Chapter 12

Problem I
(a)Working Fund Agency
..
Cash .
(b)Accounts Receivable .....................................
Sales-Agency .

5,000
5,000
50,000
50,000

(c)Cash .....................................
Accounts Receivable ..

35,000
35,000

(d)Expenses-Agency ..
Cash .

4,500

(e)Expenses-Agency ..
Cash .

2,250

4,500
2,250

(f)Cost of Goods Sold-Agency 36,000

Merchandise Shipments-Agency .
36,000
Problem II
(a) Branch Books:
(a) Cash ..
Home Office

42,500

(b) Shipments from Home Office

Home Office ...

50,200

(c) Accounts Receivable .

Sales ..

60,000

(d) Purchases
Accounts Payable

22,500

(e) Home Office ..

Accounts Receivable ..

53,400

(f) Accounts Payable ...

Cash ..

12,250

(g) Furniture & Fixtures

Cash ..
(h) Expenses ..
Cash ..

(b) Home Office Books:

42,500
50,200
60,000
22,500
53,400
12,250

8,000
8,000
18,000

18,000

(a) Branch .
Cash .

42,500

(b) Branch
Shipments to Branch ..

50,200

(c) Accounts Receivable ...

Sales

105,000

(d) Purchases .
Accounts Payable .

122,500

(e) Cash ..
Accounts Receivable

113,600

(f) Accounts Payable .

Cash

124,000

(g) Expenses
Cash

26,600

(h) Cash ..
Branch ...

53,400

(i) Retained Earnings .

Cash ...

10,000

42,500
50,200
105,000
122,500
113,600
124,000
26,600
53,400
10,000

BARTON CO.
Balance Sheet for Branch
December 31, 20x4
Assets

Liabilities

Cash
10,250
Accounts Receivable
300
Merchandise Inv...
37,900
Prepaid Expenses
Furnitures & Fixtures .
P 8,000
Less accum. Depr
650
Total Assets
.P48,450

P 4,250

Accounts Payable P

12,600

Accrued Expenses

23,500

Home Office ..

750
7,350
P48,450

Total Liabilities

BARTON CO.
Income Statement for Branch
For Year Ended December 31, 19X6
Sales
P66,000
Cost of Goods Sold:
Purchases

P22,500

Shipments for home office .

Merchandise available for sale
Less merchandise inv, December 31 ..
Cost of Goods Sold ..
Gross Profit .
Expenses
Net loss ...

50,200
P72,700

23,500
49,200
P16,800
18,200
P 1,400

BARTON CO.
Income Statement for Branch
For Year Ended December 31, 20x4
Assets

Liabilities & Stockholders Equity

Cash ..
P 23,200
Liabilities
Accounts Receivable ..
19,050
Accounts payable P 21,300
Merchandise Inventory
48,500
Accrued Expenses .
1,350
P22,650
Prepaid Expenses .
2,050
Stockholders Equity
Furniture & Fixtures .
P 20,000
Capital stock, P20 par P50,000
Less accum. Depr..
5,580
14,420
Retained Earnings . 72,740
122,470
Branch
37,900
Total liabilities and stockholders
Total Assets ...
P145,120
equity
P145,120
BARTON CO.
Income Statement for Home Office
For Year Ended December 31, 20x4
Sales .......
Cost of goods sold:
Merchandise inventory, January 1 .
Purchases ...
Merchandise available for sale
Less shipments to branch ...
Merchandise available for own sale ..
Less merchandise inventory, December 31 .
Cost of Goods Sold .
Gross Profit
Expenses
Net income from own operations ..
Deduct branch net loss .
Total Income .

P105,000
P 40,120
122,500
P162,620
50,200
P112,420
48,500

63,920
P 41,080
27,630
P 13,450
1,400
P 12,050

BARTON CO.
Income Statement for Home Office
For Year Ended December 31, 20x4
Sales .
Cost of goods sold:
Merchandise inventory, January 1 ..
Purchases
Merchandise available for sale

P171,000
P 40,120
145,000
P185,120

Less merchandise inventory, December 31 ..

Cost of goods sold .
Gross profit ..
Expenses ..
Net Income .

