Based on Cost

Based on SP

sae , -
10 -

3
UNIVERSITY OF THE EAST

HOME OFFICE, BRANCH And AGENCY Accounting:

6 months

Problem 1: On October 1, 2025, ROMAN Inc., established a sales agency in Taguig City by sending P250,000
cash to be maintained on an imprest system and shipping samples costing P120,000 to be used up to April 1,
2026 supply. During the month, the agency submitted sales orders to the home office amounting to P3,000,000,
but only 75% of them were approved and invoiced by the end of the calendar year. Disbursements for the 3
months were as follows: cash allowance P150,000, rent P75,000, delivery expense P40,000 and other
miscellaneous charges, P25,000. The gross profit rate of the company is 50% based on costs.

What is the net income to be reported by the Taguig City agency for the year ended December
31, 2025?
A. P460,000 B. P420,000 C. P440,000 D. P400,000

150 % Sales 2250000

Sales 3M
Sales 2250 000
Log
00
100 %

50 % Sp 1000 cogs (1500000)

GP 750800

6p =
3mx75 %
X 50 % Cash Allow (150,000)
1 5
(75000)
.

Rent
=
750008 Deliv Exp
.
(40000)
Misce .

Exp (25 000)

Sample usedHo
Sample Used :

120000
=
20000 X3
=
60
, 000
G mos

Problem 2: The following transactions were found in your examination of the interoffice accounts between the
RIVER Inc., and its branch in Ilocos and Isabela Branch.
Shipment to =

& cost

Shipment from &billed price

a. The home office shipped merchandise costing P1,000,000 to the Ilocos branch. Shipments to the branches
were billed at 120% of cost. The branch had received only 60% of the above shipments; the balance was
inadvertently shipped Isabela Branch who retained the goods with the consent of the home office.
b. The branch purchased slightly used delivery truck worth P500,000 after informing the head office. It is the
policy of RIVER Inc., that all records of the fixed assets are to be maintained in the home office.
c. P220,000 marketing expenses of Ilocos Branch was paid by Isabela Branch.
d. Isabela Branch recorded a debit note on inventory transfers from the Home Office of P250,000 twice.
e. The Home Office recorded a cash remittance of P450,000 from Ilocos Branch as coming from the Isabela
branch.
f. Isabela Branch paid the accounts payable of the home office, P75,000 and Ilocos Branch, P40,000.
g. The home office collected P200,000 and P300,000 of Isabela and Ilocos’s Branch receivables, respectively.
h. Ilocos and Isabela Branches reported net income of P120,000 and P(50,000) for the year just ended.

Required:
Journal entries to record the above transactions on the books of the home office and its two branches.

HO llocos Br Isabela Br
Per

branch/
Per Ho

1200 006 Ship from Ho (1 2m x 40 % ) 480, 000 Inr in Branch AssetH o Current Capital
Invin llocos
.

a .

Ship from HO(1m x 60% ) 720

, 000

11020s Ho 4)80 00
CR
100000
Ship to
Ho 720008 DR DR
Allow for Mark up

t -

t
-

Inv in Isabela 480

, 000

Inv in ll0c0s 480, 000 Debit Memo Cm

DR memo
Cr Memo

400, 000
Ship to 110cs

Ship to Isabela 400000

.
6
DeliveryEquipment
50
000000
HO 50000 000

C .
Inv in ll0c0s , 000
220

220 OOW
Marketing Exp
HO
220
/ 000

220,000
HO 22000 2000

Inv in Isabela

250
, 000
di
Ho
,
250 000
Ship from Ho

Isabela 450
, 000
.
e Inv in

Inv in llocs 450, 000

Ho 115 000
,

75000

Accounts Dayanos
f
Accounts Payable 40000
.

40006 115 000

40008 Cash
115 000 Ho
Inv in Isabela

500006 He 200
, 800
.
g Cash Ho 300 Our

300 AR 200 000

Ininllocos
AR 300 006

120 000
llocos 120 006 In2
Summary
h . In in

120000 120000
Br MI

Ho 50
, 000

te our
Br nL 50 006 In Summary
50000
Inv in Isabela
Reconciliation
4
Problem 3: On January 1, 2025, JANNIK Company established a branch in a nearby suburban city. At the close of
the calendar year ended December 31, 2025, the investment in Branch account on the books of the home office
had a balance of P1,950,000. The branch books reflected another amount thus the difference in the reciprocal
accounts is due to the following data:

a. Cash of P750,000 forwarded to the home office by the branch is in transit and has not been recorded on
the home office books.
Branch
Cash 750
1
, 000
to 750
, 000
Ir in Branch Cash

