solution chapter 12

7/17/2019 Solution Chapter 12

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Chapter 12

Problem I

(a)Working Fund – Agency ……………………………………………………….. 5,000

Cash …………………………………………………………………………. 5,000

(b)Accounts Receivable …………………………………..................................... 50,000Sales-Agency ………………………………………………………………. 50,000

(c)Cash ………………………………………………………..................................... 35,000

Accounts Receivable …………………………………………………….. 35,000

(d)Expenses-Agency ……………………………………………………………….. 4,500

Cash …………………………………………………………………………. 4,500

(e)Expenses-Agency ……………………………………………………………….. 2,250

Cash …………………………………………………………………………. 2,250

(f)Cost of Goods Sold-Agency …………………………………………………… 36,000

Merchandise Shipments-Agency ………………………………………. 36,000

Problem II

(a) Branch Books:

(a) Cash ………………………………………………………….. 42,500

Home Office …………………………………………… 42,500

(b) Shipments from Home Office …………………………… 50,200

Home Office …………………………………………... 50,200

(c) Accounts Receivable ……………………………………. 60,000

Sales …………………………………………………….. 60,000

(d) Purchases …………………………………………………… 22,500

Accounts Payable …………………………………… 22,500

(e) Home Office ……………………………………………….. 53,400

Accounts Receivable ………………………….. 53,400

(f) Accounts Payable ………………………………………... 12,250

Cash …………………………………………………….. 12,250

(g) Furniture & Fixtures ………………………………………… 8,000

Cash …………………………………………………….. 8,000

(h) Expenses …………………………………………………….. 18,000

Cash …………………………………………………….. 18,000

(b) Home Office Books:

(a) Branch ………………………………………………………. 42,500

Cash ……………………………………………………. 42,500



(b) Branch ……………………………………………………… 50,200

Shipments to Branch ……………………………….. 50,200

(c) Accounts Receivable …………………………………... 105,000

Sales …………………………………………………… 105,000

(d) Purchases …………………………………………………. 122,500

Accounts Payable …………………………………. 122,500

(e) Cash ……………………………………………………….. 113,600

Accounts Receivable ……………………………… 113,600

(f) Accounts Payable ………………………………………. 124,000

Cash …………………………………………………… 124,000

(g) Expenses …………………………………………………… 26,600

Cash …………………………………………………… 26,600

(h) Cash ……………………………………………………….. 53,400

Branch ………………………………………………... 53,400

(i) Retained Earnings ………………………………………. 10,000

Cash …………………………………………………... 10,000

BARTON CO.

Balance Sheet for Branch

December 31, 20x4

Assets Liabilities

Cash …………………………… P 4,250 Accounts Payable ………… P 10,250Accounts Receivable ……… 12,600 Accrued Expenses …………… 300

Merchandise Inv……………... 23,500 Home Office ………………….. 37,900

Prepaid Expenses …………… 750

Furnitures & Fixtures …. P 8,000

Less accum. Depr …… 650 7,350

Total Assets …………………… P48,450 Total Liabilities ………………….P48,450

BARTON CO.

Income Statement for Branch

For Year Ended December 31, 19X6

Sales …………………………………………………………………………… P66,000

Cost of Goods Sold:

Purchases …………………………………………………………… P22,500

Shipments for home office ………………………………………. 50,200

Merchandise available for sale ………………………………… P72,700

Less merchandise inv, December 31 ………………………….. 23,500

Cost of Goods Sold ……………………………………………….. 49,200

Gross Profit ……………………………………………………………………. P16,800



Expenses ……………………………………………………………………… 18,200

Net loss ………………………………………………………………………... P 1,400

BARTON CO.


For Year Ended December 31, 20x4

Assets Liabilities & Stockholders Equity

Cash …………………………….. P 23,200 Liabilities

Accounts Receivable ……….. 19,050 Accounts payable ………… P 21,300

Merchandise Inventory……… 48,500 Accrued Expenses …………. 1,350 P22,650

Prepaid Expenses ……………. 2,050 Stockholders Equity

Furniture & Fixtures …. P 20,000 Capital stock, P20 par……… P50,000

Less accum. Depr….. 5,580 14,420 Retained Earnings …………. 72,740 122,470

Branch ………………………… 37,900 Total liabilities and stockholders’

Total Assets …………………... P145,120 equity ………………… P145,120

BARTON CO.

