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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES PRACTICAL ACCOUNTING 2

2013-2014

AGENCY, HOME OFFICE AND BRANCH ACCOUNTING P2 - 105


AGENCY ACCOUNTING
Pro !"# 1$ On December 1, 2013, the IPhone6 Co. established an agency in Laguna, sending its merchandise sam les costing P1!,"!0 and a #or$ing %und o% P&,000 to be maintained on the im rest basis. During the month o% December, the agency transmitted to the home o%%ice sales orders #hich #ere billed at P6',3(0. ) home o%%ice disbursement chargeable to the sales agency is the ac*uisition o% %urniture and %i+tures %or Laguna, P2!,000 to be de reciated at 2', er annum. -he agency aid e+ enses o% P3,(1!. On December 31, 2013, the agency sam les #ere .alued at P10,0"!. -he gross ro%it rate o% the goods shi ed to the agency 20, based on selling rice. /o# much is the net income o% the agency %or the month ended December 31, 20130 a. P 101 b. P 2,((6 c. P 3,3(6 d. P 12,("6 Pro !"# 2$ On 2une 1, 2013, -he Ca itol Inc. established an agency in District 12, sending sam les costing P',200,000 #hich are use%ul until 3ay 31, 201' and ha.e a sal.age .alue o% P('0,000. ) #or$ing %und o% P3,'12,!00 is to be maintained using im rest basis. During 2013, the agency submitted to the home o%%ice sales order amounting to P3!,'3",!00. 4ales er in.oice #ere P2",!62,!00 #hich #ere duly a ro.ed by the home o%%ice. Collections during the year amounted to P1',"(',000 net o% ', sales discount. -he cost o% merchandise sold during the year is "0, o% the gross selling rice. 5ouchers %or the e+ enses amounted to P1,(3",!00. /o# much is the net income #ould be re orted by District 12 agency on December 31, 20130 a. P ','"1,2!0 b. P ',13!,2!0 c. P !,!3!,2!0 d. P3,(!!,2!0 Pro !"# 3$ 2ournali6e the %ollo#ing District 2 )gency transactions7 8)ssume Per etual In.entory method9 A%"&'( Tr)&*)'+,o&* a. January 1. :ecei t o% P1,000 re.ol.ing %und %rom home o%%ice. b. January 1 31 Orders sent by agency to home o%%ice and a by the home o%%ice amounting to P200. 8mar$1u on cost is 66 2;3 ,9 Ho#" o--,'" oo.*

ro.ed

Collection by home o%%ice o% the P200 agency sales c. January 1 31 P!0 disbursement %rom the re.ol.ing %und.

d. January 31 :e lenishment o% the re.ol.ing %und. e. January 31 Closing entry to determine the ro%it attributable to the agency.

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Pro !"# 4$ <-he Ca itol= Inc. o ens a sales agency in District 13 and a #or$ing %und o% P1!,000 is established on im rest basis. -he %und #as re lenished in the amount o% P12,000 8.arious agency e+ enses9. -he entry in the home o%%ice boo$s %or the re lenishment is a. Dr > In.estment in District 13 agency and Cr > ?or$ing %und %or P12,000. b. Dr > District 13 agency e+ enses and Cr > ?or$ing %und %or P12,000. c. Dr > District 13 agency e+ enses and Cr > Cash %or P12,000. d. Dr > In.estment in District 13 agency and Cr > Cash %or P12,000.

HOME OFFICE AND BRANCH ACCOUNTING


Pro !"# 1$ ) home o%%ice shi s in.entory to its branch at 12!, o% cost. -he re*uired balance o% the de%erred ro%it account is P "(,"!0. During the year, the home o%%ice sent merchandise to the branch costing P "(',000. )t the start o% the year, the branch@s 4tatement o% Ainancial Position sho#s P31!,000 o% in.entory on hand that #as ac*uired %rom the home o%%ice. By #hat amount is the cost o% goods sold 8COC49 o.erstated0 a. P 101 b. P1(0,2!0 c. P1&6,000 d. P1,0"6,2!0 Pro !"# 2$ ) home o%%ice shi s in.entory to its branch at a mar$1u o% 12!, abo.e cost. -he re*uired balance o% the allo#ance %or o.er.aluation account is P 1,'2!,000. During the year, the home o%%ice sent merchandise to the branch costing P &,000,000. )t the start o% the year, the branch@s 4tatement o% Ainancial Position sho#s P1,(00,000 o% in.entory on hand that #as ac*uired %rom the home o%%ice. By #hat amount #ill the )llo#ance %or Dnreali6ed Cross 3argin in Branch In.entory account be debited at the end o% the year0 a. P2,610,000 b. P1,1(!,000 c. P10,(2!,000 d. P12,2!0,000 Pro !"# 3$ During the year 2013, goods billed at P3,2!0,000 #ere shi ed to the branch at 130, cost. -he account Loading in Branch In.entory has a balance o% P1,22!,000 be%ore adEustment. -he beginning in.entory o% the branch %rom the home o%%ice at cost is P2,3"!,000F the beginning in.entory o% the branch %rom outsiders is P!'0,000F urchases %rom outsiders is P1,'!0,000. Guestions7 1. /o# much is the total goods a.ailable %or sale o% the branch0 a. P!,30(,33! b. P6,100,000 P(,0&0,000

