SET A: HOME OFFICE AND BRANCH ACCOUNTING

Write your answer on a ¼ sheet of yellow paper. If your answer is not on the choices, write E. Any form of tampering is
considered wrong. Please don’t forget to write your Set.

1. Jeremy Lin, Inc. established a branch in Antipolo to distribute part of the goods purchased by home office. The home
office prices inventory shipped to the branch at 25% above cost. The following account balances were taken from the
ledger maintained by the home office and the branch.

Jeremy Lin, Inc. Antipolo Branch

Sales P336,000 P144,000 (20% still uncollected)
Beginning inventory 69,000 38,400 (1/3 from HO)
Purchases 222,000 40,000 (30% unpaid)
Shipments to branch 66,000
Shipments from HO 82,500
Operating expenses 68,000 11,200 (4/5 unpaid)
Ending inventory 48,000 21,600 (10% from outsiders)
Calculate the combined net income for the home office and the branch:
a) P84,500
b) P83,172
c) P96,972
d) P99,672

2. On December 31, 2012, the home office of Tony Company recorded a shipment of merchandise to its Calamba branch as
follows:
Calamba branch 30,000
Shipment to Calamba branch 25,000
Unrealized profit in branch inventory 4,000
Cash (for freight charges) 1,000

The Calamba branch sells 40% of the merchandise to outside entities during the rest of December, 2012. The books of
the home office and Calamba branch are closed on December 31 of each year. At what amounts should the 60% of the
merchandise remaining unsold at December 31, 2012 should be included in the published statement of financial
position of Tony Company at December 31, 2012?
a) 15,600
b) 15,000
c) 18,000
d) 18,600

3. The following data pertains to the shipments of merchandise from Home Office to Branch during 2013:

Home office’s cost of merchandise P350,000

Inter-office billings 420,000
Sales by branch to outsiders 520,000
Merchandise inventory on December 31, 2013 50,000
In the combined statement of comprehensive income of the Home Office and the Branch for the year ended December 31,
2013, what amount of the above transactions should be included as sales?
a) P570,000
b) P520,000
c) P470,000
d) P350,000

4. Nike Corporation operates a number of branches in the provinces. On December 31, 2013, its Davao branch showed a
Home Office account balance of P54,700 and the home office books showed an Investment in Davao Branch account
balance of P51,000. The following information may help in reconciling both accounts:
  A P24,000 shipments, charged by home office to Davao Branch, was actually sent to and retained by Cebu Branch.
 A P30,000 shipments, intended and charged to Aklan Branch, was shipped to Davao Branch and retained by the
latter.
 A P4,000 emergency cash transfer from Cebu Branch was not taken up in the Home Office books.
 Home Office collects a Davao Branch accounts receivable of P7,200 and fails to notify the branch.
 Home Office was charged for P2,400 for merchandise returned by Davao Branch on December 30. The
merchandise is in transit.
 Home office erroneously recorded Davao Branch’s net income for 2013 at P32,550. The branch reported a net
income of P25,350.
What is the adjusted balance of the Home Office and Davao Branch reciprocal accounts on December 31, 2013?
a) P40,300
b) P54,700
c) P47,500
d) P43,500

5. The branch manager of Tower Cosmetics in Cebu submitted a report as of May 31, 2013 containing the following
information:

Petty Cash Fund P1,500

Sales 198,720
Sales returns 3,600
Accounts Written Of 1,920
Shipments from Home Office 136,080
Accounts Receivable – May 31, 2012 43,800
Accounts Receivable – May 31, 2013 49,140
Inventory – May 31, 2012 37,170
Inventory – May 31, 2013 41,370
Expenses (reimbursed by H.O.) 57,930
Assuming all cash collected by the branch is remitted to Tower Cosmetics home office, the remittances for the period
amounted to:
a) P187,860
b) P189,780
c) P195,120
d) P198,720

