Problem 1

REQUIREMENT 1: Journal entries on the books of the Home Office and Branch.

HOME OFFICE BOOKS BRANCH BOOKS

1. Accounts Receivable ₱ 67 000 1. Accounts Receivable ₱ 50 000

Sales ₱ 67 000 Sales ₱ 50 000
To record sales. To record sales.

Branch 33 000 Shipments from Home Office 33 000

Shipments to Branches 30 000 Home Office 33 000
Unrealized profit-Branch Inventory 3 000 To record transfer of merchandise from
To record transfer of merchandise to Home Office.
branch at billed price.

2. Purchases 50 000 2. Purchases 7 000

Accounts Payable 50 000 Accounts Payable 7 000
To record purchase from outside entities. To record purchase from outside suppliers.

3. Cash 68 000 3. Cash 51 000

Accounts Receivable 68 000 Accounts Receivable 51 000
To record collections from sales. To record collections from sales.

Cash 30 000 Home Office 30 000

Branch 30 000 Cash 30 000
To record transfer of cash to branch. To record transfer of cash from home office.

4. Accounts Payable 51 500 4. Accounts Payable 4 000

Cash 51 500 Cash 4 000
To record payments on account. To record payments on account.

5. Operating Expense 20 000 5. Operating Expense 6 000

Cash 20 000 Cash 6 000
To record operating expenses paid. To record operating expenses paid.

6. Depreciation Expense 4 000 6. Depreciation Expense 1 000

Accumulated Depreciation- Plant Asset 4 000 Accumulated Depreciation- Plant Assets 1 000
To record depreciation on plant assets. To record depreciation on plant assets.

7. Branch 2 000 7. Operating Expense 2 000

Operating Expense 2 000 Home Office 2 000
To record allocated expenses to branch. To record allocated expenses by the
home office.

CAASI, Jefferson D. BSA-4A

REQUIREMENT 2: Trial Balance of Home Office and the Branch.
N Corporation
Trial Balance
December 31, 20x1
HOME OFFICE BRANCH

Debits
Cash ₱ 33 500 ₱ 13 000

Accounts Receivable- Net 9 000 2 500

Inventory- Jan. 1, 20x1 15 000 5 500
Plant Assets- Net 45 000 20 000
Branch 33 000
Purchases 50 000 7 000
Operating Expense 18 000 8 000
Depreciation expense 4 000 1 000
Shipments from Home Office ______ 33 000

Total 207 500 90 000

Inventory- Dec. 31, 20x1

(to State of FP) ₱ 11 000 ₱ 6 000

Credits
Accounts Payable ₱ 3 000 ₱ 5 500
Other Liabilities 3 000 500
Acc. Depreciation- Plant Assets 4 000 1 000
Unrealized Profit- Branch Inventory 3 500 33 000

Home Office
Capital Stock 80 000
Retained Earnings 17 000
Sales 67 000 50 000
Shipments to Branch 30 000 ______

207 500 90 000

Inventory- Dec. 31, 20x1

(to State of CI) ₱ 11 000 ₱ 6 000

CAASI, Jefferson D. BSA-4A

REQUIREMENT 3: Individual Financial Statements of Home Office and Branch

N Corporation- Home Office

Statement of Financial Position
December 31, 20x1

Assets
Cash ₱ 33 500
Accounts Receivable- net 9 000
Inventory 11 000
Plant Assets ₱ 45 000
Less: Accumulated Depreciation 4 000 41 000
Branch 34 500
Less: Unrealized Profit- Branch Inventory 450 34 050
TOTAL ASSETS ₱ 128 550

Liabilities and Equity

Accounts Payable ₱3 000
Other Liabilities 3 000
Capital Stock 80 000
Retained Earnings 42 550
TOTAL LIABILITIES AND EQUITY ₱ 128 550

N Corporation- Home Office

Statement of Comprehensive Income
December 31, 20x1
Sales ₱ 67 000

Cost of Sales
Inventory, Jan 1 ₱ 15 000
Purchases 50 000
Goods available for sale 65 000
Less: Shipments to branch 30 000
Goods available for own sale 35 000
Less: Inventory, Dec. 31 11 000 24 000
Gross Income 43 000
Operating expenses 18 000
Depreciation expense 4 000 22 000
Net Income from own Operation 21 000
Branch Income 4 550
COMPREHENSIVE INCOME ` ₱ 25 550