72,000
113,120
P 57,880
45,830
P 12,050

(a) Branch Books:

Expenses .
Accumulated Depreciation F&F.

650
650

Sales
Merchandise Inventory .
Income summary ..

66,000
23,500

Income Summary
Shipments from Home Office
50,200
Purchases
22,500
Expenses ..

90,900

Home Office
Income Summary

89,500

18,200
1,400
1,400

(b) Home Office Books

Expenses .
Accumulated Depreciation F&F.
Sales
Merchandise Inventory .
Shipments to Branch ..
Income summary ..
Income Summary
Merchandise Inventory
Purchases .
Expenses ..

1,180

105,000
48,500
50,200
203,700
190,250
40,120
122,500
27,630

Branch Income
Branch .

1,400

Income Summary ..
Branch Income

1,400

Income Summary ..
Retained Earnings ..

12,050

Problem III
(a) Branch Books:

1,180

1,400
1,400
12,050

Jan.

1,500

Shipments from home office .

Home Office

10,200

1,500

10,200

Home Office ..
Cash ..

900

Accts. Rec. Home office .

Home Office

2,600

1-31

Accts. Rec.-Home Office .

Sales ..

6,200

1-31

Cash ..
Accounts Receivable ..

2,600

1-31

Purchases .
Accounts Payable

3,000

1-31

Accounts Payable .
Cash ..

1-31
Jan.

Cash .
Home Office

1-31

Expenses ..
Cash .
Cash
Accts. Rec.-Home Office ...

2,600

3,000

1,450
1,450
1,250

1,250

1,600
1,600

Home Office
Accts. Rec.-Home Office .

150

1-31

Shipments from Home Office

Home Office .

1,250

Home Office
Cash

6,200
2,600

1-31

1-31

900

150
1,250

1,000

1,000

(b) Home Office Books:

Jan.

1
1
1
1

Branch .. 1,500
Cash
Branch .. 10,200
Shipments to Branch ..
Store Furniture and Fixtures Branch .. 3,000
Store Furniture and Fixtures ...

1,500
10,200
3,000

Accumulated Depr. Store F&F ..

750
Accumulated Depr. Store Furniture
And Fixtures, Branch ..
750
Calculation of depreciation: 2.5years at P300, (10% of

P3,000), or P750
1

Store Furniture and Fixtures Branch ..

Branch

900
900

Branch 2,600
Accounts Receivable .........

2,600

1-31

Accounts Receivable 34,600

Sales ................................

34,600

1-31

Cash . 40,000
Accounts Receivable

40,000

1-31

Purchases .31,600
Accounts Receivable .

31,600

1-31

Accounts Payable 36,200

Cash ...

36,200

1-31

Accrued Expenses Payable .

Expenses .
Cash ..

1-31

250
8,950

9,200

Allowance for Doubtful Accounts ..

Branch ..

150

1-31

Branch .
Shipments to Branch

1,250

1-31

Cash
Branch .

150
1,250

1,000
1,000

EAGLE CO.
Balance Sheet
January 31, 20x4
Assets

Liabilities

Cash ............................
Accounts Receivable ..
Accts. Rec.-home office .
Merchandise Inventory
Merchandise in Transit .
Total assets
P37,200

P 1,100
3,600
850
9,800
600
P37,200

Accounts Payable . P 2,400

Accrued expenses .
400
Home Office
14,050
Total Liabilities .

EAGLE CO.
Income Statement for Branch
For Month Ended January 31, 20x4
Sales .
Cost of Goods Sold:

P 6,200

Purchases
P 3,000
Shipments from home office .
11,450
Shipments from home office in transit ..........
600
Merchandise Available for Sale ..
P15,050
Less merchandise inv. Dec 31, 19X9 ................P9,800
Merchandise in transit ..
600 10,400
Cost of Goods Sold .
4,650
Gross Profit
P 1,550
Expenses
2,110
Net Loss ..
..
P

560

EAGLE CO.
Balance Sheet for Home Office
January 31, 20x4
Assets
Cash
Accounts Receivable P34,000
Less allowance for doubtful accounts ..
1,050
Merchandise Inventory .
Store furniture and fixtures
P12,000
Less accumulated depreciation .
3,950
Store furniture and fixtures-branch
P 3,900
Less accumulated depreciation
785
Branch office ...
Total Assets

P 9,100
32,950
44,500
8,050
3,315

14,050
P111,765

Liabilities
Accounts Payable .. P29,150
Accrued Expenses ..
750
Total Liabilities ..

