Home and Branch Accounting

1.) On December 31, 2011, the branch manager of Binay Company in Iloilo City submitted
the following data to the home office in Manila

Petty cash fund 6,000

Sales 390,000
Shipments from home office 270,000
Accounts receivable, January 1, 2011 86,000
Inventory, January 1, 2011 74,000
Inventory, December 31, 2011 82,000
Expenses 96,000

All cash collected on accounts receivable amounting to P378,000 were remitted to the home
office.

What is the balance of the Home Office account on:

January 1, 2011 January 1, 2012

A. 270,000 186,000
B. 166,000 186,000
C. 166,000 88,000
D. 270,000 88,000

2.) Just before the books are closed on December 31, 2011, the trial balances for the home
office and branch contained the following account balances:

Investment in branch 38,600

Home office 21,320

Your examination of the accounts revealed the following information:

a.) On December 26, the branch remitted P10,400 in cash to the home office that was not
received until January 3.
b.) Merchandise that was billed to the branch at P7,280 was in transit at December 31.
c.) A cash payment of P400 on an open accounts receivable was received by the home
office. The account, however, was carried on the books of the branch. The home office
did not notify the branch of the cash collection.

What is the adjusted balance of the reciprocal accounts on December 31, 2011?
A. 29,000
B. 49,000
C. 39,000
D. 28,200

3.) The home office ships merchandise to its branch at 20 percent above cost. The branch’s
books show a beginning inventory of home office merchandise of P30,000 and shipments
from home office of P180,000. What is the balance before closing in the Allowance for
 Overvaluation of Branch Inventory account?
A. 35,000
B. 36,000
C. 42,000
D. 52,500

4.) Power Corporation shipped inventory from the home office to its Bacolod branch,
charging the branch P375,000 plus freight. Power bills inventory to its branches at 120
percent of original cost, plus the actual amount of shipping charges. At the end of the
year, the Bacolod branch had resold 50 percent of the inventory from the home office.
Shipping costs paid by Power were P2,000.

What amount of inventory should be reported in the branch’s statement of financial

position?
A. 187,500
B. 188,500
C. 189,500
D. 377,000

5.) Using the data in number 4, at what amount should the branch’s inventory from the home
office be reported in the statement of financial position of Power Corporation as a whole?
A. 157,250
B. 188,500
C. 189,500
D. 377,000

6.) Oro Corporation has a branch in Cebu. The branch reported income of P130,000 for 2011.
The branch has a balance in its Home Office account at the end of the year, after closing,
of P765,000. Branch income has not been recorded by Oro’s home office. During the
year, Oro shipped to the branch at a price of P160,000; Oro’s original cost was P90,000.
All but 45 percent of the inventory has been resold to unrelated parties by year-end.

What is the balance in Oro’s Investment in Branch account?

A. 594,500
B. 603,500
C. 635,000
D. 765,000

7.) A branch’s ending inventory of merchandise shipped by the home office and purchased
from outside vendors amounts to P50,000. The post-closing balance in the Unrealized
Gross Profit in Branch Inventory account is P6,000 due to the home office’s practice of
shipping merchandise at 20% above cost. The merchandise purchased from outside
vendors contained in the ending inventory of the branch amounts to:
A. 38,000
B. 30,000
C. 18,000
D. 14,000
 8.) The following balances are from the books of the Bicol Co. and its Naga City branch
location as of December 31, 2011:

Debit Credit
Sales 270,000
Shipments from Home Office 151,200
Inventory, January 1 28,350
Expenses 90,000

The Naga City branch purchases all of its merchandise from the home office. Its December 31
inventory was P25,200. The home office bills the branch at 40% above its cost.

Before closing, what is the balance of the Shipment to Branch Account on the Home
Office Books?
A. 128,250
B. 108,000
C. 99,900
D. 90,720

9.) Using the data on number 8m what is the branch profit as far as the home office is
concerned?
A. 28,800
B. 31,950
C. 69,750
D. 76,950

10.) The Ventures Corporation decided to open a branch store in Manila. Shipments of
merchandise to the branch totalled P108,000 which included a 20% mark-up on cost. All
accounting records are to be kept at the home office.

The branch submitted the following report summarizing its operations for the period ended
December 31, 2011.

Sales on account 148,000

Sales on cash basis 44,000
Collections of accounts 120,000
Expenses paid 76,000
Expenses unpaid 24,000
Purchase of merchandise for cash 52,000
Inventory on hand, December 31 (80% 60,000
from Home Office
Remittances to Home Office 110,000

How much is the ending inventory at cost?

A. 40,000
B. 50,000
C. 52,000
 D. 51,000

11.) Using the data in number 10, what is the branch net income under the generally
accepted accounting principles?
A. 1,600
B. 2,000
C. 8,000
D. 5,000

12.) The following data were taken from the records of Luzon Corporation of Manila
and its Rizal branch for 2011:

Manila Office Rizal Branch

Sales 530,000 157,500
Inventory, January 1 57,500 22,250
Purchases 410,000
Shipments to Branch 105,000
Shipments from Home Office 126,000
Inventory, December 31 71,250 29,250
Expenses 191,000 50,750

In 2011, Manila office billed the Rizal branch at 120% of cost which was lower by
5% than last’ year’s.

What is the combined net income?

A. 48,325
B. 48,000
C. 49,650
D. 56,075

13.) Tiger, Inc. owns a branch in Bicol. As of the end of the current year, the home has
an Investment in Bicol Branch account with a P77,000 debit balance. At the same time,
the branch is reporting a Home Office account with a P61,000 credit balance. An
investigation uncovers the following:
 During the year, the home office shipped merchandise costing P16,000 to
the branch at a billed price of P28,000. The branch accidentally recorded
the shipment as P38,000
 At year’s end, the home office assigned in P14,000 in expenses to the
branch, the branch recorded this allocation as P19,000
 Also at year’s end, the branch transferred P31,000 in cash to the home
office. The home office has not yet recorded this money.

What is the reconciled balance of the reciprocal accounts?

A. 46,000
B. 53,000
C. 46,500
D. 77,000