ARTS CPA Review Center

No. 44, Kamagong Avenue, Metroville, Santiago City

0917-5723900
e-mail address: jonathandeveyra_ARTS@yahoo.com.ph
24TH BATCH
ADVANCED ACCOUNTING CHARLON F. HUAN, CPA/SAMUEL U. ITHCON, JR., CPA

HOME OFFICE-BRANCH ACCOUNTING ADV 10

Use the following information for questions 1 to 5:
Selected balances from the Amor Corporations Branch A and Branch B are as follows:
Branch A Branch B
Inventory, Jan. 01, 2006 21,000 19,000
Imprest Branch Fund 2,000 1,500
Inventory, Dec. 31, 2006 19,000 12,000
Accounts receivable, Jan. 01, 2006 55,000 43,500
Merchandise from Home Office 61,000 47,000
Accounts receivable, Dec. 31, 2006 70,000 53,500
Cash collections 85,000 70,000
Sales 100,000 80,000
Cash Expenses 21,000 14,300
All sales, collections and expenses are handled at the branch. All cash received from sales and collections are sent directly to
the Home Office. Expenses are paid bys the branch from the imprest fund and immediately reimbursed by the Home Office and
credited to the Home Office account. All expenses paid by the branch are recorded in the books of the branch.
1. The net profit of Branch A is:
a. 16,000 c. 15,000
b. 21,000 d. 18,000

2. The balance of the Home Office account of Branch A on Jan. 01, 2006 is:
a. 80,000 c. 78,000
b. 64,000 d. 75,000

3. The balance of the Home Office account of Branch B on Jan. 01, 2006 is:
a. 80,000 c. 78,000
b. 64,000 d. 95,000

4. The balance of the Branch Current account for Branch B on December 31, 2006 is:
a. 70,000 c. 67,000
b. 64,000 d. 65,000

5. The entry in Branch Bs records in order to update the reciprocal Home Office account on December 31, 2006 is:
a. Dr Home Office. Cr Profit & Loss
b. Dr Profit & Loss Cr Branch Current
c. Dr Branch Current Cr Profit & Loss
d. Dr Profit & Loss Cr Home Office

6. Sim Corporation, operates a number of branches in Metro Manila. On June 30, 2011, its San Lorenzo branch showed a Home
Office account balance of P 27,350 and the Home Office books showed a San Lorenzo branch account balance of P 25,550.
The following information may help in reconciling both accounts:
A P 12,000 shipment, charged by Home Office to San Lorenzo branch, was actually sent to and retained by Santo
Tomas branch.
A P 15,000 shipment, intended and charged to San Jose branch was shipped to San Lorenzo branch and retained
by the latter.
A P 2,000 emergency cash transfer from Santo Tomas branch was not taken up in the Home Office books.
Home Office collects a San Lorenzo branch accounts receivable at P 3,600 and fails to notify the branch.
Home Office was charged for P 1,200 for merchandise returned by San Lorenzo branch on June 28. The
merchandise is in transit.
Home Office erroneously recorded San Lorenzos net income for May, 2011 at P 16,275. The branch reported a net income of
P 12,675. What is the reconciled amount of the Home Office and San Lorenzo branch reciprocal accounts?
a. 21,750 c. 27,350
b. 23,750 d. 20,150

7. Kami Marketing operates a branch in Makati, Metro Manila. On October 31, 2008, the Branch Current account had a balance
of P 300,000. In the process of reconciling the reciprocal current accounts, the items that follow were noted:
The home office had billed the branch P 75,000 for merchandise shipment still in as of October 31.
A home office customers account for P 21,000 collected by the branch on October 26 has not been reported to the
home office.
The branch has failed to recognize its P 5,000 share of advertising expense paid for by the home office.
The branch reported a net income of P 43,500 during the fiscal period then ended, this was erroneously taken up as
P 45,500 by the home office.
Assuming that all other transactions related to the home office and the branch are correctly recorded, the adjusted balance of
the reciprocal accounts as of October 31, 2008, was:
a. 300,000 c. 319,000
b. 314,000 d. 323,000

