EASY #1

Gaol Inc opens a sales agency in Davao City, and a working fund for P20,000 is established on the
imprest basis. The first payment from the fund is P3,000 for rent. The transaction should be recorded by
the home office as follows:

a. No entry
b. Rent 3,000
Cash 3,000
c. Davao Agency 3,000
Cash 3,000
d. Davao Agency 3,000
Working Fund 3,000
EASY #2

When a depreciable asset deployed in the branch is maintained in the home office books of accounts,
the depreciation is recorded as:

a. Memorandum entry in the branch books

b. Debit to the Home Office Current account

c. Credit to the Branch Current account

d. Credit to the Home Office Current account

e. None of these
EASY #3

The collection of a P500 branch receivable by the home office should be recorded by the branch with
the following entry:

a. No entry is necessary, since the branch was not involved in the

transaction
b. Cash 500
Home Office 500
c. Home Office 500
Accounts Receivable 500
d. Cash 500
Accounts receivable 500
EASY #4

Which of the following statements is/are false?

I. In computing the Cost of Sales of a branch, the Shipments from Home Office account is to be deducted
from the purchases from outside suppliers.

II. Recording branch profit increases both the Home Office and Investment in Branch accounts.

a. I only

b. II only

c. Both I and II

d. Neither I nor II
EASY #5

Which of the following is/are not true?

I. Transfer of merchandise from the branch to the home office results to a debit in the Investment in
Branch account.

II. Remittances from a branch to its home office are considered income by the home office.

a. I only

b. II only

c. Both I and II

d. Neither I nor II
EASY #6

James Company opened an agency in Makati in 2017. The following is a summary of the transactions of
the agency:

Sales orders sent to home office P55,000

Sales orders filled by home office in 2017 46,500
Freight on shipment to agency 1,100
Collections, net of 2% discount 39,690
Selling expenses paid from agency working fund 2,820
Administrative expenses charged to agency 5% of sales
Samples shipped to agency:
Cost 3,000
Inventory Dec. 31 1,100

The company maintains its gross margin on agency sales at 30% excluding the freight cost on shipments
to agency.

Determine the agency net income or loss.

EASY #7

The following transactions were incurred for the year by the HAYAHAY Company:

 Transfer of P13,000 merchandise to an agency to establish working fund.

 Receipt of sales orders from the agency, P130,000.
 Collection of agency accounts by the home office, P91,000.
 Home office disbursements representing agency expenses, P11,700.
 Replenishment of the agency working fund upon receipt of expense vouchers for P5,850.
 Cost of goods sold identified with the agency sales, P93,600.
 Merchandise in agency as of the end of the period amounts to P5,000.

Compute the amount of net income traceable to the agency:

EASY #8

On June 1, 2017, EliteFurn Co. established an agency in Davao, sending samples costing P4,200,000
which are useful until May 31, 2018 and have a salvage value of 20% of cost. A working fund of
P3,412,500 is to be maintained using the imprest basis. During 2017, the agency submitted to the home
office sales order amounting to P35,437,500. Sales per invoice were P27,562,500 which were duly
approved by the home office. Collections during the year amounted to P14,784,000 net of 4% sales
discount. The cost of merchandise sold during the year is equal to 70% of the gross selling price.
Vouchers for expenses amounted to P1,837,500.

How much net income would be reported by the BGC agency on December 31, 2017?
EASY #9

The branch manager of Tower Cosmetics in Cebu submitted a report as of June 30, 2017 containing the
following information:

Petty cash fund P1,500

Sales 198,720
Sales returns 3,600
Account written off 1,920
Shipments from home office 136,080
Accounts receivable – June 30, 2016 43,800
Accounts receivable – June 30, 2017 49,140
Inventory, June 30, 2016 37,170
Inventory, June 30, 2017 41,370
Expenses 57,930

How much is the branch net income for 2017?

