Question 1

A branch operation buys most of its inventory from outside parties. However, this year the home
office transferred merchandise costing P50,000 to the branch for P80,000. At the end of the year,
20% of this merchandise was still held by branch. Although the inventory was correctly counted and
reported, the branch did not tell the home office that this portion of the remaining goods came from
inter-branch transfers. Consequently, the home office assumed that all of the transferred merchandise
had been sold to outside parties. What is the resulting impact on the net income reported for the
company as a whole?

a. The net income figure would be P30,000 understated

b. The net income figure would be P30,000 overstated
c. The net income figure would still be correctly calculated
d. The net income figure would be P6,000 overstated
 
Question 2
Barros Corporation’s shipments to and from its Brazil City brand are billed at 120% of cost. On
December 31, Brazil branch reported the following data, at billing prices: inventor, January 1, of
33,600; shipments received from home office of 840,000: shipments returned of 48,000:and
inventory, December 31, of 36,000. What is the balance of the allowance for over-valuation the
branch inventory on December 31 before adjustments?

a. 6,000
b. 137,600 
c. 5600 
d. 145,600
 
Question 3
Tillan Textile Company has a angle Branch in Bulacan. On March 1, 2021, the home office accounting
records include an Allowance for Overvaluation of inventories – Bulacan Branch ledger account with a
credit balance of 32,000. During March, merchandise costing 36,000 was shipping to the Bulacan
Brach and billed at a price representing a 40% markup on the billed price. On March 31, 2021, the
branch prepared an income statement indicating a net loss of 11,500 for March ending inventories a
billing price of 25,000. What is the amount of adjustment for allowance for overvaluation of
inventories to reflect the true branch net income?

a. 46,000 credit
b. 120,000 debit 
c. 108,000 debit 
d. 46,000 debit 
 
Question 4
Charity, Inc. establish its first branch on May 1, 2021. During the first month of operation, the home
office shipped merchandise to the branch worth 135,000 which included a markup of 15% on cost.
Sales for cash were 80,000 while sales on account were 250,000.At months end the branch reported
operating expenses of 38,000 and a closing inventory of 23,000 at billed a price. As far as the home
office is concerned the true branch net for May 2021 is?  

a. 82,000  
b. 192,000 
c. 147,000 
d. 117,000

Question 5
Jaimen Marketing Co. opened a branch in San Fernando City at the beginning of 2021. The branch
extends credit makes collections pays expenses from cash receipts and acquires goods exclusively
from the home office. During 2021, goods shipped by the home office to the branch, at a billing price
of 125% cost, amounted to 104,000 of which 12,500 remained in the branch year-end inventory.
Other branch transaction in 2021 were as follows: sales all on credit 117, expenses of which 1,500 are
unpaid at year end 20,000 collections on account after deducting discounts of P1,480, P84,000; and
total remittances to the home office, P62,500. As far as the home office is concerned the operation of
the branch in 2021 resulted in a:

a. 9,550 net loss 

b. 22,750 net income 
c. 4,450 net income
 d. 18,300 net income

Question 6
The manila branch of the great company is billed for merchandise by the home office at 20% above
cost. The branch in turn prices merchandise for sales purpose at 25% above billed price. On February
16 all of the branch merchandise is destroyed by fire. No insurance was maintained. Branch accounts
show the following information:
Merchandise inventory January 1
                   (At billed price) ……………………………………………………………………………   P26,400
                   Shipments from home office (Jan. 1 – Feb. 16) ……………………………    20,000
                   Sales……………………………………………………………………………………………    15,000
                   Sales returns……………………………………………………………………………….      2,000
                   Sales allowances………………………………………………………………………...       1,000
What was the cost of the merchandise destroyed by fire?