c. P6,33",!00

d.

2. /o# much is the total goods a.ailable %or sale o% the branch %rom the home o%%ice0 a. P!,30(,33! b. P6,100,000 c. P6,33",!00 P(,0&0,000

d.

Pro !"# 4$ -he District ' branch o% -he Ca itol Inc. submitted trial balance as o% December 31, 2013 a%ter the %irst year o% o erations7 Debit Credit Cash P10,'00 )ccounts recei.able 63,200 4hi ments %rom home o%%ice 16(,000 H+ enses 10,(00 4ales P13','00 /ome o%%ice current 11(,000 3erchandise In.entory, December 31 > P!0,'00 4hi ments to the branch are billed at 1'0, o% cost Guestions7 1. -he adEustment to the cost o% goods sold o% the Branch account amounts to7 a. P 101 b. P1','00 c. P33,600 2. -he true net income o% the branch during 2013 #as a. P 101 b. P6,000 c. P33,600

d. P6(,600 d. P3&,600

3. -he o.erstatement in the branch in.entory at December 31, 2013 #as

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a. P 101 b. P6,000 c. P1','00 d. P2&,'00 Pro !"# 5$ <-he Ca itol= Inc. has established a branch in District ! by sending goods costing P1(',&00 and P(0,000 cash on 2uly 1, 2013. /ome o%%ice initiated transactions %or the remainder o% the year are %ound belo#. )t the end o% the year, the com any@s controller has %ound out that 4eneca Crane, the accounting sta%% assigned in recording the transactions bet#een home o%%ice and the branches, had %ailed to record all the transactions initiated by the branch. Because o% this, there is a signi%icant discre ancy bet#een the balances o% the reci rocal accounts. -he home o%%ice ac*uired com uter e*ui ment amounting to P'20,000 %or the branch on )ugust 1, 2013. )s er agreement, the branch #ill $ee all the ro erty, lant and e*ui ment records. Coods costing P320,000 #ere shi ed %rom the home o%%ice to branch on Io.ember &, 2013. )dditional cash amounting to P!3,000 #as trans%erred to the branch on December 2, 2013. ) branch customer has incorrectly aid P2!,000 cash to the home o%%ice on December 16, 2013. -he home o%%ice incurred P6!,000 o ad.ertising cost and P&6,000 o% salaries. District ! branch is to shoulder 30, and 20, o% these e+ enses, res ecti.ely.

Aor ur ose o% reconciling the reci rocal accounts, the controller has instructed the branch accountant to send a co y o% the /ome O%%ice Current general leger to the home o%%ice. (;3 11;! 12;20 H*ui ment ac*uisition Cash remittance :eturn o% goods to /O P'20,000 "(,000 '&,000 Ho#" O--,'" C/rr"&+ ";1 Coods %rom /O ";1 Cash (;1! Collection o% /O@s ): 11;10 Coods %rom /O 12;' Cash P1(',&00 (0,000 113,600 230,000 !0,300 P111,(00 Determine the %ollo#ing7 1. DnadEusted balance o% the In.estment in District ! account7 a. P1,1'2,(00 b. P1,0'',(00

c. P1,0"1,600

d. P1,0!(,200 d. P&'6,'00 net

2. Iet adEustment in the /ome O%%ice Current account. Indicate #hether net debit or net credit7 a. P&'6,'00 net debit b. P&'6,'00 net credit c. P&&6,'00 net debit credit