P29,900

Stockholders Equity
Capital Stock P50,000
Retained earnings .. 31,865
Total stockholders equity
Total liabilities and stockholders equity

81,865
P111,765

AGLE CO.
Income Statement for Home Office
For Month Ended January 31, 20x4
Sales
P 34,600
Cost of goods sold:
Merchandise inventory, January 1 ..
P46,000
Purchases
31,600
Merchandise available for sale
77,600
Less shipments to branch
12,050
Merchandise available for own sales .
P65,550
Less merchandise inventory, January 31
44,500
Cost of goods sold
21,050

Gross Profit
Expenses
Net income from own operations .
Deduct branch net loss
Total Income

P 13,650
9,325
P 4,225
560
P 3,665

EAGLE CO.
Income Statement for Home Office
For Month Ended January 31, 20x4
Assets
Liabiities and Stockholders Equity
Liabilities
Cash ..
. P 10,200
Accounts Payable P30,700
Accounts receivable .. P38,450
Accrued Expenses
1,100
P
31,800
Less allow for doubtFul accounts ..
1,050
37,400
Merchandise Inventory ..
54,900
Stockholders Equity
Store furn. & fixtures P15,900
Capital Stocks P50,000
Less accum depr
4,735
11,165
Retained earnings 31,865
81,865
Total assets P113,665
Total liab. And stockholders equity . P113,665
EAGLE CO.
Combined Income Statement for Home Office and Branch
For Month Ended January 31, 20x4
Sales ..
Cost of goods sold:
Merchandise Inventory, January 1 .
P46,000
Purchases ...
34,600
Merchandise available for sale ...
P80,600
Less merchandise inventory, Jan 31 ...
54,900
Cost of goods sold ...............................
Gross profit ...
Expenses
Net Income ..

P 40,800

25,700
P 15,100
11,435
P 3,665

(a) Branch Books

Jan.

31

Shipments from Office-in Transit

Home Office .

600

Expenses .
475
Home Office .
31
Expenses
35
Home Office ..
1/120 x P3,000, or P25 (depreciation for one month;
Asset life, 10 years); 1/90 x P900, or P10 (depreciation
For one month; asset life, 7.5 years)

600

31

31

Merchandise Inventory 9,800

Merchandise in Transit ..
600
Income Summary

475
35

10,400

31

Expenses ..
Accrued Expenses .

350

31

Sales .
Income Summary ..

6,200

31

Income Summary . 17,160

Shipments from Home Office .
Ship. From Home Office in Trans .
Purchases
Expenses ..

31

Home Office ..
Income Summary ...

350
6,200
11,450
600
3,000
2,110

560
560

(b) Home Office Books:

31

Branch .
Shipments to Branch .

600

31

Branch .
Expenses ...

475

31

31

Branch .
Accumulated Depreciation, Store
Furniture and Fixtures Branch ..

475
35
35

Expenses .
100
Accumulated Depreciation store
Furniture and Fixtures branch .
1/120 x P12,000, or P100 (depreciation for one
Month; asset life, 10 years)

31

Income Summary
Merchandise Inventory

46,000

31

Merchandise Inventory ..
Income Summary ..

44,500

31

Expenses .
Accrued Expenses .

31

Sales
Purchases
Expenses ..

31

600

100

46,000
44,500

750

750

40,925
31,600
9,325

Branch Income .
Branch ..

560

31

Income Summary .
Branch Income ...

560

31

Income Summary .
Retained Earnings ..

3,665

560
560
3,665

Problem IV
1.

