Accounting 7

Agency/Home Office

Problem 1:
A) Agency profit is determined separately b) agency profit is not determined separately

2018 2018
May 1-Working Fund – QC agency P 10,000 May 1-Working Fund – QC agency P 10,000
Samples Inventory – QC agency 50,000 Samples Inventory – QC agency 50,000
Cash P 10,000 Cash P10,000
Shipments of Merchandise- Shipments of Merchandise-
QC agency 50,000 QC agency 50,000
Working fund established Working fund established
& samples shipped to agency. & samples shipped to agency.

- Accounts Receivable – QC agency 176,000 - Accounts Receivable – QC agency 176,000

Sales – QC agency 176,000 Sales 176,000
Sales- QC agency. Sales- QC agency.

- Cost of Sales – QC agency 105,000 No entry

Shipment of Merchandise -
QC agency 105,000
Cost of good sold – QC agency

- Furniture & Fixtures – QC agency 24,000 - Furniture & Fixtures – QC agency 24,000
Expenses – QC agency 15,500 Expenses 15,500
Furniture & Fixtures 24,000 Furniture & Fixtures 24,000
Cash 15,500 Cash 15,500
Disbursements chargeable Disbursements chargeable
to agency. to agency.

- Expenses – QC agency 9,250 - Expenses 9,250

Cash 9,250 Cash 9,250
Replenishment of agency’s Replenishment of agency’s
working fund. working fund.

- Samples Expense – QC agency 3,750 - Samples Expense 3,750

Expenses – QC agency 400 Expenses 400
Samples Inventory – QC agency 3,750 Samples Inventory – QC agency 3,750
Accum. Depreciation – Furniture Accum. Depreciation – Furniture
& .fixtures – QC agency 400 & .fixtures – QC agency 400
Samples expense and depre- Samples expense and depre-
ciation of furniture & fixtures. ciation of furniture & fixtures.

31 – Sales 176,000
Cost of Sales – QC agency 105,000
Expenses – QC agency 25,150
Samples Expense – QC agency 3,750
Income Summary – QC agency 42,100
To close nominal accounts
to agency income summary
account.

31 – Income Summary – QC agency 42,100

Income Summary 42,100
To close agency income
summary account to income
summary.
Problem 2:
HOME OFFICE BOOKS (NST Corp.) BATANGAS BRANCH BOOKS
2018 2018
Mar. 1 Investment in Batangas Branch P 3,710,000 Mar. 1 Cash P 850,000
Cash P 850,000 Shipments from HO 2,860,000
Shipments to Batangas Branch 2,200,000 Home Office 3,710,000
Allo. For overvaluation of Shipments from HO
Branch inventory 660,000
Shipments to branch. 1 – Rent Expense 40,000
Prepaid Rent 40,000
1 - Furniture and Fixtures-Batangas 650,000 Cash 80,000
Investment in Batangas 650,000 1st & last month rent
purchased by Batangas
. 1 – Home Office 650,000
Cash 200,000
Accounts Payable 450,000
F and F purchased

Purchases 950,000
Accounts Payable 950,000
purchases

Accounts Payable 350,000

Cash 350,000
payment

Accounts receivable 1,602,500

Sales 1,602,500
Sales

Cash 800,000
Notes receivable 150,000
Accounts receivable 950,000
Collection

Advertising Expense 32,000

Sales salaries & commissions 75,000
Misc. selling expense 35,000
Misc. general expense 30,000
Cash 172,000
payment

31 Cash 250,000 31 Home office 354,000

Shipment to Batangas 80,000 Cash 250,000
Allo. for over. of BI 24,000 Shipment from HO 104,000
Investment in Batangas 354,000 Remittance & return to HO
Remittance & return

Inv. In Batangas 60,500 31 -Depreciation Exp. – F & f 6,500

Depreciation Exp. – F & f 6,500 Insurance Expense 5,000
Insurance Expense 5,000 Taxes Expense 4,000
Taxes Expense 4,000 Advertising Expense 45,000
Advertising Expense 45,000 Home Office 60,500
Charges to Batangas Charges from HO

- Sales salaries & commissions 4,000

Salaries Payable 4,000
Accrued salaries

31- Branch income or loss 15,000 Sales 1,602,500

Investment in Batangas 15,000 Merchandise Inventory, end 2,365,000
Net loss reported by branch Income Summary 15,000
Shipments from HO 2,756,000
- Allowance for over of BI 201,000 Purchases 950,000
Branch income or loss 201,000 Rent Expense 40,000
Realized profit on 30%mark up Advertising expense 77,000
Sales salaries & comm. 79,000
- Branch income 186,000 Insurance expense 5,000
Income Summary 186,000 Taxes expense 4,000
Close branch income Depreciation expense – F & F 6,500
Misc. Selling expense 35,000
Misc. general expenses 30,000
Close nominal accounts