a. 36,800 
b. 30,000
c. 30,667
d. 36,000 
 
Question 7
The home office bills its Aklan branch at 125% of cost. During the year 2021, goods costing P300,000
were shipped to the branch. The account ‘’allowance for overvaluation of branch inventory’’, after
adjustment, shows a balance of 14,000 at the end of the year.
Compute the amount of ending inventory at: 
Cost; Billed Price

a. 70,000; 56,000
b. 56,000; 70,000
c. 300,000; 375,000
d. 56,000; 56,000

Question 8
The Best Co. Bills merchandise shipments in its Cavity City branch at 125% of cost. The branch, in turn
sells the merchandise it receives from the home. Office at 25% above the billing price. On August 1,
2021, all of the branch merchandise stock was destroyed by fire. The branch records that were
recovered showed the following:
   Inventory, January 1, 2021 (at billed price) …………………………………….     P165,000
   Shipments received from home office,
            January to July (at billed price) ……………………………………………….       110,000
   Purchases, at cost, from outside sources,
            All re-sold at a 20% mark-up……………………………………………………        7,000
   Sales…………………………………………………………………………………………………   169,000
  Sales returns and allowances……………………………………………………………       3,750
The Best Co. will file an insurance claim. How mush is the estimated cost of the merchandise
destroyed by the fire? 
a. 120,000
b. 150,000
c. 140,000 
d. 130,000
 

 
Question 9
Lobster Trading bills its Iloilo City branch for shipments of goods at 25% above cost. At the close of
business on October 31, 2021, a fire gutted the branch warehouse and destroy 60% of the
merchandise stock stored therein Thereafter, the following data were gathered:
       January 1 inventory, at billed price…………………………………. P50,000
       Shipments from home office to Oct. 31……………………………130,000
       Not sales to October 31……………………………………………………225,000
If undamaged merchandise recovered are marked to sell for 30,000, the estimated cost of the
merchandise destroyed by the fire was:  

a. 24,000 
b. 14,400
c. 27,500 
d. 21,600

Question 10
Swift Corporation operates a number of branches in Metro Manila. On June 30, 2021, its Sn, Lorenzo
branch showed a Home Office Account balance of 27,350 and the Home Office book showed a Sn.
Lorenzo branch account balance of 25,550. The following information may help in reconciling both
account:

1. A 12,000 shipment charged by home office to Sn, Lorenzo branch was actually send to and
retained by Sto. Tomas branch.
2. A 15,000 shipment intended and charged to Sn. Jose branch was shipped to Sn. Lorenzo
branch and retained by the latter.
3. A 2,000 emergency cash transfers from Sto. Tomas branch was not taken up in the Home
office books.
4. Home office collects a Sn. Lorenzo branch account receivable of 3,600 and fails to notify
the branch.
5. Home office was charged for 1,200 for merchandise returned by Sn. Lorenzo branch on
June 28. The merchandise is in transit.

Home office erroneously recorded Sn. Lorenzo net income for May 20, 2021 at 16,275. The branch
reported a net income of 12,675.
What is the reconciled amount of the home office and Sn. Lorenzo branch reciprocal amount?  

a. 27,350
b. 21,750
c. 20,150
d. 23,750
 
Question 11
Lipton Company had on agency in Antipolo. For the period just ended the agency transaction showed
the following:
Receipt from sales…………………………………………………………………………………….350,000
Disbursement:
Purchases………………………………………………………………………………………………….400,000
Salaries and commission…………………………………………………………………………...70,000
Rent…………………………………………………………………………………………………………..20,000
Advertising supplies…………………………………………………………………………………...10,000
Other expenses…………………………………………………………………………………………...5,000
The agency had 100,000 receivable and 50,000 payables as of the end of the period. Also they were
inventories on hand of 90,000 and unused advertising supplies of 6,000. The agency was set up as an
experiment for one period and would be closer if losses were incurred. The agency should:
   
 a. Close with the period operation loss of 9,000  
b. Close with the period operation loss of 155,000.
c. Continue with the period profit of 25,000 
d. Review again because it was a break-even operation.
 