b. During the year, Shipments to Branch totaled P650,000 while Shipments from Home Office amounted to
P747,500. It is the policy of the home office to charge the branch at 115% of cost. 17t # =
1 15
.
so no reconciliatioa

c. Notification sent by the home office to the branch, informing the latter that P50,000 of its operating
expenses was paid by the former. No entry has yet been made by the branch inBr >500 EXP50000 Inv

d. Cash of P1,500,000 received by the branch from the home office was erroneously recorded by the branch
as P1,050,000.
e. The branch sent a credit memo of P125,000 to the home office covering the latter’s share in a local
advertisement which had not yet been acknowledged by the home office.
f. The branch purchased, for cash P1,200,000 delivery van for its use; fixed asset accounts of the branch are
maintained at the branch. The home office was duly informed about it

1. What is the unadjusted balance of home office current account?

A. P575,000
B. P1,325,000
C. P1,025,000
D. P863,750

2. What account would be (1) debited or credited and (2) by whom in item (f)?
A. (1) Delivery Equipment- debit; (2) Home Office
B. (1) Delivery Equipment- debit; (2) Branch
C. (1) Investment in Branch- credit; (2) Home Office
D. (1) none of these

Der Branch
Per HO

Branch #Current
A
in

575000
1950 000
Unadjust Bal
Cash
In in Br &
(750000)
b

Invin Br
Cash
, 000
50
[i
+ 50000 EXPH0

inBr
Inv
Cash
1500 a d 1050 00
.

+ 450000

Advertising Exp
e (125000) - Dr memo
Ho
.

Inr in Br 125 000

,

Cash

fo
entry
-

memo Delivery Equip

-

1200008
Cash
1075000 107500
Adjusted Balance
 Exam
5
Problem 4. WILCOX BUILDERS operates a number of branches. On September 30, 2024, its PATEROS branch
shows Home- Office Current account P64,200 and the home office books show Investment in PATEROS Branch
account of P705,200. An examination of the records discloses the following information which may help in
disregard

reconciling both accounts:

a. A P620,000 shipment, charged by the home office to PATEROS Branch, was actually sent to, and retained
correctenteto-Bichten
entry

by, BICUTAN branch. resing lB

ship to
Ship

Ho
b. A P710,000 shipment intended for, and charged to, ALABANG Branch, was sent instead to PATEROS and
per
llB

retained by the latter.

Ship to Branch

c. A P500,000 emergency cash transfer from SUSANA Branch to BICUTAN branch was not taken up in the home
Ho
Per office books.
Per effect
Branch no

llB d. A Home office customer

Cash erroneously paid his P1,000,000 account to PATEROS branch. The accountant of
the branch had already notified the home-office about it, however, no entry has been made yet on the
Ak Ho

Ship to Branch
IlB
books of the latter.
5K Ho 51
Ship from Ho

Ship to Br e. Home office was charged P50,000 for merchandise returned by PATEROS Branch but the home office
45K

recorded it as P5,000.
llB

f. On September 30, 2024, Home office wired cash of P750,000 to PATEROS Branch (upon the request of the latter)
Phipta
asa

but was only credited to the branch account only after a couple of days. However, the accountant of the home
Adjusting IIBdmin office had inadvertently debited this transaction to Administrative Expenses.
Exp

asa g. Home Office credit memo of P100,000 was recorded by the bookkeeper of the Branch as P10,000.
Cash
100
p

som Set h. As of September 30, 2024, total shipments made by the Home to the branch amounted to P5,250,000 however
Ship 5

Bipo
records of the branch showed only P5,000,000. Shipments to the branch are billed at cost
i. The records of the home office showed total remittance of P4,500,000 but the cash disbursements books of the
Ho

cash To
4505
Cash

branch as of September 30, 2024, showed P4,505,000

Ens Income Summary j. For the month ended, home office erroneously recorded PATEROS branch net loss of P50,500 as net income.
5o
a

Correct 1
Income Summary
50500

netloss
11
Income Summary
5050
3. How much is the reconciled balance of the reciprocal accounts as of September 30, 2024? ans .
974 200

A. P1,504,500 B. P1,504,200 C. P1,594,500 D. P1,684,200

4. What is the unadjusted balance of Branch

home office current account? ans. (1800)

A. P64,200 B. P154,200 C. P710,000 C. P1,000,000

5. For item (f), which of the following debit or credit is correct?

A. Dr. Home Office -
B. Cr. Investment in Branch Inv in Branch
C. Dr. Investment in Branch Cash
D. Dr. Administrative Expenses

Patros
Branch
to
-

Unadjusted Bal
Per ) create
64208

(620000)
G -

b .
+ 710000

C .

cash im
Inv in Br + 1000 000
d . to
AR

(45000)
Ship to Br e
+ 750000
+ 750000
Adver Exp750K
Cash
.
f

(90000)
g
.