6. The Home office shipped merchandise costing P47,100 to Branch A and paid for the freight charges of P7,500. Branch A
was subsequently instructed to transfer the merchandise to Branch B Wherein Branch A paid P6,000 freight. If the
shipment was made directly from Home Office to Branch B, the freight cost would have been P11,250.
Which of the following statements is incorrect?
a) Upon receipt of merchandise by B from A, B credits home office accounts by P58,350
b) Upon transfer of merchandise by A to B, home office debits Investment in Branch A account by P58,350
c) Upon transfer of merchandise by home office to A, home office debits investment in branch A account by
P54,600
d) Upon transfer of merchandise by A to B, A debits home office accounts by P60,600

7. SPIDERMAN Corporation maintains a branch in Pampanga. Selected account balances taken

from the books of the Home office and its branch as of December 31, 2014 were as follows:

Home Office Pampanga Branch

Sales P1,200,000 P540,000
Inventory, January 1, 2015 80,000 122,100
 Purchases 500,000
Shipments to branch 315,000
Shipments from Home Office 346,500
Inventory, December 31, 2013 350,000 157,500
Expenses 113,000 89,000
In 2013, the Home Office billed its branch at 120% of cost which was higher by 5% than the previous year. All of the
units in the beginning inventory of the branch were acquired from the home office in 2013.
By what amount will the retained earnings of SPIDERMAN Corporation increase for the year 2014?
a) P732,793
b) P747,750
c) P743,750
d) P738,500

8. The following were found in your examination of the interplant accounts between the Home Office and the Ironman
Branch:
 Transfer of fixed assets from Home Office amounting to P53,960 was not booked by the Ironman branch.
 P10,000 covering marketing expense of another branch was charged by Home Office to Ironman.
 Ironman recorded a debit note on inventory transfers from Home Office of P75,000 twice.
 Home Office recorded cash transfer of P65,700 from Ironman Branch as coming from THOR Branch.
 Ironman reversed a previous debit memo from HULK Branch amounting to P10,500.
 Home Office decided that this charge is appropriately THOR Branch’s cost Ironman recorded a debit
memo from Home Office of P4,650 as P4,560.
The net (debit)/credit adjustment in Ironman’s books related to the Home Office account is:
a) P20,950 net increase
b) P31,450 net decrease
c) P(20,950)
d) P31,450 net credit

Use the following information for numbers 9 and 10:

Fire Company has a branch in Baguio and Davao. The reciprocal accounts between the home office and the branches were in
agreement at the beginning of 2013. However, at December 31, 2013, the following reciprocal balances are found in the home
office books:

Investment in Baguio P186,500

Investment in Davao 84,000

Data for reconciliation of the reciprocal accounts are as follows:

 On December 29, 2013, the home office has instructed Baguio to transfer P74,000 cash to Davao. Baguio recorded this
transaction immediately. Upon receipt, Davao has recorded this transfer at P47,000. The home office however has not yet
recorded this interbranch transaction as of the end of the year.
 Fire has transferred goods costing P28,900 to Baguio branch and paid P2,500 of shipping cost on December 16, 2013.
Baguio shipped all of these goods to Davao upon instruction of the home office on December 30, 2013. Shipping cost is
P3,600 freight collect. Had the goods were shipped directly to Davao, P5,000 of freight cost should have been incurred.
The interbranch shipment was not recorded by the branches and the home as well.
 Baguio has collected cash of P5,750 from Davao’s customer. This transaction is not yet recorded by Davao and the home
office.
 The home office has already allocated P11,000 and P9,000 of administrative expenses to Baguio and Davao respectively.
The branches are not yet notified.
 Baguio remitted P14,300 cash to the home office on December 12, 2013. The home office has failed to record the said
remittance.
 Davao returned goods costing P6,850 to the home office. The goods were shipped on December 19 and received on
December 24 but no entries have been made in the home office books.
9. Adjusted balance of Investment in Baguio account
 a) P72,550
b) P66,800
c) P86,850
d) P103,950

10. Adjusted balance of Investment in Davao account

a) P181,450
b) P182,550
c) P175,700
d) P145,400