 
Question 12
Betzier Company branch in Malate began operations on January 1, 2021. During the first year of
operations, the home office shipped merchandise to the Malate branch that cost P250,000 at billed
price of P300,000, One-fourth of the merchandise remained unsold at the end of 2021. The home
office records the shipments to the branch at the P300,000 billed price at the time shipment are made.
Freight-in of P2,000 on the shipments from the home office was paid by the branch. The home office
should make an adjusting entry for freight-in as follows:  

a. A year-end adjusting entry debiting the branch account for P500.   

b. No year-end adjusting entry for the freight charge.
c. A year-end adjusting entry debiting the branch account for P2,000.
d. A year-end adjusting entry crediting the branch account for P500

Question 13
The Gift Co. has a branch in Dipolog City, during 2021, the home office shipped to the branch
merchandise billed at P150,000 including a mark-up of 20% on cost. The branch reports operating and
closing inventories of P90,000 and P120,000, respectively, while the home office has a closing
inventory of P210,000 which includes merchandise which are held on consignment valued at P10,000.
Both locations use the periodic inventory system. What closing inventory would be reported in the
combined statement of income for the year 2021?  

a. 300,000
b. 330,000   
c. 296,000
d. 320,000

Question 14
Hope Corporation started operating a branch on May 1, 2021 with a shipment of merchandise billed
at P250,000. Additional shipments during the month were billed at P125,000. The branch returned
damaged merchandise worth P10,000. Inter-office shipments are billed uniformly at 125% of cost. On
May 31, 2021, the branch reported a net loss of P52,000 and on inventory of P150,000. What is the
branch net income (loss) reflected in the combined income statement for May 2021? 

a. 43,000
b. 95,000
c. (52,000)
d. (9,500)

Question 15
The Robert Corporation established its Bulacan branch in January 2021. During its first year of
operations, home office shipped to its Bulacan branch merchandise worth P250,000, while cash sales
amounted to P80,000. Bulacan reported operating expenses of P38,000 and ending inventory of
P15,000, at billed price. In so far as the home office is concerned, the real net income of Bulacan is:
a. 82,000
b. 177,000 
c. 192,000
d. 147,000

Question 16
The Quezon City Sales Company established a branch in Dumaguete City early last year. It shipped
merchandise and billed the branch for P300,000 prior to its opening. For the year, it made additional
shipments at billed price of P120,000. Within the year, the branch shipped back P7,500 inventory and
got the credit memo for said returns. On the working day of the year, an inventory count was made.
Ending inventory of P185,000 was established consisting of purchases from third parties at P20,000.
With the balance coming from home office shipments at billed price. The home office billed the branch
at 20% above cost. The total purchases of the branch from outside suppliers amounted to P72,500.
The total cost of goods available for sale by the branch at cost (net of overvaluation and returns)
amounted to:
 a. 485,000
b. 435,250
c. 422,500
d. 416,000

Question 17
At the end of 2016, the branch reported an inventory of P15,625. The home office bills this branch at
125% of cost. During 2017, goods costing P300,000 were shipped to the branch. The account
“allowance for overvaluation of branch inventory” after adjustment, shows a balance of P16,250 at the
end of the year.
What was the amount of inventory at January 1, 2017 at cost?

a. 78,125  
b. 81,250
c. 3,125
d. 12,500

Question 18
At the end of 2016, the branch reported an inventory of P15,625. The home office bills this branch at
125% of cost. During 2017, goods costing P300,000 were shipped to the branch. The account
“allowance for overvaluation of branch inventory” after adjustment, shows a balance of P16,250 at the
end of the year.
What was the amount of ending inventory at billed price?

a. 78,125 
b. 12,500  
c. 3,125  
d. 81,250

Question 19
At the end of 2016, the branch reported an inventory of P15,625. The home office bills this branch at
125% of cost. During 2017, goods costing P300,000 were shipped to the branch. The account
“allowance for overvaluation of branch inventory” after adjustment, shows a balance of P16,250 at the
end of the year.