+ 250000
no

Cashhu in Br i (5000)

(101000)
05
974208 974208
Adj Cap

Der Branch
Per Ho

100 000
ship
transit 5000 . 72500
2
Merch in
-

1
I -

k
.
2 Remittance in transit -
2000
Cash B -
2 (20000
4 500
.
3 Ho Debit Memo of 5000 3 .

was recorded by the Branch -500 -

4
(108, 000)
10 800 Cash 10

llB10000
5
4
. Branch "Credit Memo of 1200

154508 154500
, 000
120
recorded byH o as

5
.
Branch collected HO AR-10, 000

Ho not yet notified

, 000
100
Unadjusted Ho Current
-

6 .

bal of
 6
Problem 5. The discrepancies enumerated below were discovered in the inter-office account of WENT TRADING
CORPORATION with its SAN JUAN Branch and the corresponding account carried on the latter’s books as of
December 31, 2024.
a. Shipments in transit of P380,000.
b. Remittance in transit, P900,000. debit
c. A charged of P15,500 was made by the home office for freight on merchandise, but the amount was
recorded by the Branch as P51,500.
d. The home office had incorrectly charged the branch the amount of P15,000 for repairs cost. However,
the branch had made no entry. it bran
t

e. The home corrected the entry in (d) on January 3, 2025 and a credit memo was inadvertently sent to
the branch who subsequently made the corresponding entry on December 31, 2024 based on the
credit memo.
The inter-office accounts were in balance as of January 1, 2024. The balance of the inter-office account on the
home office books as of December 31, 2024 was P1,250,000.

6. How much is the adjusted balance of the inter-office account as of December 31, 2025?
A. PP335,000 B. P6,000 C. P350,000 P35,000

7. What is the unadjusted balance of the inter-office account on the books on the Branch books
as of December 31, 2024?
A. PP335,000 B. P6,000 C. P350,000 P35,000

ASE
Ho per Branch
per
Exp -

cm
24 600
1250 000

380 000
Ship
from
office
I 11B

Cash l I gook
b .

(90000)

C .
(36000)
Exp
IIB 15000
di (15000) Dm
Horo

C .
+ 1500
Ho
Exp 18000)EXPHo
335000 33508

Problem 6. Home office bills its branch for merchandise shipments at 20% above cost. The following are some of
the account balances appearing on the books of home office and its branch as of December 31: 2-m should
-
1
2400000 : .

e
400000
100 %

Outside
Home Office Books Books of the Branch B1480 Bl
costo 70 000
BI
Inventory, Jan 1 P 1,100,000 P 550,000 Ship 250000000000
. 100 000
2
420
purch 220008

ShipmentsQue
cat 500 000

to Branch 2,100,000
Outside to
(355000)
El

cogs
(70
e, 000) (720,000 10000 Tags (65000)
Purchases & BD
4,200,000 220,000 1800000 , 000
2160 36000

Shipments from Home Office 2,400,000

Allowance for Overvaluation 500,000
Sales 5,000,000 1,300,000
Operating Expenses 940,000 180,000

Per physical count, the ending inventory of the branch is P720,000 excluding goods from outside purchases of
P355, 000; the ending inventory of the home office is P650, 000
500 006 Allow from Overhead 500 000

Ship to Branch 2100 000 Allow for Overall

Less : Allow ,
End
Less : Allow from Current Ship
Ship Hote
from cast
Branch El from HO
(420, 000)
(2100
end
) (14000 bal at the
20% Adjusted
=
00
Ou X 100000 X 20 %
2 our
o
-400
+

80000

Bl Beg Allow 360 000

.

- 20 %
Ship intrate 1000
j

400 00 26
&f
1
Branch B1 B) from Ho at Cost X .

S
80 000
Bal Allow
Add :
Beg Realized Allow 360008

at BP 488008
Cost 400000 1 20 Branch BI & Ho Overstatement of Br COS
.

B1 from Ho
x .