EASY #10

BRANCH CURRENT
Beg. 35,100
12/03 Shipment 25,000
12/31 Shipment 12,500
12/31 Profit 2,400

HOME OFFICE CURRENT

Beg. 35,100
12/10 Shipment 25,000
12/25 A/R home office
collected 3,500
12/29 Returns 1,500 12/31 Profit 2,040

Based on the above postings, determine the adjusted balance of the reciprocal accounts.
AVERAGE #1

Thanatos, Inc. had a branch operation located in Cebu. On the home office financial record, Thanatos
represents Investment in Cebu Branch account with a P78,000 debit balance. At the same time, the
branch operation is reporting a Home Office account with an P81,000 credit balance.

Which of the following is true?

a. Since two different sets of records are being kept, these two accounts are designed to agree.

b. The difference indicates that inventory may be in transit from the home office to the branch.

c. The difference indicates that cash may be in transit from the branch to the home office.

d. Cash may have been collected by the home office for the branch but not yet reported to the branch.
AVERAGE #2

In a combined income statement, which of the following is/are deducted from the cost of goods
available for sale to determine the cost of goods sold?

a. Ending inventory

b. Beginning inventory

c. Shipment from home office

d. Shipment to branch

e. a and d
AVERAGE #3

The following are the postings to the inter-office accounts of Oro Corporation for 2017 prior to the
closing of books:

Cebu Branch Current

Jan. 01 Balance 15,600 Oct. 01 Remittance from branch 18,700
Feb. 10 Shipments to branch 8,000 Dec. 05 Goods returned by branch 780
Apr. 30 Branch expenses 9,800 Dec. 31 Collection of branch A/R 6,500
Nov. 20 Shipments to branch 18,300
Dec. 28 Shipments to branch 20,100
Dec. 29 Replenishment check
For branch 11,500

Home Office Current

Sep. 30 Remittance to home office 18,700 Jan. 01 Balance 15,600
Dec. 02 Goods returned 7,800 Feb. 15 Shipments from H/O 8,000
Dec. 30 Home office expenses paid 9,500 May 10 Expenses paid by H/O 9,800
Dec. 05 Shipments from H/O 13,800

What is the adjusted balance of the reciprocal accounts?

AVERAGE #4

A reconciliation of the Makati branch account of GGB Company’s head office and the Head Office
account carried in the books of the Makati branch office shows the following reconciliation items at
December 31, 2017:

(1) A credit for merchandise allowance of P9,562.50 was taken up by the branch as P8,437.50

(2) A charge by the branch of P6,750 for an advance taken by the Branch operations manager when he
visited the branch was recorded twice by the Home Office.

(3) The branch has not taken up P4,375 covered by a credit memo from the home office.

The Makati branch account in the head office books had a debit balance of P380,625 at December 31,
2017. The reciprocal accounts were in agreement at the beginning of the year.

The unadjusted balance of the Head Office account in the branch books at December 31, 2017 is:
AVERAGE #5

On December 31, 2017, the following information has been collected by KASAYUN Company’s office
and branch for reconciling the branch and home office accounts.

(1) The home office’s branch account balances at December 31, 2017 is P590,000. The branch’s home
office balance is P506,700.

(2) On December 30, 2017, the branch sent a check for P40,000 to the home office to settle its account.
The check was not delivered to the home office until January 3, 2018.

(3) On December 27, 2017, the branch returned P15,000 of seasonal merchandise to the home office for
the January clearance sale. The merchandise was not received by the home office until January 6.

(4) The home office allocated general expenses of P28,000 to the branch. The branch had not learned of
the allocation as of year-end.

(5) Branch store insurance premiums of P900 were paid by the home office. The branch recorded the
amount of P600.

Determine the reconciled amounts:

AVERAGE #6

On December 31, 2017, the Branch Current account in the books of the home office shows a balance
before adjustment of P50,000. The following facts are ascertained:

Merchandise billed at P12,500 is in transit on December 31 from the home office to the branch.

The branch collected a home office accounts receivable for P3,500. The branch did not notify the home
office of such collection.