Socrates Company
Home Office and Plato Branch
Reconciliation of Reciprocal Ledger Accounts
June 30, 20x4
Investment in
Plato Branch
Ledger
Account
Account
(Debit)
Balances prior to adjustment
P85,000
Add: Merchandise shipped to branch
Less: Acquisition of office equipment by branch
(carried in accounting records of home office)(14,500)
Collection of branch trade accounts receivable
Payment of cash by branch
(22,000)
Adjusted balances
P48,500

2.

Home Office
Ledger
(Credit)
P33,500
24,000
(9,000)
_______
P48,500

(a)
Accounting records of home office:
Office Equipment: Plato Branch
14,500
Investment in Plato Branch
To record acquisition of office equipment by branch.
Cash in Transit
Investment in Plato Branch
To record cash in transit from branch.
(b)

22,000
22,000

Accounting records of branch:

Home Office
9,000
Trade Accounts Receivable
To record collection by home office of branch accounts
receivable.
Inventories in Transit
Home Office
To record shipment of merchandise in transit from
home office.

Problem V
((a)
Balances before Adjustments ..
Adjustments:
Additions:
Merchandise in transit to branch .
Collection of Home office receivable by Branch
Understatement of branch net income for Nov..
Deductions:
Merchandise return to home office in transit .
Corrected Balances
(b) Branch Books:

14,500

9,000

24,000

BRANCH
ACCOUNT
P 8,400

24,000

HOME OFFICE
ACCOUNT
P 9,735
615

2,500
90
P10,990

P10,350

640
P10,350

P10,350

Shipments from Home Office-in Transit .

Home Office ...

615
615

Home Office Books:

Branch
Accounts Receivable ..

2,500
2,500

Branch
Retained Earnings .

90

Merchandise Returns from Branch in Transit .

Branch ..

90

640
640

Multiple Choice Problem

1. d
Branch A
Assets:
Inventory, January 1
Imprest branch fund
Accounts receivable, January 1
Total Assets
Less: Liabilities
Home Office Current Account

P 21,000
2,000
55,000
P 78,000
-0P 78,000

Branch B
P 19,000
1,500
43,500
P 64,000
-0P 64,000

2. b
Branch A
Assets:
Inventory, December 31
Imprest branch fund
Accounts receivable, December 31
Total Assets
Less: Liabilities
Home Office Current Account

P 19,000
2,000
70,000
P 91,000
-0P 91,000

Branch B
P 12,000
1,500
53,500
P 67,000
-0P 67,000

3. d incidentally, the entry in the books of the branch would be as follows:

Profit and loss summary xxx
Home Office Current.
Xxx
4. c
Assets:
Inventory
Petty cash fund
Accounts receivable
Total Assets
Less: Liabilities
Home Office Current Account

January
1,20x4

5. a refer to No. 4 for computations

6. a
Sales
Less: Cost of goods sold:
SFHO

P 37,000
3,000
43,000
P 83,000
_____-0P 83,000

January 1,
20x5
P 41,000
3,000
49,000
P 93,000
_____-0P 93,000

P 74,000
P67,680

Less: Inventory, ending

Gross profit
Less: Expenses
Net Loss..
7. a

9,180

58,500
P 15,500
6,820
P 8,680

January 1,
20x6

Assets:
Cash
Inventory
Accounts receivable
Total Assets
Less: Liabilities
Home Office Current Account

P 4,200
9,180
12,800
P 26,180
_____-0P 26,180

8. a nominal accounts have zero beginning balance.

9. d
Branch
Current

H. Office
Current

Unadjusted balance, 6/30/20x4

P 225,770
P 226,485*
Add (Deduct): Adjustments
1 Erroneous recording of branch equipment
3150
2. Insurance premium recorded twice
(
675)
3. Erroneous recording of freight
(
90)
4. Discount on merchandise
(
800)
5. Failure by the branch to record share in advertising
700
6. error by the home office to record remittance of
3,000
________
Cebu
Adjusted balance, 6/30/20x4
P 228,770
P 228,770
* The P226,485 is compute simply by working back with P228,770 adjusted balance as the starting
point.

