Académique Documents
Professionnel Documents
Culture Documents
Problem I
Sales....................................................................................................................... 42,000
Shipments to Newark Branch................................................................
35,000
Unrealized Intercompany Inventory Profit...........................................
7,000
Cost of merchandise shipped t branch: P42,000/1.20= P35,000.
Shipments to Newark Branch.............................................................................
Unrealized Intercompany Inventory Profit........................................................
Sales Returns...........................................................................................
Cost of merchandise returned by branch: P750/1.20= P625.
625
125
2,600
4,125
750
2,600
4,125
1,525
Problem II
a. Unrealized Intercompany Inventory Profit has a credit balance of P9,450 before adjustment on
December 31, calculated as follows:
Merchandise transferred by home office at billed price,
35% above cost (P16,200 plus P20,250)............................................. P36,450
Merchandise transferred by home office at cost, P36,450/1.35.... 27,000
Additions to unrealized profit account resulting from transfers
by home office..................................................................................... P9,450
b. Unrealized Intercompany Inventory Profit.................................................. 4,550
Cash.......................................................................................................
4,550
c. Branch Books:
Home Office........................................................................................... 540
Shipments from Home office...................................................
Home Office Books:
Shipments to Branch.............................................................................. 400
Unrealized Intercompany Inventory Profit........................................... 140
Branch........................................................................................
Cost of merchandise returned: P540/1.35, or P400.
540
540
Problem III
a. The branch office inventory as of December 1 considered of:
Shipments from Home Office (see below)............................................................. P 12,000
Purchases from outsiders (balance of inventory)..................................................
3,000
Total inventory........................................................................................................... P 15,000
Goods acquired from home office and included in branch inventory at billed price are calculated
as follows:
Balance of unrealized intercompany inventory profit, December 31.................... P 3,600
Additions to unrealized profit account during December, 20% of
shipments to branch (20% x P8,000)............................................................................. 1,600
Balance of unrealized profit account, December 1.................................................. P 2,000
Balance of unrealized profit account, December 1, P2,000 / 20% markup on
cost equals December 1 inventory at cost................................................................ P 10,000
Add 20% markup...........................................................................................................
2,000
Goods in branch inventory at billed price................................................................. P 12,000
b. Unrealized Intercompany Inventory Profit......................................... 2,200
Branch Income............................................................................
2,200
Selling Expenses............................................................................ 80
Accumulated Depreciation-Store Furniture........................
Depreciation:1% of P8,000, or P80.
260
80
31 Selling Expenses............................................................................
Accrued Expenses Payable.................................................
120
120
150
16,000
16,950
1,000
31 Sales.................................................................................................20,500
Income Summary.......................................................................
20,500
5,000
10,500
4,560
1,840
450
1,000
450
450
2,200
1,750
Problems V
(1)
SPENCER CO.
Balance Sheet for Branch
December 31,20x4
Assets
Cash..................................................... P 2,650
Accounts receivable........................ 12,850
Merchandise inventory..................... 14,600
Store supplies......................................
300
Prepaid expenses...............................
120
Furniture and fixtures.............. P 3,600
Less: Accumulated
depreciation..............
576 3,024
Total assets....................................... P 33,544
Liabilities____________________
Accounts payable................................... P 4,200
Accrued expenses...................................
105
Home office............................................... 29,239
________
Total liabilities............................................ P 33,544
SPENCER CO.
Income Statement for Branch
For Month Ended December 31, 20x4
Sales........................................................................................................................................... P 20,000
Cost of goods sold:
Merchandise inventory, December 1................................................ P 14,400
Purchases..............................................................................................
4,100
Shipments from home office............................................................... 10,200
Merchandise available for sale.......................................................... P 28,700
Less: Merchandise Inventory, December 31..................................... 14,600
Cost of goods sold....................................................................................................... 14,100
Gross profit................................................................................................................................. P 5,900
Operating expenses:
Advertising expense............................................................................. P 2,800
Salaries and commissions expense.....................................................