HOME OFFICE-BRANCH ACCOUNTING page 02

 8. After examining on a comparative basis the inter-office account of the Bulacan Company with its suburban branch and
the similar account carried on the latters books, the following discrepancies at the close of the business on June 30, 2005
were seen:
a. A charge for labor by the Home Office, P 500 was recorded twice by the branch.
b. A charge of P 895 was made by the Home Office for freight on merchandise, but the amount was
recorded by the Branch as P 89.50.
c. A charge of P 980 (furniture and fixture) on the Home Office books was taken up by the Branch as
P 890.
d. A credit by the Home Office for P 350 (merchandise allowances) was taken up bys the Branch as P
400.
e. The Home Office charged the Branch P 425 for interest on open account which the Branch failed
to take up in full; instead, the Branch sent to the Home Office a wrong adjusting memo, reducing
the charge by P 100 and set up a liability for the net amount.
f. The Home Office received P 5,000, from the sale of a truck which it erroneously credited to the
Branch; the Branch did not charge the Home Office therewith.
g. The Branch by mistake sent the home office a debit note for P 370 representing its proportion of a
bill for repairs of truck; the Home Office did not record it.
h. The Branch inadvertently received a copy of the Home Office entry dated July 19, 2005 correcting
item (f) and entered a credit in favor of the home office as of June 30, 2005.
At June 30, 2005, the unadjusted balance of the Investment in Branch account on the Home Office books showed P
175,520. At the beginning of the year, the inter-office accounts were in balance.
What is the unadjusted balance of the Home Office account on the branch books on June 30, 2005?
a. 184,279.50 c. 184,729.00
b. 160,725.50 d. 165,279.50

9. Jaime Marketing Co. opened a branch in San Fernando City at the beginning of 2005. The branch extends credit,
makes collections, pays expenses from cash receipts, and acquires goods exclusively from the home office. During 2005,
goods shipped by the home office to the branch, at a billing price of 125% of cost, amounted to P 104,000, of which P
12,500 remained in the branchs year-end inventory. Other branch transactions in 2005 were as follows: sales, all on
credit, P 117,430; expenses, of which P 1,500 are unpaid at year-end, P 20,000; collections on account, after deducting
discounts of P 1,480, P 84,000; and, total remittances to the home office, P 62,500. As far as the home office is concerned,
the operations of the branch in 2005 resulted in a:
a. 4,450 net income. c. 18,300 net income.
b. 9,550 net loss. d. 22,750 net income.

10. The Clark branch of Freeport Corporation submitted the following trial balance as of 30 June 2005:
Debit Credit
Cash 28,600
Accounts receivable 173,800
Shipments from home office 462,000
Home office current 324,500
Sales 369,600
Expenses 29,700
-------------------- ------------------
Total 694,100 694,100
=========== ==========
Clark reported an ending inventory of P 138,600. Shipments are billed at a markup of 40% on cost. What is the real net income
of Clark branch?
a. 92,400 c. 70,600
b. 138,600 d. 108,900

Use the following information for questions 11 & 12:

New Era Co. bills its newly established branch for merchandise at 140% of cost. At the end of its first month, the
branch reported, among other things, the following:
Merchandise from home office (at billed price) 28,000
Merchandise purchased locally by branch 10,000
Inventory, September 30, of which P 2,000 are local purchases 9,000
Net sales for month 43,500

11. The branch inventory at cost should be recorded at:

a. 38,000 c. 9,000
b. 7,000 d. 10,000

12. The gross profit of the branch in so far as the home office is concerned was:
a. 22,500 c. 22,790
b. 14,500 d. 20,500

13. Pekto Sales, Inc. has branch in Cubao, Quezon City. The branch buys merchandise from outside parties and also receives
merchandise from the home office for which it is billed at 20% above cost. Below are excerpts from trial balances and other
data of the home office and the Cubao branch for the month just ended:
Home Office:
Cr.: Allowance for overvaluation of branch merchandise 370,000
Cr.: Shipments to branch 850,000

HOME OFFICE-BRANCH ACCOUNTING page 03

Cubao Branch:
Dr.: Beginning inventory 1,440,000
Dr.: Shipments from Home Office 1,020,000
Dr.: Purchases 410,000

Month-end branch inventory:

From home office, at billed price 1,170,000
From outside parties, at cost 290,000
The amount of overvaluation that was realized because of branch sales for the month just ended was:
a. 175,000 c. 200,000
b. 195,000 d. 370,000