1. What was the amount of allowance for overvaluation before adjustment?

a. 3,125 
b. 12,500
c. 81,250
d. 78,125

Question 20
Montilla Company is engaged in merchandising both at its Head Office in Makati and a Branch in
Cebu. Selected accounts in the trial balances of the Montilla Company and the Cebu Branch at
December 31, 2017 follow:

Debit Home Office Books Branch Books

Inventory , January P18,400 P9,240

Branch 46,640
Purchases 152,000
Shipment from Home Office 84,000
Freight in from Home Office 4,400
Sundry expenses 40,000 20,000
 
Credit    
Home Office   42,640
Sales 124,000 112,000
Shipments to Branch 80,000  
AFOVOBI 8,800  

                Additional information:

 1. Cebu Branch receives all its merchandise from the Head Office. The Head Office bills the
goods at cost plus 10% mark-up. At December 31, 2017 a shipment with a billing price of
P4,000 was in transit to the Branch. Freight on this shipment was P200 which is to be
treated as part of inventory.
2. December 31, 2017 inventories, excluding the shipment in transit was:

Head Office, at cost                                         24,000

Cebu Branch, at billed value
(Excluding freight of P416)                              8,320

The net income of the Head Office from own operation was? 

a. 12,936
b. 10,776  
c. 7,680 
d. 17,600

Question 21
Montilla Company is engaged in merchandising both at its Head Office in Makati and a Branch in
Cebu. Selected accounts in the trial balances of the Montilla Company and the Cebu Branch at
December 31, 2017 follow:

Debit Home Office Books Branch Books

Inventory, January P18,400 P9,240
Branch 46,640
Purchases 152,000
Shipment from Home Office 84,000
Freight in from Home Office 4,400
Sundry expenses 40,000 20,000
 
Credit    
Home Office   42,640
Sales 124,000 112,000
Shipments to Branch 80,000  
AFOVOBI 8,800  

                Additional information:

1. Cebu Branch receives all its merchandise from the Head Office. The Head Office bills the
goods at cost plus 10% mark-up. At December 31, 2017 a shipment with a billing price of
P4,000 was in transit to the Branch. Freight on this shipment was P200 which is to be
treated as part of inventory.
2. December 31, 2017 inventories, excluding the shipment in transit was:

Head Office, at cost                                         24,000

Cebu Branch, at billed value
(Excluding freight of P416)                              8,320

True income of Cebu Branch was?

a. 12,936
b. 17,600 
c. 10,776
d. 7,680
 

 
Question 22
Montilla Company is engaged in merchandising both at its Head Office in Makati and a Branch in
Cebu. Selected accounts in the trial balances of the Montilla Company and the Cebu Branch at
December 31, 2017 follow: 

Debit Home Office Books Branch Books

Inventory, January P18,400 P9,240
Branch 46,640
Purchases 152,000
Shipment from Home Office 84,000
Freight in from Home Office 4,400
Sundry expenses 40,000 20,000
 
Credit    
Home Office 42,640
Sales 124,000 112,000
Shipments to Branch 80,000  
AFOVOBI 8,800  

                Additional information:

1. Cebu Branch receives all its merchandise from the Head Office. The Head Office bills the
goods at cost plus 10% mark-up. At December 31, 2017 a shipment with a billing price of
P4,000 was in transit to the Branch. Freight on this shipment was P200 which is to be
treated as part of inventory.
2. December 31, 2017 inventories, excluding the shipment in transit was:

Head Office, at cost                                         24,000

Cebu Branch, at billed value
(Excluding freight of P416)                              8,320
How much is the branch reported ending inventory? 

a. 10,776
b. 12,936
c. 7,680
d. 17,600

Question 23
The following information are taken from the books and records of Dain Company and its branch. The
balances are at December 31, 2017, the second year of the company’s operations.

  Home Office Books Branch Books

Sales P500,000
Expenses 125,000
Shipment to Branch P250,000
Branch inventory allowance 71,875

The branch obtains all its merchandise from the home office. The Home Office ships the merchandise
at 125% of its cost. The ending inventory of the branch is P50,000 at the billed price.
The true income of the branch is? 

a. 65,625
b. 61,875
c. 127,500
d. 247,500
 
Question 24
The following information are taken from the books and records of Dain Company and its branch. The
balances are at December 31, 2017, the second year of the company’s operations.