2,350
Store supplies expense.........................................................................
280
Miscellaneous selling expense............................................................
1,050
Rent expense........................................................................................
1,500
Depreciation expense furniture and fixtures..................................
36
Miscellaneous general expense.........................................................
905
Total operating expenses..........................................................................................
8,921
Net loss...................................................................................................................................... P 3,021
SPENCER CO.
Balance Sheet for Home Office
December 31, 20x4
Assets
Liabilities and Stockholders Equity_______
Cash..................................................... P10,350
Liabilities
Cash in transit.....................................
1,500
Accounts payable................ P 35,400
Accounts receivable........................ 26,200
Accrued expenses...............
260 P 35,660
Merchandise inventory..................... 24,200
Stockholders Equity
Store supplies......................................
380
Capital Stock......................... P 65,000
Prepaid expenses...............................
350
Less deficit..............................
4,476
60,524
Furniture and fixtures.............. P 8,500
Less: Accumulated
depreciation.............. 2, 585 5,915
Branch..................................... P29,239
Less: Unrealized intercompany
inventory profit............ 1,950 27,289
Total assets........................................ P 96,184
SPENCER CO.
Income Statement for Home Office
For Month Ended December 31, 20x4
Sales........................................................................................................................................... P 44,850
Cost of goods sold:
Merchandise inventory, December 1................................................ P 31,500
Purchases..............................................................................................
27,600
Merchandise available for sale.......................................................... P 59,100
Less: Shipments to branch...................................................................
8,500
Merchandise available for own sales................................................ P 50,600
Less: Merchandise Inventory, December 31..................................... 24,200
Cost of goods sold.......................................................................................... 26,400
Gross profit................................................................................................................................. P 18,450
Operating expenses:
Advertising expense............................................................................. P 2,850
Salaries and commissions expense.....................................................
4,250
Store supplies expense.........................................................................
560
Miscellaneous selling expense............................................................
1,850
Rent expense........................................................................................
2,700
Depreciation expense furniture and fixtures..................................
85
Miscellaneous general expense.........................................................
2,510
Total operating expenses............................................................................. 14,805
Net income from own operations......................................................................................... P 3,645
Less: Branch net loss................................................................................................................
1,271
Total income............................................................................................................................ P 2,374
2. WORKSHEET refer to a separate sheet
SPENCER CO.
Combined Balance Sheet for Home Office and Branch
December 31, 20x4
Assets
Cash .
P 14,500
Accounts Receivable
39,050
Merchandise Inv .
36,850
Store Supplies ..
680
Prepaid Expenses ..
470
Furniture & Fixtures
P12,100
Less accumulated
Depreciation ...
3,161 8,939
Total assets
P100,489
Liabilities
Accounts Payable ..
P39,600
Accrued Expenses .
365
Stockholders Equity
Capital Stock
P65,000
Less deficit .
4,476
P 39,965
60,524
SPENCER CO.
Branch Books
31
31
31
Dec.
31
31
31
31
31
Income Summary ..
Merchandise Inventory ..
14,400
Merchandise Inventory
Income Summary .
14,600
280
14,400
14,600
280
Prepaid Expenses
Miscellaneous General Expense .
120
105
36
220
Sales
Income Summary .
20,000
120
105
36
220
20,000
31
31
(b)
Dec
22,221
Home Office .
Income Summary ..
3,021
4,100
10,200
2,800
2,350
280
1,050
1,500
36
905
3,021
31
31
31
31
31
Dec
Income Summary
Purchases
Shipments from Home Office
Advertising Expense .
Salaries and Commissions Expense .
Store Supplies Expense
Miscellaneous Selling Expense ..
Rent Expense .
Depreciation Expense F&F .
Miscellaneous General Expense .
31
Income Summary .
Merchandise Inventory .
31,500
24,200
560
Prepaid Expense
Miscellaneous General Expense
350
260
Depreciation Expense ..
Accumulated Depreciation F&F .
Depreciation: 1% of P8,500, or P85
85
Cash in Transit .