14. The home office in Quezon City ships and bills merchandise to its provincial branch at cost. The branch carries its own
accounts receivable and makes its own collections. The branch also pays its expenses.
The transactions for 2005 are reflected in the branch trial balance that follows:
Debit Credit
Cash 20,000
Home Office 180,000
Shipments from Home Office 250,000
Accounts Receivable 80,000
Expenses 55,500
Sales 225,500
---------------- ------------------
Total 405,500 405,500
========== ===========
December 31 inventory 65,000
===========
Assuming all the transactions are properly recorded, what is the balance of the Investment in Branch account in the home office
books?
a. 180,000 c. 165,000
b. 195,000 d. 175,000

15. On December 31, 2005, the following data are in the records of the Cebu City branch of the Claire Company:
Petty cash 94,500
Accounts receivable, Dec. 31, 2004 85,200
Merchandise inventory, Dec. 31, 2004 75,500
Accounts receivable, Dec. 31, 2004 88,800
Merchandise inventory, Dec. 31, 2005 81,000
Sales 272,700
Sales returns 4,800
Accounts receivable written off 2,000
Shipments from home office 220,600
Expenses (paid by home office) 22,500
If all cash collections in 2005 were remitted to Home Office, the total remittance amounted to:
a. 262,300 c. 264,300
b. 266,800 d. 267,100

16. Toper Corp. bills its branch for merchandise shipments at 125% of cost as of cut-off date on December 31, the
following data are available:
Mdse from HO Outside
(Billing Price) Purchases Total
December 01 300,000 120,000 420,000
Dec. additions 450,000 360,000 810,000
December 31 420,000 150,000 570,000
The branch returned merchandise to the home office at P 15,000 billed price. As a result of branch sales for the month
of December, the portion of the allowance for overvaluation that was realized as income was:
a. 63,000 c. 84,000
b. 66,000 d. 87,500

17. Filipinas Corp, a Bicol-based agricultural corporation, has a new opened branch in Lucena City to which it ships
merchandise at 140% of cost. In the first year, 2007, Lucena Branch submitted this data:
Net sales 325,000
Merchandise received from home office 175,000
Merchandise acquired from outside sources 140,000
Operating expenses 20,000
Merchandise inventory (including P 10,000 acquired from outside sources) 45,000
What is the Lucena branch net income to be reported in the year-end combined income statement?
a. 35,000 c. 75,000
b. 55,000 d. 95,000

18. Selected balances from the Legaspi Companys Branch A and Branch B are as follows:
Branch A Branch B
Inventory, Jan. 01, 2008 21,000 19,000
Imprest Branch Fund 2,000 1,500
Inventory, Dec. 31, 2008 19,000 12,000
A/Receivable, Jan. 01, 2008 55,000 43,500

HOME OFFICE-BRANCH ACCOUNTING page 04

 Merchandise from Home Office 61,000 47,000
A/Receivable, Dec. 31, 2008 70,000 53,500
Cash collections 85,000 70,000
Sales 100,000 80,000
Cash expenses 21,000 14,300
All sales, collections and expenses are handled at the branch. All cash received from sales and collections are sent
directly to the Home Office. Expenses are paid by the branch from the imprest fund and immediately reimbursed by
the Home Office and credited to the Home Office account. All expenses paid by the branch are recorded in the books
of the branch. Compute the balance of the Home Office account on January 01, 2008:
Branch A Books Branch B Books
a. 78,000 67,000
b. 75,000 64,000
c. 64,000 78,000
d. 78,000 64,000

19. The J Company Inc. opened an agency in Makati in 2008. The following is a summary of the transactions of the
agency:
Sales orders sent to home office 66,000
Sales orders filled by home office in 2008 55,800
Freight on shipment to agency 1,320
Collections, net of 2% discount 47,628
Selling expenses paid from the agency working fund 3,384
Administrative expenses charged to agency 5% of gross sales
Sampled shipped to agency:
Cost 3,600
Inventory, December 31, 2008 1,320
The company maintains its gross margin on agency gross sales at 30% excluding the freight cost on shipments to
agency. The agencys cost of sales including freight and agencys net income would amount to:
Cost of sales Net income
a. 39,000 5,994
b. 47,520 7,668
c. 40,380 5,994
d. 40,380 7,320

Use the following information for questions 20 to 22:

The following information are extracted from the books and records of Ivana Corporation and its branch. The balances are at
December 31, 2008, the third year of the corporations existence.
Home Office Branch
Books Books
Sales 700,000
Expenses 250,000
Shipments from home office 383,750
Allowance for overvaluation of branch inventory 93,750
The branch acquires all of its merchandise from the home office. The inventories of the branch at billed prices are as follows:
January 01, 2008 85,000
December 31, 2008 84,000
20. The percentage of profit on cost that the home office uses to bill merchandise shipped to branch is:
a. 120% c. 20%
b. 125% d. 25%