CAASI, Jefferson D. BSA-4A

 N Corporation- Branch
Statement of Financial Position
December 31, 20x1

Assets
Cash ₱ 13 000
Accounts Receivable- net 2 500
Inventory 6 000
Plant Assets ₱ 20 000
Less: Accumulated Depreciation 1 000 19 000
TOTAL ASSETS ₱40 500

Liabilities and Equity

Accounts Payable ₱ 5 500
Other Liabilities 500
Home office 34 500
TOTAL LIABILITIES AND EQUITY ₱ 40 500

N Corporation- Branch
Statement of Comprehensive Income
December 31, 20x1

Sales ₱ 50 000

Cost of Sales
Inventory, Jan 1 ₱ 5 500
Purchases 7 000
Shipments from home office 33 000
Goods available for sale 45 500
Less: Inventory, Dec. 31 6 000 39 500
Gross Income 10 500
Operating expenses 8 000
Depreciation expense 1 000 9 000
COMPREHENSIVE INCOME ` ₱ 1 500

REQUIREMENT 4: Combined Home Office and Branch Financial Statements

Working Paper- Elimination Entries:

a. Home Office ₱ 33 000

Branch ₱ 33 000
To eliminate Home Office account against
Investment in Branch account.
CAASI, Jefferson D. BSA-4A
 b. Shipments to Branch 30 000
Unrealized Profit- Branch Inventory 3 000
Shipments from Home Office 33 000
To eliminate shipments to Branch and Shipments from Home Office account.

c. Inventory, Dec.31, 20x1(Statement of CI) 450

Inventory, Dec.31, 20x1(Statement of FP) 450
To bring the ending inventory to its actual cost

d. Unrealized Profit- Branch Inventory 500

Inventory, Jan. 1, 20x1 500
To bring the beginning inventory to its actual cost

N Corporation
Combined Statement of Financial Position
December 31, 20x1

Assets
Cash ₱46 500
Accounts Receivable- net 11 500
Inventory 16 550
Plant Assets ₱ 65 000
Less: Accumulated Depreciation 5 000 60 000
TOTAL ASSETS ₱134 550

Liabilities and Equity

Accounts Payable ₱ 8 500
Other Liabilities 3 500
Capital Stock 80 000
Retained Earnings 42 550
TOTAL LIABILITIES AND EQUITY ₱ 134 550

N Corporation
Combined Statement of Comprehensive Income
December 31, 20x1
Sales ₱ 117 000
Cost of Sales
Inventory, Jan 1 ₱ 20 000
Purchases 57 000
Goods available for sale 77 000
Less: Inventory, Dec. 31 16 550 60 450
Gross Income 56 550
Operating expenses 26 000
Depreciation expense 5 000 31 000
Comprehensive Income ₱ 25 550
CAASI, Jefferson D. BSA-4A
REQUIREMENT 5: Closing entries and adjusting entries for the Home Office and closing entries for
the branch.

HOME OFFICE BOOKS BRANCH BOOKS

1. Sales ₱ 67 000 1. Sales ₱ 50 000
Inventory, Dec. 31, 20x1 11 000 Inventory, Dec. 31, 20x 6 000
Shipments to Branch 30 000 Inventory, Jan.1 20x1 ₱ 5 500
Inventory, Jan.1 20x1 ₱ 15 000 Purchases 7 000
Purchases 50 000 Operating Expense 8 000
Operating Expense 18 000 Depreciation Expense 1 000
Depreciation Expense 4 000 Shipments from Home Office 33 000
Income Summary 21 000 Income Summary 1 500
To adjust ending inventory and close To adjust ending inventory and close
temporary accounts. temporary accounts.

2. Branch 1 500 2. Income Summary 1 500

Branch Income 1 500 Home Office 1 500
To record the result of operations reported To report the result of operations
by the branch. to the home office.

3. Unrealized Profit- Branch Inventory 3 050

Branch Income 3 050
To record the realization of the 10% mark-up
on merchandise sold by branch.
Balance of Unrealized Profit 3 500
Less: Overvaluation of Branch Ending
Inventory: Billed price- cost 450
Realized Profit 3 050

4. Branch Income 4 550

Income Summary 4 550
To close the branch’s result of operations to
the general Income Summary account.

5. Income Summary 25 550

Retained Earnings 25 550
To close Income Summary account to
Retained Earnings.

CAASI, Jefferson D. BSA-4A