31 - Home office 15,000

Income summary 15,000
Close income summary
Problem 3: D – P 124,400

Branch Control Home Office Control

(Home Office Books) (Branch Books)
Unadjusted Balance 166,400 103,200
Error in recording expense allocation( 52,400 – 45,200) 7,200
Cash remittance by branch not yet recorded (30,000)
Merchandise returned by branch not yet recorded by HO (12,000)
Shipment in transit 24,000
Collection from branch customer by HO (18,000)
Supplies purchased by HO shipped directly to branch _______ 8,000
Adjusted balance 124,400 124,400

Problem 4:

Home Office Lipa Branch San Pablo Branch

1. Lipa Branch 20,000 Cash 20,000
Cash 20,000 Home Office 20,000
Cash transfer Cash received

2.Lipa Branch 50,000 Shipment from HO 50,000 Shipment from HO 80,000

San Pablo Branch 80,000 Home Office 50,000 Home Office 80,000
Shipment to Lipa 40,000 Shipment Shipment
Shipment to SP 64,000
Allo. For O of BI 26,000
shipment

3. F & F -Lipa Branch 15,000

F & F San Pablo 20,000
Cash 30,000
Purchase of furn.

4. Expenses 8,000 Home Office 8,000

Lipa Branch 8,000 Cash 8,000
Paid by Lipa HO expense

5. San Pablo Branch 29,400 Home Office 29,400 Cash 29,400

Lipa Branch 29,400 Sales discounts 600 Home Office 29,400
AR of Lipa Accounts Receivable 30,000 AR of Lipa
collected by San Pablo Collected by SP

6. San Pablo branch 10,000 Home Office 10,000 Cash 10,000

Lipa branch 10,000 Cash 10,000 Home Office 10,000
Cash transfer Cash transfer Cash transfer

7. Shipment to Lipa 4,000 Home Office 5,000

Allo for O of BI 1,000 Shipment from HO 5,000
Lipa Branch 5,000 Mdse returned
Mdse returned

8. Lipa Branch 1,800 Expenses 1,800 Home Office 1,800

San Pablo branch 1,800 Home Office 1,800 Cash 1,800
Lipa expenses Paid by San Pablo Lipa’s expenses

9. Lipa Branch 40,500 Shipment from HO 40,000

Shipment to Lipa 32,000 Freight in 500
Allo. for O of BI 8,000 Home Office 40,500
Cash 500 Shipment from HO
Shipment to Lipa

10. Shipment to Lipa 32,000 Home Office 40,700 Shipment from HO 40,000
Shipment to SP 32,000 Shipment from HO 40,000 Freight in 550
Mdse from Lipa to San Pablo Freight in 500 Home Office 40,550
Cash 200
San Pablo Branch 40,550 Mdse shipped to SP
Interbranch transfer-
Freight expense 150
Lipa Bramch 40,700
Mdse transfer from Lipa to San Pablo
Problem 6:
Home Office Branch 1 Branch 2
1. Branch 1 25,000 Shipment from HO 25,000 Shipment from HO 33,000
Branch 2 33,000 Home Office 25,000 Home Office 33,000
Shipment to 25,000 Shipmnet from HO Ship’t. from HO
Branch1
Shipment to 33,000
Branch2
Shipment to
B1,B2

2. Cash 18,000 Branch 1 18,000

Branch 2 18,000 Accounts receivable 18,000
Collected AR of B2 AR collected by
B1

3. Expenses 2,000 Home Office 2,000

Branch 2 2,000 Cash 2,000
Paid by B2 HO expenses

4. Branch 1 10,000 Cash 10,000 Cash 12,000

Branch 2 12,000 Home Office 10,000 Home Office 12,000
Cash 22,000 Cash received Cash received
Cash transfer from Home office from Home office

5. Branch 2 12,500 Expenses 12,500

Cash 12,500 Branch 1 12,500
Branch 2 expenses Paid by Bracnh
1

6. Expenses 3,700 Branch 1 3,700

Branch 2 3,700 Cash 3,700
Paid by Bracnh 2 B1 expenses

7. Shipment to B1 1,500 Home Office 1,500

Branch 1 1,500 Shipment from HO 1,500
Mdse returned Mdse returned

Correcting Entry:
Branch 1 9,200 Branch 2 9,200 Home Office 9,200
Branch 2 9,200 Home Office 9,200 Branch 1 9,200
#

Books of Branch 1 Books of Branch 2

Branch 2 Branch 1
12,500 18,000 18,000 12,500
3,700 3,700
12,500 21,700 21,700 12,500

Bal. 9200 Bal. 9,200

Problem 8:
Home Office Branch Books
1) Inv. In Branch 280,000 Shipment from HO 280,000
Shipment to Branch 200,000 Home Office 280,000
Allo. for O of BI 80,000 Shipmnet from HO
shipment

2) Inv. In Branch 36,000 Income Summary 36,000

Branch income 36,000 Home Office 36,000
Branch net income Branch net income

3) Allo. for O of BI 76,000

Branch income 76,000
Realized profit

Branch income 112,000

Income Summary 112,000

Allowance for O of BI
76,000 – cost of sales Beg. Invty 12,000 Or:
 Shipment 80,000 Mdse Inventory @ billed price 56,000
76,000 92,000 Mdse Inventory @ cost 40,000
Bal. 76,000 Allo. for O of BI balance, end 16,000