& Understatement of Br n

Add .
Be
Allowance 80008

480000 Branch Tot a

Du
 7
COMPUTE:
8. How much is the amount of shipments in transit, if any, at cost?
A. P100,000 B. P133 C. P80,000 D. P84,000

9. How much of the branch beginning inventory came from outside purchases?
A. P100,000 B. P120,000 C. P70,000 D. P84,000

10. How much is the overstatement of branch cost of sales? ans . 360 800

A. P164,000 B. P136,000 C. P336,000 D. P256,000

11. How much is the total ending inventory to be shown on the combined financial statements? ans .
1705 800

A. P1,300,000 B. P1,200,000 C. P1,250,000 D. P1,350,000

Total
Ending Inv on the Combined FS (at cost)

650 000

-ver 1055000

to

Problem 8. The account balances shown below were taken from the trial balances submitted to ABC BAZAR by its
BLUMENTRIT branch:

2023 2024
Petty cash P 25,000 P 25,000
Accounts receivable 400,000 750,000
Inventory Beg Inv
- 1,220,000
Sales & BP
750,000 2,250,000
Shipments from home (125% of cost) 560,000 1,500,000
Expenses 162,500 500,000
Accounts written off 6,000 12,500
All branch collections are remitted to the home office. All branch expenses are paid out of the petty cash fund.
When the petty cash fund is replenished, the branch debits appropriate expense accounts and credits Home Office
Current. The petty cash is counted every December 31, and its composition was as follows:

12/31/23 12/31/24
Currency and coins P12,350 P16,340
I 25088
Expense vouchers 12,650 8,660
Gincluded a 500K so less sa Exp (excluded a book so need to add sa
Exp
bec next
year mo
pa siga babayaran
End Inv

The branch inventory on December 31, 2024 was P354,000.

True

12. What is the correct branch net income for 2024? nL (151310)
A. P9,002 B.P(59,290) C. (P251,310) D. P(62,345)

2 250 000
Sales

BI
0 COS &
, 000
1220
Cost

+ 1500000
-

354666
(1892800)
1200000 1500000 , 800
300 T
25
Ship
.

544808 GP 357206
CGAS 2) 760002720000

El 283200) (354800)(70800) Expenses : 500 000

12500
Cogs 1892800 2366000473200
2023 (12650)
20248660 (508510)

Net Income((loss) (151310)

 8
Problem 9. The Manila branch of the BERENSON Company is billed for merchandise by the home office at 20%
above cost. The branch in turn prices merchandise for sales purposes 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) P 2,403,750

Shipments from home office (Jan. 1 – Feb. 16) & BP 120 %
1,875,000
Sales 4,293,750
Sales returns 112,500
Sales allowances 75,000

13. What was the cost of the merchandise destroyed by fire? ans .
778 125

TGAS at
Cost TGAS at
Cost
+ 1875000
-403750
+ 1875000 3565625 -403750 3565625
1 20
1 20
.

Less : COGS at Cost

El destroyed by Fire
778125
4) 293750 -

112500 = 1 .

25/1 . 20 (2787500)
COGS at Cost
2787500
El
778 125
4) 293750 112500 = 1 25/1 20

by Fire
.

destroyed
.
-

less

14.If the home office receives a debit memo from the branch, the home office shall record it in its separate
statement of financial position by
A. Increasing the investment in the branch account
B. Decreasing the investment in the branch account Cash
C. Disclosure only
D. None of the above
less

15. If the branch receives a credit memo from the home office, the branch shall record it in its separate
statement of financial position by:
A. Increasing the home office account
B. Crediting the home office account to
C. Debiting the home office account cash /Exp

D. Disclosure

16.Which of the following transactions will increase the home office account in the branch’s separate
statement of financial position?
A. Net loss of the branch
B. Collection by the home office of the branch’s receivable
C. Debit memo received from the home office Cash/Exp
Ho

D. Payment by the branch of home office’s liability

17.Which of the following transactions will decrease the investment in the branch’s account in the home
office’s separate statement of financial position?
A. Net income of the branch
B. Payment of the branch’s liability by the home office
C. Credit memo received from the branch
Ship to Branch

D. Return by the branch to the home office of merchandise shipped 11B

18.Which of the following reconciling transactions will require credit to the home office's current account in
Branch A’s book for the adjustment?
A. Collection by Branch A of Branch B’s accounts receivable
Branis Becht
B. Payment by branch A of the home office’s accounts payable Cash
Ho

C. Credit memo received by branch A from home office

Ho
Cash/Exp
D. Reshipment of goods received by branch A to branch B
x Per HO Branch A Branch B

IIB Ship from Ho

to Branch A Ho
Ship
Ship Ho
from
Ho
Branch B Ho
Ho
Ship from
Branch A