Branch
31,500
24,200
560
350
260
85
1,500
1,500
Sales
Shipments to branch .......................
Income Summary .
44,850
8,500
Income Summary
Purchases
Advertising Expense .
Salaries and Commissions Expense .
Store Supplies Expense
Miscellaneous Selling Expense ..
Rent Expense .
Depreciation Expense F&F .
Miscellaneous General Expense .
42,405
53,350
27,600
2,850
4,250
560
1,850
2,700
85
2,510
31
31
31
31
Branch Income ..
Branch
3,021
1,750
Income Summary
Branch Income .
1,271
Income Summary
Retained Earnings .
2,374
3,021
1,750
1,271
2,374
Problem VI
1.
Branch
Current
Unadjusted balance, 12/31/20x4
Add (Deduct): Adjustments
1 Cash in transit
2. Merchandise in transit
3. Branch expenses paid by home office
4. Cash in transit from home office
Adjusted balance, 12/31/20x4
P 44,000
H. Office
Current
P 9,000
( 10,000)
_______
P 34,000
10,000
12,000
3,000
P34,000
Sales.............................................................................................................................. P315,000
Cost of goods sold:
Merchandise inventory, January 1, 20x5................................... P 44,500
Shipments from home office...................................................... 252,000
Merchandise available for sale................................................. P296,500
Less: Merchandise Inventory, December 31, 20x5..................
58,500 238,000
Gross profit................................................................................................................. P 77,000
Operating expenses................................................................................................. 101,500
Net loss....................................................................................................................... P 24,500
PAXTON CO.
Income Statement for Cincinnati Home Office
For Year Ended December 31, 20x5
Sales.............................................................................................................................. P1,060,000
Cost of goods sold:
Merchandise inventory, January 1, 20x5................................... P115,000
Shipments from home office...................................................... 820,000
Merchandise available for sale................................................. P935,000
Less: Shipments to branch.......................................................... 210,000
Merchandise available for own sales....................................... P725,000
Less: Merchandise Inventory, December 31, 20x5.................. 142,500
582,500
Gross profit..................................................................................................................
P477,500
Expenses......................................................................................................................
382,000
Net income from own operations............................................................................
P 95,500
Add branch net income...........................................................................................
16,650
Total income...............................................................................................................
P112,150
(2)
PAXTON CO.
Combined Income Statement for Home Office and Branch
For Year Ended December 31, 20x5
Sales.............................................................................................................................. P1,375,000
Cost of goods sold:
Merchandise inventory, January 1, 20x5...................................P 150,600
Purchases...................................................................................... 820,000
Merchandise available for sale................................................. P970,600
Less: Merchandise Inventory, December 31, 20x5.................. 191,250
779,350
Gross profit.................................................................................................................... P595,650
Operating expenses....................................................................................................
483,500
Net income................................................................................................................... P112,150
(3) Merchandise Inventory, December 31................................................................ 58,500
Sales.......................................................................................................................... 315,000
Income Summary............................................................................................
373,500
44,500
252,000
101,500
Home Office...............................................................................................................
24,500
Income Summary..........................................................................................
24,500
24,500
41,150
24,500
41,150
9,750
41,150
16,650
115,000
820,000
382,000
112,150
Problem VIII
(1)
RUGGLES CO.
Income Statement for Branch
For Year Ended December 31, 20x4
Sales................................................................................................................................ P 78,500
Cost of goods sold:
Merchandise inventory, January 1, 20x4......................................... P 32,000
Shipments from home office........................................... P 40,000
P 256,000
205,000
51,000
60,000
P
9,000
13,500
P
4,500
P
(2)
RUGGLES CO.
Combined Income Statement for Home Office and Branch
For Year Ended December 31, 20x4
Sales.............................................................................................................................. P 334,500
Cost of goods sold:
Merchandise inventory, January 1, 20x4................................... P 107,500
Purchases...................................................................................... 230,000
Merchandise available for sale.................................................. P 337,500
Less: Merchandise Inventory, December 31, 20x4...................
