Hoba Acctg
Hoba Acctg
Hoba Acctg
Problem I
HER Corporation of Manila has operated as sales branch in Davao, for a number of years. All
merchandise shipped to the Davao branch is transferred at normal sales prices, which are 125% of
home office cost. The Davao branch also purchases merchandise from outside suppliers. This
merchandise is sold by Davao at 25% markup based on invoice cost. Balance sheet for HER
Corporation’s home office and its Davao branch at December 31, 2017 are as follows:
All plant asset record for HER’s home office and Davao branch are maintained on the home office books.
Half of the P160,000 branch inventory at December 31, 2017 was received from local suppliers, and the
remaining P80,000 was received from the home office at established transfer prices. A summary of the
transactions for HER’s home office and branch for 2018 were as follows:
1. HER’s sales for 2018 were P2,817,500, of which P2,000,000 were home office sales and P817,500
were sales made by the Davao branch. All sales were on account.
2. Home office and branch purchases on account for 2018 were P2,050,000 and P200,000,
respectively. The home office shipped P400,000 of merchandise to Davao branch at a transfer price
of P500,000.
3. The home office collected P1,950,000 on account during 2018, and Davao branch collected
P797,500.
4. The Davao branch transferred P550,000 cash to the home office during 2018.
5. Payments on account were home office, P2,100,000; Davao branch, P210,000.
6. During 2018, the home office paid operating expenses of P200,000, and Davao branch paid
operating expense of P20,000.
Of the operating expenses paid by the home office P10,000 was allocated to Davao branch.
7. Total depreciation for the year was P80,000, of which P15,000 was allocated to branch operations.
Year-end inventories are P250,000 for the home office, and P100,000 for Davao branch, with half of the
branch inventory consisting of merchandise acquired from home office.
Required.
1. Prepare the journal entries for the year 2018 on the books of the home office and branch.
2. Prepare the adjusting and closing entries on the home office books and the closing entry on the
books of the branch.
3. Prepare the unadjusted trial balance of the home office and the branch for the year 2018.
4. Prepare the individual financial statements of the home office and the branch.
5. Prepare the combined financial statements of HER Corporation for the year 2018.
Problem II
VENTURA Grament Company operates a branch in Cebu City. At the end of the year, the branch
account in the books of home office at Manila shows a balance of P1,500,000. The following information
are ascertained:
1. The home office has billed the branch the amount of P375,000 for the merchandise, which was
in transit on Dec. 31.
2. A home office accounts receivable for P105,000 was collected by the branch. Said collection
was not reported to the home office by the branch.
3. Supplies of P45,000 was returned by the branch to the home office but the home office has not
yet reflected in its records the receipt of the supplies.
4. The branch mad profit of P101,000 for the month of December but the home office erroneously
recorded it as P111,800.
5. The branch has not received the cash in the amount of P250,000 sent by the home office on
December 31. This was charged to general expense account.
What is the balance of the Home Office account on the books of the branch as of December 31, before
adjustment?
A. P1,219,200 B. P1,230,000 C. P1,174,200 D. P1,069,200
Problem II
Comparative trial balances of the home office and two branches of France Corporation at December 31,
2017 were as follows:
Additional information:
Home office and branch inventories at December 31, 2017 were:
Home office (at cost) P1,200,000
Branch 1 (at billed price) 720,000
Branch 2 (at billed price) 960,000
1. What is the markup rate on merchandise transfers to branch?
A. 20 percent at billed price C. 16-2/3 percent of billed price
B. 20 percent at cost D. 25 percent of billed price
4. How much is the correct net income of Branch 2 as far as home office is concerned?
A. P1,900,000 B. P1,580,000 C. P1,850,000 D. P940,000
5. How much net income will the home office report in its separate net income statement?
A. P2,200,000 B. P5,950,000 C. P4,940,000 D. P1,000,000
Problem III
The Palawan branch of Brandy Enterprises, Manila was billed for merchandise shipments from home
office at cost plus 25% in 2016 and cost plus 20% in 2017. Other pertinent data for 2017 are as follows:
1. What will be the combined cost of sales of Palawan branch and Brandy’s home office that must be
shown in the combined income statement?
A. P224,300 B. P1,558,150 C. P1,558,700 D. P220,400
2. What will be the combined net income of Palawan branch and Brandy’s home office?
A. P224,300 B. P226,000 C. P221,330 D. P220,400
Problem IV
The home office sells merchandise to its branch at 120% of cost. The branch was established several
years ago with policy that all its merchandise would be acquired from home office. The branch reported
inventory at the beginning of P36,000 and inventory ending of P60,000. The home office showed in its
trial balance an unrealized profit on inventory account balance of P46,000. The cost of merchandise sold
by the branch that came from home office is
A. P216,000 B. P180,00 C. P210,000 D. Cannot be determined.
Problem V
Except for the error by the branch in its share in allocated expenses, all differences are timing
differences.
Problem VI
The pre-closing general ledger trail balances at December 31, 2017 for the KPAPs Wholesale Company
and its Manila Branch
Home Office Branch office are shown
Dr. (Cr.) Office
Dr. (Cr.) below:
Cash P3,600,000 P800,000
Accounts receivable 3,500,000 1,200,000
Inventories 7,000,000 1,500,000
Plant assets (net) 9,000,000
Branch office 2,000,000
Accounts payable (3,600,000) (1,350,000)
Accrued expenses (1,400,000) (250,00
Home office (900,000)
Capital share (5,000,000)
Retained earnings (4,500,000)
Sales (44,000,000) (9,500,000)
Purchases 29,000,000 2,400,000
Purchases from home 4,500,000
office
Expenses 4,400,000 1,600,000
2. On December 27, a branch office customer erroneously paid his account of P200,000 to the
home office. The bookkeeper made the correct entry on the home office books but did not notify
the branch office.
3. On December 30, the branch office remitted cash of P500,000, which received by the home
office in January of the following year.
4. On December 31 the branch erroneously recorded the December allocated expenses from the
home office as P50,000 instead of P150,000.
5. On December 31 the home office shipped merchandise billed at P300,000 to the branch office
which was received January of the following year.
6. The entire opening inventory of the branch office had been purchased from the home office.
Home office 2017 shipments to the branch office were purchased by the home office in 2017.
The physical inventories at December 31, 2017, excluding shipments in transit, are:
Home office – P5,500,000 (at cost)
Branch office – P2,000,000 (Comprised of P1,800,000 from Home office, and
P200,000 from outside vendors)
7. The home office consistently bills shipments to the branch office at 20% above cost. The sales
account is credited for the invoice price.
2. How much is the adjusted balance of reciprocal account before net income of branch?
A. P1,100,000 B. P1,900,000 C. P800,000 D. P1,300,000
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wep/ACCTG100D/homeandbranchaccounting