P2-07
10. c

Unadjusted balance
Add (deduct) adjustments:
In transit
Remittance
Returns
Cash in transit
Expenses - HO
Expenses branch
Error
Adjusted balance

Home Office Books

(Branch CurrentDr. balance)
P518,575
( 17,000)
(
775)
(

800)

________
P 500,000

Branch Books
(Home Office Current
Cr. balance)
P452,276
10,500
25,000
12,000
_____224
P 500,000

11. d
Home Office Books

Branch Books

Unadjusted balance
Add (deduct) adjustments:
Excess freight
Cash in transit
Returns
Expenses branch
Adjusted balance
12.
13.
14.
15.

(Branch CurrentDr. balance)

P515,000

(Home Office Current

Cr. balance)
P495,750
(

750)

( 11,000)
( 4,000)
________

5,000

P 500,000

P 500,000

c refer to No. 11 for computations

a refer to No. 11 for computations
No answer available P495,750
d - No entry should be made in the books of the home office, since the freight should be
chargeable to the branch and the payment of the freight was made by the branch.

16. b

Unadjusted balance
Add (deduct) adjustments:
Remittance
Returns
Error by the branch
Expenses branch
Adjusted balance

Home Office Books

(Branch CurrentDr. balance)
P590,000

Branch Books
(Home Office Current
Cr. balance)
P506,700

(40,000)
(15,000)
________

300
28,000

P 535,000

P 535,000

Home Office Books

(Branch Current- Dr.
balance)
P150,000

Branch Books
(Home Office Current
Cr. balance)
P117,420

17. c

Unadjusted balance
Add (deduct) adjustments:
In transit
HO A/R collected by br.
Supplies returned
Error in recording Br. NI
Cash sent to branch
to General Expense by HO
Adjusted balance

37,500
10,500
( 4,500)
( 1,080)
25,000
P 179,920

25,000
P 179,920

Home Office Books

(Branch Current- Dr.
balance)
P40,000

Branch Books
(Home Office Current
Cr. balance)
P31,100

18. d refer to No. 17 for computation.

19. a

Unadjusted balance
Add (deduct) adjustments:
In transit
HO A/R collected by br.

500

5,800

Cash in transit
Error in recording Br. NI
Adjusted balance

2,000
( 3,600)
P38,900

2,000
_______
P38,900

Home Office Books

(Branch Current- Dr.
balance)
P49,600

Branch Books
(Home Office Current
Cr. balance)
P44,00

20. a refer to No. 19 for computations

21. a

Unadjusted balance
Add (deduct) adjustments:
Collection of branch A/R
In transit
Purchase of furniture
Return of excess merchandise
Remittance
Adjusted balance

(
( 1,200)
( 1,500)
(
500)
P46,400

800)
3,200

_______
P46,400

22. b refer to No. 21 for computations

23. (C)

Sales (P350,000 + P100,000).P 450,000

Less: Cost of goods sold:
Purchases (P400,000 + P50,000).
P 450,000
Less: Inventory, ending
90,000
360,000
Gross profit
P 90,000
Less: Expenses
Salaries and commission..
P 70,000
Rent
20,000
Advertising supplies (P10,000 P6,000)
4,000
Other expenses.
5,000
99,000
Net Loss..
P( 9,000)

24. a
In adopting the imprest system for the agency working fund, the home office writes a check to
the agency for the amount of the fund. Establishment of the fund is recorded on the home
office books by a debit to the Agency working fund and credit cash. The agency will request
fund replenishment whenever the fund runs low and at the end of each fiscal period. Such a
request is normally accomplished by an itemized and authenticated statement of
disbursements and the paid vouchers. Upon sending the agency a check in replenishment of
the fund, the home office debits expense or other accounts for which disbursements from the
fund were reported and credits cash.
25. d
Normally, transactions of the agency are recorded in the books of the home office separately
identified with the appropriate agency.
Theories
1 True
.
2 True

6.

False

11.

False

16.

7.

False

12.

False

17.

21
.
22

26.

27.

31
.
32

b
b

.
3
.
4
.
5
.

False

8.

False

13.

True

18.

False

9.

True

14.

True

19.

True

10
,

True

15.

True

20.

.
23
.
24
.
25
.

28.

29.

30.

.
33
.
34
.
35
.
36
.

c
c
c
d