80,000
Cost of goods sold.............................................................................
257,500
Gross profit.................................................................................................................... P 77,000
Operating expenses....................................................................................................
72,500
Net income................................................................................................................... P 4,500
(3) Merchandise Inventory......................................................................................... 31,500
Sales.......................................................................................................................... 78,500
Income Summary............................................................................................
110,000
Income Summary......................................................................................................... 104,500
Merchandise Inventory...................................................................................
Shipments from Home Office.........................................................................
Purchases.........................................................................................................
Expenses...........................................................................................................
32,000
40,000
20,000
12,500
5,500
(4) Branch......................................................................................................................
Branch Income................................................................................................
5,500
5,500
8,000
8,000
13,500
4,500
4,500
Problem IX
1.
Branch
Current
Unadjusted balance, 12/31/20x4
Add (Deduct): Adjustments
1 Remittance
2. Cash in transit
3. Shipments in transit
P 60,000
H. Office
Current
P 51,500
I 1,700)
1,800
5,800
P 57,300
P 57,300
295,000
184,530
110,470
66,300
44,170
1,500
b. Books of branch B:
Cash...................................................................................................... 1,500
Home Office............................................................................
1,500
1,500
Problem XII
a. Books of Branch No. 1 :
Home Office .
Shipments from Home Office..
Freight In
1,600
350
1,950
1,600
400
1,750
250
1,750
200
1,950
1,600
1,600
P 31,000
6,600
P 37,600
3. a
True Branch Net Income
Branch Net Income
Add (deduct):
Overvaluation of cost of goods sold/realized profit
from sales made by branch:
Shipments from home office.
P 280,000
Less: Ending inventory, at billed
price (P50,000 P6,600)
43,400
Cost of goods sold from home
office at billed price
P 236,600
Multiplied by: Mark-up
40/140
Unrecorded branch expenses
True Branch Net Income
5,000
67,600
( 2,500)
P 70,100
4. c
True Branch Net Income
Less: branch Net Income as reported by the branch
Overvaluation of CGS
Less: Cost of goods sold from home office at BP
Inventory, December 1
Shipment from HO
COGAS
Less: Inventory, December 31
CGS from home office, at cost
P156,000
60,000
P 96,000
P 70,000
350,000
P 420,000
84,000
336,000
P 240,000
P 20,000
6,000
P 14,000
Billed Price
0
550,000
550,000
75,000
CGS, at BP
X: Mark-up ratio
True/Adjusted/Real Branch Net Income
475,000
25/125
95,000
P109,000
7. d
Sales (P537,500 + P300,000).. P 837,500
Less: Cost of goods sold
Merchandise inventory, beg. [P50,000 + (P45,000 / 1.20)]P 87,500
Add: Purchases. 500,000
Cost of Goods Available for Sale... P 587,500
Less: MI, ending [P70,000 + (P60,000 / 1.20)]. 120,000 467,500
Gross profit.
P 370,000
Less: Expenses (P120,000 + P50,000...
170,000
Net Income
P 200,000
8. d
Overvaluation of Cost of Goods Sold:
Unrealized Profit in branch inventory/ before adjustment.P 7,200
Less: Allowance of ending branch inventory (P20,000 x 84% =
P16,800 x 20/120.. 2,800
Overvaluation of Cost of Goods Sold. .P 4,400
Adjusted branch net income:
SalesP60,000
Less: Cost of goods sold:
Inventory, January 1, 2003.P 30,000
Add: Purchases..... 11,000
Shipments from home office.. 19,200
Cost of Goods available for sale P 60,200
Less: Inventory, December 31, 2003.
20,000
40,200
Gross profit.. P 19,200
Less: Expenses.. 12,000
Unadjusted branch net income.P 7,800
Add: Overvaluation of Cost of Goods Sold.