21. The balance of the Shipments to Branch account before the books are closed is:
a. 375,000 c. 383,750
b. 362,500 d. 307,000

22. The adjusted profit of the branch is:

a. 65,250 c. 160,800
b. 142,200 d. 67,250

Use the following information for questions 23 to 25:

The following information is taken from the books and records of Atlas Company and its branch. The balances are at December
31, 2015, the second year of the companys operations:
Home Office Branch
Books Books
Sales 500,000
Expenses 150,000
Shipments to branch 180,000
Allowance for overvaluation
Of branch inventory 37,500
The branch obtains all of its merchandise from the home office. The home office ships the merchandise at 120% of its cost.
The ending inventory of the branch is P 60,000 billed price.
23. The beginning inventory of the branch at billed price is:
a. 9,000 c. 7,500
b. 36,000 d. 1,500

HOME OFFICE-BRANCH ACCOUNTING page 05

24. The net income as reflected on the books of the branch is:
a. 212,500 c. 175,000
b. 185,000 d. 182,500

25. The true income of the branch is:

a. 212,500 c. 175,000
b. 185,000 d. 182,500

Use the following information for questions 26 & 27:

Selected accounts from the December 31, 2015 trial balances of Five Star Co. and its branch follow:
5-star Branch
Inventory, Jan. 01 46,000 23,100
Branch current 116,600
Purchases 380,000
Shipments from home office 209,000
Freight in 10,450
Expenses 104,000 58,100
Home Office Current ( 106,600 )
Sales ( 310,000 ) ( 280,000 )
Shipments to branch ( 200,000 )
Branch merchandise markup ( 22,000 )
As of December 31, 2015, a shipment with a billing price of P 11,000 was in transit to the branch. Freight cost, typically 5% of
the billing price, is inventoriable. Merchandise on hand at year end were: at home office, P 64,000 at cost; at branch, P 33,000
at billing price.
26. As far as home office is concerned, the branchs net income for the year ended December 31, 2015 was:
a. 12,350 c. 31,350
b. 14,000 d. 33,000

27. Net income of the combined operation was:

a. 29,000 c. 58,000
b. 36,000 d. 77,000

28. Lobby Trading bills its Iloilo City branch for shipments of goods at 25% above cost. At the close of business on October 31,
2016, a fire gutted the branch warehouse and destroyed 60% of the merchandise stock stored therein. Thereafter, the following
data were gathered:
January 01 inventory, at billed price 50,000
Shipments from home office to Oct. 31 130,000
Net sales to October 31 225,000
If undamaged merchandise recovered are marked to sell for P 30,000, the estimated cost of the merchandise destroyed ;by the
fire was:
a. 14,400 c. 24,000
b. 21,600 d. 27,500

29. On August 31, 2016, a fire destroyed totally the rented bodega or stockroom of Isabela Company. The following are some
of the data of the company:
Merchandise inventory, Dec. 31, 2015 110,000
For the period Jan. 01 Aug. 31, 2016:
Purchases 560,500
Freight in 5,600
Purchase returns 10,200
Sales 695,000
Sales returns and allowances 7,500
Using a 20% gross profit rate, the cost of the merchandise lost in the fire was:
a. 90,700 c. 88,400
b. 115,900 d. 63,200

30. The account balances shown below were taken from the trial balances submitted to Bona Corporation by its Alabang
branch:
2015 2016
Petty cash fund 1,500 1,500
Accounts receivable 43,800 49,140
Inventory 37,170
Sales 173,180 195,120
Shipments from home (140% of cost) 107,450 136,080
Expenses 51,260 57,930
Accounts written off 1,220 1,920
All branch collections are remitted to the home office. All branch expenses are paid out of the petty cash fund. When the petty
cash fund is replenished, the branch debits appropriate expense accounts and credits Home Office Current. The petty cash is
counted every December 31, and its composition was as follows:
12.31.15 12.31.16
Currency and coins 580 860
Expense vouchers 920 640
The branch inventory on December 31, 2016 was P 41,370. The correct branch net income for 2016 was:
a. 3,390 c. 41,070
b. 3,670 d. 41,350
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