Pro !"# 0$ Lea Products Cor oration has t#o branches, Jalibo and )lta.as, to #hich merchandise is billed at 20, abo.e cost. Partial trial balance accounts o% the three entities at December 31, 2013 are summari6ed as %ollo#s7 /ome O%%ice Jalibo Branch )lta.as Branch In.entory P (00,000 P 1(0,000 P 2'0,000 In.estment in Jalibo Branch '!0,000 In.estment in )lta.as Branch '20,000 4hi ments %rom /ome O%%ice 600,000 360,000 Purchases 1,600,000 H+ enses &00,000 2!0,000 200,000 /ome O%%ice '!0,000 300,000 Loading > Jalibo Branch 130,000 Loading > )lta.as Branch 120,000 4ales 1,&!0,000 &00,000 "!0,000 4hi ments to Jalibo Branch !00,000 4hi ments to )lta.as Branch '00,000 )dditional In%ormation7 Physical in.entories on hand as counted by the three entities at December 31, 2013 #ere as %ollo#s7 /ome O%%ice Jalibo Branch )lta.as Branch P"00,000 210,000 1!0,000

AGENCY, HOME OFFICE AND BRANCH ACCOUNTING - P2 105

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Guestions7 1. -he ending in.entory o% Lea Products Cor oration must be7 2. -he combined net income o% home o%%ice and branches %or 2013 must be7 3. Correct net income o% the branches %or 2013 must be7 Pro !"# 1$ /ome o%%ice bills its branch %or merchandise shi ments at 30, abo.e cost. -he %ollo#ing are some o% the account balances in the boo$s o% home o%%ice and its branch as o% December 31, 20137 In.entory, 2anuary 1 4hi ments %rom /ome O%%ice Purchases 4hi ments to Branch Branch In.entory )llo#ance 4ales O erating H+ enses /ome O%%ice Boo$s P!,000 22!,000 36,2!0 13,12! 300,000 "2,!00 Branch Boo$s P1',!00 3","00 !0,000

1(0,000 2",!00

Per hysical count, the ending in.entory o% the branch is P10,!00 including goods %rom outside urchases o% P6,&2!F the ending in.entory o% the home o%%ice is P30,000. ?hat is the combined net income %or the year0 a. P136,(!0 b. P13',6"! c. P13!,""1 d. P12',!!0 Pro !"# 2$ On December 31, 2013, the home o%%ice o% :hada Com any recorded a shi ment o% merchandise to its Calamba branch as %ollo#s7 Calamba branch 30,000 4hi ment to Calamba Branch 2!,000 Dnreali6ed ro%it in branch in.entory ',000 Cash 8%reight charges9 1,000 -he Calamba branch sells '0, o% the merchandise to outside entities during the rest o% December 2013. -he boo$s o% the home o%%ice and Calamba branch are closed on December 31 o% each year. )t #hat amount should the 60, o% the merchandise remaining unsold at December 31, 2013 should be included in the ublished statement o% %inancial osition o% :hada Com any at December 31, 20130 a. P 1!,600 b. P 1!,000 c. P 1(,000 d. P 1(,600 Pro !"# 3$ During 2013, goods #ere shi ed to the branch at 120, abo.e cost. -he reci rocal account in the income statement o% the home o%%ice amounted to P23",!00. -he balance o% the contra branch current account re orts a balance o% P3"!,000 be%ore adEustment. -he beginning in.entory o% the branch %rom the home o%%ice at cost is P360,000 and %rom outsiders, P&3,000. -he branch urchased goods %rom outsiders during the year amounting to P12!,200. -he ending in.entory o% the branch as re orted in the combined statement o% %inancial osition is P3'!,000. -he branch income as re orted in the combined %inancial statements and as re orted in the branch@s boo$s are P201,12! and P120,"!0, res ecti.ely. /o# much is the cost o% goods sold to be re orted in the branch@s income statement %or the year ended December 31, 20130 a. P !!1,0"! b. P !1',!00 c. P '"0,"00 d. P "&0,!00 Pro !"# 10$ :ob. Co. o erates a branch in Cebu. On December 31, 2013, the Cebu branch in the home o%%ice boo$s sho#ed a debit balance o% P3,132,660. -he intero%%ice accounts #ere in agreement at the beginning o% the year. Aor ur oses o% reconciling the intero%%ice accounts, the %ollo#ing %acts #ere gi.en7 It is the olicy o% the home o%%ice to bill its branches at 20, abo.e cost. 4hi ments %rom home o%%ice to Cebu branch costing P'3!,000 #ere in transit as o% year1end. Cebu branch recorded tha said trans%er t#ice at cost7 one on December 31, 2013 and the other on 2anuary 1, 201'. -he home o%%ice allocated to the Cebu branch K o% the rent e+ enses it aid %or the year ended 2013. -he rent e+ ense #as P1'',000. -he home o%%ice sent a debit memo to Cebu branch %or the allocated amount, but the branch recorded the said debit memo by debiting the home o%%ice > current and crediting rent ayable. -he branch #rote1o%% uncollectible accounts amounting to P60,"20. -he allo#ance %or doubt%ul accounts is maintained in the boo$s o% the home o%%ice. -he home o%%ice recorded the #rite1o%% as a #rite1o%% o% its o#n accounts recei.able. -he branch collected accounts recei.able %rom home o%%ice@s customers amounting to P31",!20, net o% 2, cash discount. -he branch treated the said transaction as i% it #as a collection %rom its o#n customers. -he home o%%ice #as not yet noti%ied o% the said collection

