COMPREHENSIVE PROBLEM: Shi Wei Tian is a successful receipt, the Binondo Branch has recorded this transfer at

restaurant in Binondo, Manila owned by Catherine Tan under the P47,000. The Home Office however has not yet recorded this
Red Dragon Corporation. The business currently has one branch in interbranch transaction as of the end of the year.
Binondo and in 2024, it opened another branch in Bulacan. These
branches were being managed by Snoop Manansala and Irene Tiu,
respectively. The unadjusted trial balances of Shi Wei Tian and its d. On December 27, a Bulacan branch customer erroneously
branches were as follows: sent a P12,000 account payment to Shi Wei Tian. The
bookkeeper made the correct entry in the Home Office’s
books but did not notify the branch.
Shi Wei Binondo Bulacan
Tian Branch Branch
e. Binondo Branch remitted P14,700 cash to the home office on
Debits:
Cash 90,000 63,000 81,575 December 12. The Home Office has failed to record the said
Accounts 50,000 45,000 61,175 remittance.
receivable
Inventory 70,000 15,000 13,800 f. Shi Wei Tian transferred goods costing P21,600 to the
Plant assets 200,000 Binondo branch and paid P2,500 in shipping costs on
Investment in 76,500 December 16, 2025. The Binondo branch shipped all of these
Branch – Binondo goods to the Bulacan Branch upon the instruction of the home
Investment in 194,000 office on December 30. The shipping cost is P3,600 freight
Branch – Bulacan
collect. Had the goods been shipped directly to the Bulacan
Purchases 340,000 64,950 53,000
Freight charges 5,400 Branch, P4,050 of freight cost should have been incurred.
Shipment from 45,000 36,000
Home Office Upon the receipt of the goods, Ms. Catherine Tan instructed
Expenses 60,000 31,400 27,000 Irene Tiu to record this shipment at P27,000. The inter-branch
Total 1,080,500 264,350 277,950 shipment was not recorded by the branches and the home
Credits: office as well.
Accumulated 50,000
depreciation g. The Home Office maintains all the plant assets in their books
Accounts payable 51,250 33,575 39,000 and these assets have an average remaining useful life of 8
Accrued 14,800 22,975 12,150
and ½ years at the start of 2023. The related expenses were
expenses
Home Office 52,800 75,000 allocated at 30% and 25% to the Binondo and Bulacan
Ordinary share 124,000 branches, respectively and these are not yet recorded in the
capital books of the home office and branches.
Retained 121,550
earnings h. The entire beginning inventory of the Branch had been
Shipment to 142,200 purchased from the home office. Home Office shipments to
Branch its branches were purchased by the Home Office in 2024.
Allowance for 36,700 The physical inventories on December 31, 2024, excluding
overvaluation the shipment in transit and the related freight charges are:
Sales 540,000 155,000 151,800 Home Office P85,000 (at cost)
Total 1,080,500 264,350 277,950 Binondo Branch P23,000 (consisting of P18,000 from home
office)
An audit discovered the following data: Bulacan Branch P12,000 (consisting of P2,000 from outside
a. Shi Wei Tian has already allocated P11,000 and P9,000 of vendors)
administrative expenses to Binondo and Bulacan,
respectively. The branches have not yet been notified. Compute for the following:
1. Branch true net income of Binondo
b. On December 31, Shi Wei Tian shipped merchandise billed at 2. Branch true net income of Bulacan
P45,000 and P48,000 to Binondo and Bulacan, which were 3. Home Office Net income from own operation
received on January 10 and 11, 2025, respectively. The 4. Adjusted balance of Investment in Branch – Binondo
Home Office consistently bills shipment to the Binondo (after net income)
Branch at 20%. Due to distance, the Bulacan Branch also 5. Adjusted balance of Bulacan Home Office (before net
incurs freight charges equivalent to 15% of the amount of the income)
goods delivered from the Home Office. 6. Combined net income
7. Combined total assets
c. On December 20, the Home Office instructed the Bulacan 8. Combined total liabilities
Branch to transfer P74,000 cash to the Binondo Branch. The 9. Combined SHE
Bulacan Branch recorded this transaction immediately. Upon 10. Adjusted balance of Allowance for Overvaluation