4,400
Adjusted branch net income..P 12,000
9. d
Merchandise Inventory, 12/31/2005
Shipments
Cost of goods sold
Billed Price
*P 36,000
28,800
Cost
P 30,000
24,000
Allowance
P 6,000
4,800
P10,800
Billed Price
*P12,000
9,600
Cost
P10,000
8,000
Allowance
P 2,000
1,600
P 3,600
60%
Cost
40%
Allowance
Merchandise inventory, 1/1/x4
32,000
Shipments
*60,000
36,000
*24,000
Cost of goods available for sale
56,000
Less: MI, 3/31/x4 (25,000 x 40%)
10,000
Overvaluation of CGS**
46,000
*36,000 cost / 60% = 60,000 x 40% = 24,000. (Note: Markup is based on billed price)
**Realized Profit from Branch Sales
13. d
Billed
Price
Merchandise inventory, 8/1/x4
Shipments (400,000 x 25%)
Cost of goods available for sale
Less: MI, 8/31/x4 (160,000 x 25%)
Overvaluation of CGS/RPBSales
400,000
160,000
14. b
(1) Sales
Less: Cost of goods sold:
Inventory, 1/1/2003 (P4,950 / 110%)
Add: Shipments
(P22,000 / 110%)
COGAS
Less: Inventory, 12/31/2003 (P6,050 / 110%)
Gross profit
Less: Expenses
Net income from own operations
(2) Combined Cost of Goods Sold:
Cost
Allowance
60,000
*100,,000
160,000
40,000
120,000
P 40,000
P 4,500
20,000
P 24,500
5,500
P
_
P
19,000
21,000
13,100
7,900
P 21,500
50,000
P 71,500
19,500
P 52,000
P192,000
P
0
52,000
108,000
P 160,000
60,000
100,000
P 92,000
100,000
P( 8,000)
10,000
P 2,000
18. c
125%
Billed Price
40,000
250,000
290,000
60,000
230,000
100%
Cost
25%
Allowance
46,000*
19. d P326,000
Sales (P600,000 + P300,000)
Less: Cost of goods sold
Merchandise inventory, beg.
[P100,000 + (P40,000/1.25)]
Add: Purchases
Cost of goods available for sale
Less: MI, ending
[P30,000 + (P60,000/1.25)]
Gross profit
Less: Expenses (P120,000 + P50,000)
Net Income
P 900,000
P132,000
350,000
P482,000
78,000
404,000
P 496,000
_ 170,000
P 326,000
20. b
Sales (P537,500 + P300,000)
Less: Cost of goods sold
Merchandise inventory, beg.
[P50,000 + (P60,000/1.20)]
Add: Purchases
Cost of goods available for sale
Less: MI, ending
[P70,000 + (P60,000/1.20)]
Gross profit
Less: Expenses (P120,000 + P50,000)
Net Income
P 837,500
P 87,500
500,000
P587,500
120,000
467,500
P 370,000
_ 170,000
P 200,000
21. c
Sales (P120,000 + P60,000)
P 180,000
Less: Cost of goods sold:
Merchandise inventory, beg. [P40,000 + P6,000 +
(P24,000 / 1.2)] P 66,000
Add: Purchases (P70,000 + P11,000)
81,000
Cost of Goods Available for SaleP 147,000
Less: MI, ending [P40,000 + P3,200 + (P16,800 / 1.20)] 57,200
89,800
Gross profit
P 90,200
Less: Expenses (P28,000 + P12,000)
40,000
Net Income.
P 50,200
22. d
Sales (P100,000 P33,000 + P50,000)
P 117,000
Less: Cost of goods sold:
Inventory, beg. [P15,000 + (P5,500/110%) or (P5,500 P500)] P20,000
Add: Purchases (P50,000 + P7,000) 57,000
COGAS.. P77,000
Less: Inventory, end [P11,000 + P1,050 +
(P6,000- P1,050)/110%] 16,550
60,450
Gross profit
P 56,550
Less: Expenses (P20,000 + P6,000 + P5,000)
31,000
Combined Net income.