AGENCY, HOME OFFICE AND BRANCH ACCOUNTING - P2 105

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?hat is the unadEusted balance o% the home o%%ice > current account in the boo$s o% Cebu branch on December 31, 20130 a. P 2,"!','20 b. P 2,"6(,&'0 c. P 2,"(1,&00 d. P 2,(!!,&'0 Pro !"# 11$ Aire Com any has a branch in Baguio and Da.ao. -he reci rocal accounts bet#een the home o%%ice and the branches #ere in agreement at the beginning o% 2013. /o#e.er, at December 31, 2013, the %ollo#ing reci rocal balances are %ound in the home o%%ice boo$s7 In.estment in Baguio In.estment in Da.ao Data %or reconciliation o% the reci rocal accounts are as %ollo#s7 On December 2&, 2013, the home o%%ice has instructed Baguio to trans%er P"',000 cash to Da.ao. Baguio recorded this transaction immediately. D on recei t, Da.ao recorded this trans%er at P'",000. -he home o%%ice ho#e.er has not yet recorded this inter1branch transaction as o% the end o% the year. Aire has trans%erred goods costing P2(,&00 to Baguio branch and aid P2,!00 o% shi ing cost on December 16, 2013. Baguio shi ed all these goods to Da.ao u on instruction o% the home o%%ice on December 30, 2013. 4hi ing cost is P3,600 %reight collect. /ad the goods #ere shi ed directly to Da.ao, P!,000 o% %reight cost should ha.e been incurred. -he inter1branch shi ment #as not recorded by the branches and the home o%%ice as #ell. Baguio has collected cash o% P!,"!0 %rom Da.ao@s customers. -his transaction is not yet recorded by Da.ao and the home o%%ice. -he home o%%ice has already allocated P11,000 and P&,000 o% administrati.e e+ enses to Baguio and Da.ao, res ecti.ely. -he branches are not yet noti%ied. Baguio remitted P1',300 cash to the home o%%ice on December 12, 2013. -he home o%%ice has %ailed to record the said remittance. Da.ao returned goods costing P6,(!0 to the home o%%ice. -he goods #ere shi on December 2' but no entries ha.e been made in the home o%%ice boo$s. Com ute the %ollo#ing7 1. )dEusted balance o% In.estment in Baguio account. LLLLLLLLLLLLLLLLLLLLLLL 2. )dEusted balance o% In.estment in Da.ao account. LLLLLLLLLLLLLLLLLLLLLLL 3. DnadEusted balance o% /ome O%%ice Current account in Baguio@s boo$s. LLLLLLLLLLLLLLLLLLLLLLL '. DnadEusted balance o% /ome O%%ice Current account in Da.ao@s boo$s. LLLLLLLLLLLLLLLLLLLLLLL Pro !"# 12$ -he %ollo#ing transactions #ere entered in the branch current account o% 3a$ati /ead O%%ice %or the year 20137 Beg. Balance, 1;1;13 '!&,2!( 4hi ments to branch, ';1;13 212,'00 Cash %or#arded, 6;1;13 1!,000 O erating e+ enses charged to the Branch,12;31;13 2,((0 In.estment in Branch > Ortigas 33,300 &;12;13 Collection o% ): ed on December 1& and recei.ed P1(6,!00 (',000

4hi ments to branch during the year #ere made at 20, abo.e cost.

