
24,300
532,000
195,000
35,000
3,500
Income Tax
44,770
248,450
f. 110,000
5,750
h. 15,460
15,460
66,300
d.
250
h. 15,460
38,750
15,460
200,000
200,000
Retained Earnings
Home Office Equity
31,000
Sales
Shipments to Branch
155,000
110,000
31,000
51,500
g. 58,300
b. 1,800
c. 5,000
140,000
295,000
f. 110,000
1,000
532,000
e.
195,000
1,000
193,510
193,510
229,300
44,770
229,300
184,530
229,300
Cost of Goods Sold

Net income
Merchandise inventory, end:

Home office
Branch [((P15,400 / 110%) + (P15,400 x 5%)] = P14,000 + P770
Total
Cred8t
190,000
105,000
Allowance for Markup in

BI
Income Statement
a. 1,700
g. 58,300
Home
Credits
Sundry Liabilities
Income Tax Payable
Cost of Goods Sold
184,530
266,290
295,000
28,710
295,000
295,000
P30,000
14,770
P44,770
313,920
28,710
313,920

page 24

Home Office and Branch (Special Problems) - Ch9

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Home Office and Branch (Special Problems) - Ch9

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CHAPTER 9

Shipments from Home Office

AA1- Chapter 9 (2008 edition)

Allowance for Markup in Branch Inventory

Shipments from Home Office

AA1- Chapter 9 (2008 edition)

Merchandise purchased from outsiders

Allowance for Intercompany Inventory Profit

Allowance for Markup in Branch Inventory

Shipments from Home Office

AA1- Chapter 9 (2008 edition)

Allowance for Markup in Branch Inventory

Allowance on Transfer of Land

Unrealized Intercompany Inventory Profit

AA1- Chapter 9 (2008 edition)

Home Office Books

Allowance for Markup in Branch Inventory

* 75,000 / 375,000 = 20%

Cost of Goods Sold

AA1- Chapter 9 (2008 edition)

Merchandise destroyed by fire at cost

Home Office Books

Allowance for Markup in Branch Inventory

AA1- Chapter 9 (2008 edition)

Furniture and Fixtures

Shipments from Home Office

AA1- Chapter 9 (2008 edition)

Shipments from Home Office

Shipments from Home Office

Shipments from Home Office

AA1- Chapter 9 (2008 edition)

Shipments from Home Office

AA1- Chapter 9 (2008 edition)

Allowance for Markup in Branch Inventory

AA1- Chapter 9 (2008 edition)

Home Office Books

Allowance for Overvaluation in Branch Inventory

AA1- Chapter 9 (2008 edition)

Allowance for Overvaluation of Branch Inventory

Combined net income (P41,360 + P34,720 P26,628)

AA1- Chapter 9 (2008 edition)

AA1- Chapter 9 (2008 edition)

Shipments from Home Office

AA1- Chapter 9 (2008 edition)

Plant Assets, net

Shipments from Home Office

Income Tax Payable

Ordinary Share Capital

Invent ory, end:

AA1- Chapter 9 (2008 edition)

Cost of Goods Sold

Merchandise inventory, end:

Allowance for Markup in

Cost of Goods Sold

AA1- Chapter 9 (2008 edition)

Fixed Assets (net)

Home Office Current

Branch net income

Home Office net income

AA1- Chapter 9 (2008 edition)

P13,200 + P350 = P13,550

P12,000 x 20/120 = P2,000

Inventory, beginning (P165,000 / 125%)

Balance of allowance before adjustment