Afar 106 - Home Office and Branch Accounting PDF

HOME OFFICE AND BRANCH ACCOUNTING
EXERCISE 1
The Maynilad Corporation decided to open a branch in Cebu. Shipments of merchandise
to the branch totaled P540,000 which included a 20% mark-up on cost. All accounting
records are to be kept at the home office.
The branch submitted the following report summarizing its operations for the period
ended December 31, 2019.
Sales on account P740,000
Sales on cash basis 220,000
Collections of account 600,000
Expenses paid 380,000
Expenses unpaid 120,000
Purchase of merchandise for cash 260,000
Inventory on hand, Dec 31; 80% from home office 300,000
Remittance to the home office 550,000
1. How much is the ending inventory at cost?

2. The branch operations insofar as the home office is concerned resulted in a
net income of?
EXERCISE 2
The following information came from the books and records of Pogi Corporation and
its branch. The balances are as of December 31, 2019, the fourth year of the
corporation’s existence.
Home office Branch
Dr. (Cr. ) Dr. (Cr.)
Sales P(850,000)
Shipments to branch P(240,000)
Shipments from home office 360,000
Purchases 180,000
Expenses 160,000
Inventory, January 1, 2019 72,000
Unrealized profit in branch inventory (136,000)
There are no shipments in transit between the home office and the branch. Both
Shipments accounts are properly recorded. The closing inventory at billed prices
includes merchandise acquired from the home office in the amount of P54,000 and
P30,000 acquired from vendors for a total of P84,000.
1. How much of the beginning inventory of the branch was acquired from
“outsiders”?
2. How much is the correct net income of the branch?
3. What is the entry to adjust the net income of the branch on the home office
books?
EXERCISE 3
The following were found in your examination of the interplant accounts between
the Home Office and the Makati Branch:
A. Transfer of fixed assets from Home Office amount to P53,960 was not booked by
the branch.
B. P10,000 covering marketing expense of another branch was charged by the Home
Office to Makati branch.
C. Makati branch recorded a debit note on inventory transfers from Home Office
of P75,000 twice.
D. Home Office recorded cash transfer of P65,600 from Makati branch as coming
from Quezon City branch.
E. Makati branch reversed a previous debit memo from Pasig branch amounting to
P10,500. Home office decided that this charge is appropriately Quezon City
branch’s cost.
F. Makati recorded a debit memo from Home Office of P4,650 as P4,560.
Sources: CRC Ace Review School, RESA, CPAR

G. Before the above discrepancies were given effect, the balance in the Home
Office books of its Makati Branch Current account was a debit balance of
P165,920.
Determine the adjusted reciprocal balances before branch net income
EXERCISE 4
Yolanda Garmet Company operates a branch in Tacloban City. At the end of the year,
the branch account in the books of the home office at Manila shows a balance of
P150,000. The following information ascertained:
A. The home office has billed the branch the amount of P37,500 for the
merchandise, which was in transit on December 31.
B. A home office accounts receivable for P10,500 was collected by the branch.
Said collection was not reported to the home office by the branch.
C. Supplies of P4,500 was returned by the branch to the home office but the home
office has not yet reflected in its records the receipts of the supplies.
D. The branch made a profit of P10,100 for the month of December but the home
office erroneously recorded it as P11,180
E. The branch has not received cash in the amount of P25,000 sent by home office
on December 31. This was charge to General Expense account.
All transactions are presumed to have been properly recorded. What is the balance
of the Home office account on the books of the branch as of December 31, before
adjustments?
EXERCISE 5
The following information came from the books and records of Philip Corporation
and its branch. The balances are as of December 31, 2019, the fourth year of the
corporation’s existence.
Home Office Branch
Dr. (Cr.) Dr. (Cr.)
Sales P(320,000)
Shipments to branch P(80,000)
Shipments from home office 120,000
Purchases 50,000
Expenses 80,000
Inventory, January 1, 2019 36,000
Unrealized profit in branch inventory (50,000)
There are no shipments in transit between the home office and the branch. Both
shipments accounts are properly recorded. The closing inventory at billed prices
includes merchandise acquired from the home office in the amount of P21,000 and
P9,000 acquired from vendors for a total of P30,000.
1. Beginning inventory acquired from outsiders.
2. Correct cost of beginning inventory.
3. Realized profit from inventory shipments.
4. Correct net income of branch.
5. Correct ending inventory.
6. Allowance balance at the end.
EXERCISE 6
The M Company maintains branches that market the products that it produces.
Merchandise is billed to the branches at 25% above costs, with the branches paying
freight charges from the home office to the branch. On November 15, Branch No. 1
ships part of its stock to Branch No. 5 upon authorization by the home office.
Originally Branch No. 1 had been billed for this merchandise at P160,000 and had
paid freight charges of P35,000 on the shipment from the home office. Branch No.
5, upon receiving the merchandise, pays freight charges of P25,000 on the shipment

from Branch No. 1. If the shipment had been made from the home office directly to
branch No. 5, the freight cost to Branch No. 5 would have been P40,000.
Required: Prepare the journal entries necessary to record the above information
on the books of Branch No. 1, Branch No. 5 and Home Office.
EXERCISE 7
GLUTHATHIONE Products Corporation has two branches, Baguio and Davao, to which
merchandise is billed at 20% above cost. Partial trial balance accounts of the
three entities at December 31, 2019 are summarized as follows:
Home Office Baguio Branch Davao Branch

Inventory P800,000 P180,000 P240,000
Baguio Branch 450,000
Davao Branch 420,000
Shipment from home office 600,000 360,000
Purchases 1,600,000
Expenses 900,000 250,000 200,000
Home office 450,000 450,000
Loading – Baguio Branch 130,000
Loading – Davao Branch 120,000
Sales 1,950,000 900,000 750,000
Shipment to Baguio Branch 500,000
Shipment to Davao Branch 400,000
Additional information:
Physical inventories on hand at December 31, 2019 were as follows:
Home Office P700,000 at cost
Baguio Branch 210,000 at billed prices
Davao Branch 150,000 at billed prices
1. The ending inventory of Gluthathione Products Corporation

2. The combined net income of home office and branches for 2019
3. The correct net income of branches for 2019
4. The balance of allowance for overvaluation

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HOME OFFICE AND BRANCH ACCOUNTING

1. How much is the ending inventory at cost?

Sources: CRC Ace Review School, RESA, CPAR

Sources: CRC Ace Review School, RESA, CPAR

Home Office Baguio Branch Davao Branch

1. The ending inventory of Gluthathione Products Corporation

Sources: CRC Ace Review School, RESA, CPAR

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