On December 30, the home office sent cash of P7,500 to the branch, but this was charged to general
expense. The branch has not received the cash as of December 31.

Branch profit for December was recorded by the home office at P2,400 instead of P2,040.

The branch returned supplies of P1,500 to the home office but the home office has not yet recorded the
receipt of the supplies. All other transactions have been properly recorded.

What is the adjusted balance of the reciprocal accounts at December 31, 2017?
AVERAGE #7

The following were found in your examination of the interplant accounts between the Home Office and
Cebu Branch:

 Transfer of fixed assets from home office amounting to P53,960 was not booked by the branch.
 A P10,000 amount covering marketing expense of another branch was charged by home office
to Cebu branch.
 Cebu branch recorded a debit note on inventory transfer from home office of P75,000 twice.
 Home office recorded a cash transfer of P65,700 from Cebu branch as coming from Davao
branch.
 Cebu branch reversed a previous debit memo from Bacolod branch amount to P10,500. Home
office decided that this charge is appropriately Davao branch’s cost.
 Cebu branch recorded a debit memo from home office of P4,650 as P4,560.
 Before the above discrepancies were given effect, the balance in the home office books of its
Cebu branch current account was a debit balance of P165,920.

What is the unadjusted balance in the books of Cebu branch of its home office current account?
AVERAGE #8

Turbo Corporation operates a branch in Cebu. At the end of 2017, the following are the unadjusted
balances per books:

Investment in Branch P 150,000

Home Office 117,320

The following information were ascertained:

 The branch has not received the P25,000 cash sent by the home office. This was erroneously
charged to General Expenses by home office.
 The home office has billed the branch the amount of P37,500 for merchandise which was in
transit on December 31.
 A home office account receivable for P10,500 was collected by the branch. Said collection was
not reported to the home office by the branch.
 Supplies of P4,500 were returned by the branch to the home office but the home office has not
reflected in its records the receipt of the supplies.
 The branch made a profit of P10,000 for the month of December but the home office
erroneously recorded it as P11,180.

After reconciling the books based on the foregoing information, what is the adjusted balance of the
reciprocal account?
AVERAGE #9 AND #10

Metro Company has established a branch in Tacloban by sending goods costing P184,900 and P80,000
cash on July 1, 2017. Home office initiated transactions for the remainder of the year are found below.
At the end of the year, the company’s controller has found out that the accounting staff assigned in
recording the transactions between the home office and the branches had failed to record all the
transactions initiated by the branch. Because of this, there is a significant discrepancy between the
balances of the reciprocal accounts.

 The home office acquired computer equipment amounting to P420,000 for the branch on August 1,
2017. As per agreement, the branch will keep all the property, plant and equipment records.
 Goods costing P320,000 were shipped from the home office to branch on November 9, 2017.
 Additional cash amounting to P53,000 was transferred to the branch on December 2, 2017.
 A branch customer has incorrectly paid P25,000 cash to the home office on December 16, 2017.
 The home office incurred P65,000 of advertising cost and P96,000 of salaries. Tacloban branch is to
shoulder 30% and 20% of these expenses, respectively.

For the purpose of reconciling the reciprocal accounts, the controller has instructed the branch
accountant to send a copy of the Home Office Current general ledger to the home office.

Home Office Current

8/3 Equipment acquisition P420,000 7/1 Goods from HO P184,900
11/5 Cash remittance 78,000 7/1 Cash 80,000
12/20 Return of goods to HO 49,000 8/15 Collection of HO’s AR 113,600
11/10 Goods from HO 230,000
12/4 Cash 50,300

Balance P111,800

Compute for the following:

Unadjusted balance of investment in Tacloban account?

a. P1,142,800
b. P1,044,800
c. P1,071,600
d. P1,058,200

Net adjustment in the Home Office Current account. Indicate whether net debit or net credit.

a. P946,400 net debit

b. P946,400 net credit
c. P996,400 net debit
d. P996,400 net credit