  Home Office Books Branch Books

Sales P500,000
Expenses 125,000
Shipment to Branch P250,000
Branch inventory allowance 71,875

The branch obtains all its merchandise from the home office. The Home Office ships the merchandise
at 125% of its cost. The ending inventory of the branch is P50,000 at the billed price.
The reported branch net income? 

a. 61,875
b. 127,500
c. 247,500
d. 65,625

Question 25
The following information are taken from the books and records of Dain Company and its branch. The
balances are at December 31, 2017, the second year of the company’s operations.

  Home Office Books Branch Books

Sales P500,000
Expenses 125,000
Shipment to Branch P250,000  
Branch inventory allowance 71,875  

The branch obtains all its merchandise from the home office. The Home Office ships the merchandise
at 125% of its cost. The ending inventory of the branch is P50,000 at the billed price. 
How much is the realized allowance? 

a. 61,875 
b. 65,625 
c. 247,500
d. 127,500

Question 26
Malakas Inc. operates a branch in Davao. On the home office financial records at the end of 2013,
Malakas reports Investment in Davao Branch account with a P167,000 debit balance. The branch
operation reports on the same data a Home Office account with a P162,000 credit balance. Which of
the following is true?

a. The difference indicates that cash may be in transit from the branch to the home office.  
b. Cash may have been collected by the home office for the branch but not yet reported to the
branch
c. Since two different sets of records are being kept, these two accounts are not designed to
agree.
d. The difference indicates that the home office might have assigned a P6,000 expense allocation
to the branch that was incorrectly recorded by the branch as P11,000.
 
Question 27
The following statements are not incorrect, except,

a. Sales agencies usually do not keep a complete self-balancing set of accounts.

b. A branch’s Home Office account appears in the equity section of the branch’s separate balance
sheet.
c. A branch’s Home Office account appears in the asset section of a balance sheet prepared for
the company as a whole 
d. Most branches maintain a complete set of books which includes a self-balancing set of
accounts
 
 
Question 28
 Maganda, Inc. has a branch operation located in Cebu. On the home office financial record, Maganda
reports 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 statements is true?

a. The difference indicates that cash may be in transit from the branch to the home office. 
b. An accounts receivable of the home office was collected by the branch but it was not reported
yet to the home office
c. The difference indicates that inventory may be in transit from the home office to the branch.
d. Since two different sets of records are being kept, these two accounts are not designed to
agree.

Question 29
Aca, Inc. has several branches. Goods costing P10,000 were transferred by the head office to Cebu
Branch with the latter paying P600 for freight cost. Subsequently, the head office authorized Cebu
Branch to transfer the goods to Davao Branch for which the latter was billed for the P10,000 cost of
the goods and freight charge of P200 for the transfer. If the head office had shipped the goods directly
to Davao branch, the freight charge would have been P700. The P100 difference in freight cost would
be disposed of as follows:

a. Charged to Davao Branch

b. Considered as savings
c. Charged to Cebu Branch
d. Charged to the Head Office

Question 30
The unadjusted in the Allowance for Overvaluation account at year-end represents

a. The mark-up on merchandise shipped to the branch during the year

b. The mark-up on the cost of goods sold by the branch for the year
c. The mark-up on the merchandise available for sale by the branch for the year
d. The mark-up on merchandise shipped to the branch during the year less than mark-up on the
merchandise returned by the branch during the year

Question 31
Camalongay Corporation operates a number of branches in Metro Manila. On June 30, 2017, the
Home Office books showed a Sta. Clara Branch account balance of P20,440. The following
information may help in reconciling both accounts:

1. A P9,600 shipment charged by Home Office to Sta. Clara Branch was actually sent to and
retained by Sta. Inez Branch.
2. A P12,000 shipment, intended and charged to Sto. Domingo Branch was shipped to Sta.
Clara Branch and retained by the latter.
3. A P1,600 emergency cash transfer from Sta. Inez Branch was not taken up in the Home
Office books.
4. Home Office collects a Sta. Clara Branch accounts receivable of P2,880 and fails to notify
the Branch.
5. Home Office was charged for P960 for merchandise returned by Sta. Clara Branch on June
28. The merchandise is in transit

Prepare the necessary adjusting journal entries.

(upload you answer in picture, handwritten.)