AGENCY, HOME OFFICE AND BRANCH ACCOUNTING - P2 105

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-he balance o% the )llo#ance %or O.er.aluation o% Branch In.entory #as P21,300 at the beginning, and the allo#ance #as #ritten do#n to P1',"00 at year end. On December 10, 2013, the home o%%ice urchased a iece o% e*ui ment amounting to P36,000 %or its branch in Ortigas. -he said e*ui ment has a use%ul li%e o% %i.e years and #ill be carried in the boo$s o% the branch, but the home o%%ice recorded the urchase by debiting the H*ui ment. -he branch recorded the de reciation o% the e*ui ment by debiting the /ome O%%ice Current account and crediting )ccumulated De reciation. Debit memo regarding the allocation o% o erating e+ enses to the Ortigas branch #as recei.ed by the branch on 2anuary 2, 201'.

-he Ortigas branch re orted net income o% P1&","30. It also remitted cash to the home o%%ice on December 31, 2013 amounting to P33,000, #hich the home o%%ice recei.ed and recorded on 2anuary 1, 201'. -he inter1o%%ice accounts #ere in agreement at the beginning o% the year. Com ute the %ollo#ing7 1. /o# much is the adEusted balance o% Branch Current account on December 31, 2013 be%ore the necessary closing entries #ere made0 LLLLLLLLLLLLLLLLLLLLLLL 2. ?hat is the amount o% adEustment in the )llo#ance %or O.er.aluation o% Branch In.entory account0 LLLLLLLLLLLLLLLLLL 3. /o# much is the net income o% Ortigas branch that #ill be re orted in the combined income statement o% 3a$ati Com any0 LLLLLLLLLLLLLLLLLLLLLLL '. ?hat is the amount o% the /ome O%%ice Current account that #ill be re orted in the boo$s o% Ortigas branch a%ter closing entries are made0LLLLLLLLLLLLLLLLLLLLLLL Pro !"# 13$ -he home o%%ice trans%ers in.entory #orth P600,000 to BranchM1. Areight aid by the home o%%ice is P'0,000. Later on, the home o%%ice instructs BranchM1 to trans%er the merchandise to BranchM2. BranchM1 ays %reight o% P12,000. I% the merchandise had been shi ed %rom home o%%ice to BranchM2, %reight cost #ould ha.e been P!6,000. Hntries to record the transactions described includes a. a credit to sa.ings on %reight o% P ',000 in the boo$s o% BranchM1. b. a credit to sa.ings on %reight o% P ',000 in the boo$s o% BranchM2. c. a credit to sa.ings on %reight o% P ',000 in the boo$s o% the home o%%ice. d. none o% these. Pro !"# 14$ Ci.en7 /ome O%%ice Control 8Branch Boo$s9 2an. 1, 2013 Balance 2an. 3, 2013 Cash remitted to home o%%ice 2an. !, 2013 4hi ments %rom home o%%ice 2an. 2(, 2013 H+ enses %rom home o%%ice 2an. 2(, 2013 Cash remitted to home o%%ice 2an. 2(, 2013 3erchandise returned to home o%%ice Branch Control 8/ome O%%ice Boo$s9 2an. 1, 2013 Balance 2an. 3, 2013 Cash recei.ed %rom branch 2an. ', 2013 4hi ments to branch 2an. 2(, 2013 H+ ense allocation 2an. 2(, 2013 4hi ments to branch 2an. 2(, 2013 Collection %rom branch customer 60,000 (0,000 120,000 '!,200 30,000 12,000 60,000 (0,000 120,000 !2,'00 2',000 1(,000

AGENCY, HOME OFFICE AND BRANCH ACCOUNTING - P2 105

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2an. 2(, 2013

4u shi

lies urchased %rom branch and ed directly to the branch

(,000

H+ce t %or the error by the branch in recording its share o% allocated e+ enses, all di%%erences are timing di%%erences. -he adEusted balance o% reci rocal accounts is7 a. P 11",200 b. P 103,200 c. P 12','00 d. P 166,'00 Pro !"# 15$ -he Ca itol Inc. has t#o branches to #hich merchandise is trans%erred at cost lus 20,, lus %reight charges. On Io.ember 30, 2013, home o%%ice shi ed merchandise that cost P!,!00 to its District 1 branch, and the P200 shi ing charges #as aid by the home o%%ice. On December 1!, 2013, the District 2 branch encountered an in.entory shortage , and District 1 branch shi ed the merchandise to the District 2 branch at a %reight cost o% P160 aid by District 1 branch. 4hi ing charges %rom the home o%%ice to the District 2 branch #ould ha.e been P1"!. Guestion7 1. I% merchandise is unsold at year end, the District 2 branch #ill in.entory the merchandise at #hat amount0 2. I% merchandise is unsold at year end, ho# much #ould the home o%%ice include as in.entory in its re ort to shareholders0

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