P 25,550
23. c
Sales
Less: Cost of Sales
Inventory, 1/1/10
P155,000
P 23,000
Purchases
Cost of goods available for sale
Less: Shipment/Sales to Branch,
at cost (P110,000/110%)
Cost of goods available for HO
Sale
Less: Inventory, 12/31/10
Gross profit
Less: Expenses
Net income home office
190,000
P213,000
100,000
P113,000
30,000
83,000
P 72,000
52,000
P 20,000
24. a
Sales
P140,000
Less: Cost of Sales
Inventory, 1/1/10
P 11,550
Purchases
105,000
Freight-in
5,500
Shipment in transit (P5,000+P250)
5,250
Cost of goods available for sale P127,300
Less: Inventory, 12/31/10
(P10,400 + P520 + P5,250)
16,170 111,130
Gross profit
P 28,870
Less: Expenses
28,000
Net income per branch books/unadjusted
P
870
Add: Overvaluation of CGS*
9,600
Net Income of Davao Branch, adjusted
P 10,470
BP
Cost
Allowance
1,000
100,000
**10,000
11,000
****1,400
9,600
MI. 1/1/2010
Shipments
110,000
Available for sale
-: MI, 12/31/10
***15,400
CGS
**110,000 x 10/110
***10,400 + 5,000, in transit
****15,400 x 10/110
25. a
26. d
Merchandise inventory, January 1
Shipments from home office
Cost of goods available for sale
Less: Cost of goods sold, at BP:
Sales
Less: Sales returns
Net sales
Divided by: SP based on cost
Merchandise inventory, ending at BP
Divided by: Billed price
Merchandise inventory, ending at cost
lost due to fire)
P 26,400
__20,000
P 46,400
P 15,000
___2,000
P 13,000
____125%
__10,400
P 36,000
____120%
P 30,000
27. d
Freight actually paid by:
Home OfficeP 500
Branch P
700
TotalP 1,200
Less: Freight that should be recorded..
800
Excess freightP 400
28. d in arriving at the cost of merchandise inventory at the end of the period, freight charges are
properly recognized as a part of the cost. But a branch should not be charged with excessive
freight charges when, because of indirect routing, excessive costs are incurred. Under such
circumstances, the branch acquiring the goods should be charged for no more than the normal
freight from the usual shipping point. The office directing the inter-branch transfers are
responsible for the excessive cost should absorb the excess as an expense because it represents
management mistakes (or inefficiencies.)
29. c
Inventory of the Branch:
Shipments from home office at billed price.........................................P 37,700
X: Ending inventory %................................................................................
60%
Ending inventory at billed price.....P 22,620
Add: Freight (P1,300 x 60%)......
780
P 23,400
Or, P39,000 x 60% = P23,400
30. b
Inventory in the published balance sheet, at cost
Shipments at cost..........................................P 32,500
X: Ending inventory %....................................................................................
60%
Ending inventory at billed price.P19,500
Add: Freight (P1,300 x 60%).........
780
P 20,280
31. c
Home Office Books
Davao Branch39,000
Davao Branch
SFHO.37,700
Baguio Branch
STB, cost.
32,500
Unrealized profit
5,200
Cash (freight).
1,300
BC Baguio19,630
Excess freight 520
BC-Davao.
20,150
Freight-in. 1,300
HOC..
39,000
HOC.20,150
SFHO(50%)
18,850
Freight-in (50%)
650
Cash......
650
SFHO18,850
Freight-in.. 780
HOC...
19,630
32. d
(1) Branch Inventory, 12/31/20x4: P30,000 x 60%...................................P 18,000
(2) Branch Inventory, at cost: (P25,000 + P1,000) x 60%.........................P 15,600
33.
34.
35.
36.
37.
38.
39.
40.
Theories
1. True
2. False
3. True
4. True
5. False
20.
21.
22.
23
d
d
a
d
6.
7.
8.
9.
10.
False
False
False
True
True
11.
12.
13.
14.
15.
False
True
False
True
False
16.
17.
18.
19.
True
True
True
False