Income Statement for Home Office


Sales ……………………………………………………………………………....... P105,000

Cost of goods sold:

Merchandise inventory, January 1 …………………………………. P 40,120

Purchases ………………………………………………………………... 122,500

Merchandise available for sale ……………………………………… P162,620

Less shipments to branch ……………………………………………... 50,200

Merchandise available for own sale ……………………………….. P112,420

Less merchandise inventory, December 31 ………………………. 48,500

Cost of Goods Sold ……………………………………………………. 63,920

Gross Profit ………………………………………………………………………… P 41,080Expenses …………………………………………………………………………… 27,630

Net income from own operations …………………………………………….. P 13,450

Deduct branch net loss …………………………………………………………. 1,400

Total Income ………………………………………………………………………. P 12,050

BARTON CO.



Sales …………………………………………………………………………………. P171,000

Cost of goods sold:

Merchandise inventory, January 1 ………………………………….. P 40,120Purchases ………………………………………………………………… 145,000

Merchandise available for sale ……………………………………… P185,120

Less merchandise inventory, December 31 ……………………….. 72,000

Cost of goods sold ………………………………………………………. 113,120

Gross profit ………………………………………………………………………….. P 57,880

Expenses …………………………………………………………………………….. 45,830

Net Income …………………………………………………………………………. P 12,050



(a) Branch Books:

Expenses ………………………………………………………………. 650

Accumulated Depreciation – F&F………………………. 650

Sales …………………………………………………………………… 66,000Merchandise Inventory ……………………………………………. 23,500

Income summary ………………………………………….. 89,500

Income Summary …………………………………………………… 90,900

Shipments from Home Office …………………………… 50,200

Purchases …………………………………………………… 22,500

Expenses …………………………………………………….. 18,200

Home Office ………………………………………………………… 1,400

Income Summary ………………………………………… 1,400

(b) Home Office Books

Expenses ………………………………………………………………. 1,180

Accumulated Depreciation – F&F………………………. 1,180

Sales …………………………………………………………………… 105,000

Merchandise Inventory ……………………………………………. 48,500

Shipments to Branch ……………………………………………….. 50,200

Income summary ………………………………………….. 203,700

Income Summary …………………………………………………… 190,250

Merchandise Inventory …………………………………… 40,120

Purchases ……………………………………………………. 122,500

Expenses …………………………………………………….. 27,630

Branch Income ……………………………………………………… 1,400

Branch ………………………………………………………. 1,400

Income Summary ………………………………………………….. 1,400

Branch Income …………………………………………… 1,400

Income Summary ………………………………………………….. 12,050

Retained Earnings ……………………………………….. 12,050

Problem III

(a) Branch Books:

Jan. 1 Cash …………………………………………. 1,500

Home Office ……………………… 1,500

1 Shipments from home office ……………. 10,200

Home Office ……………………… 10,200



1 Home Office ……………………………….. 900

Cash ……………………………….. 900

1 Accts. Rec. – Home office ………………. 2,600

Home Office ……………………… 2,600

1-31 Accts. Rec.-Home Office ………………. 6,200Sales ……………………………….. 6,200

1-31 Cash ……………………………………….. 2,600

Accounts Receivable ………….. 2,600

1-31 Purchases …………………………………. 3,000

Accounts Payable ……………… 3,000

1-31 Accounts Payable ………………………. 1,450

Cash ……………………………….. 1,450

1-31 Expenses ………………………………….. 1,250

Cash ………………………………. 1,250

Jan. 1-31 Cash ………………………………………… 1,600

Accts. Rec.-Home Office ……... 1,600

1-31 Home Office ……………………………… 150

Accts. Rec.-Home Office ……. 150

1-31 Shipments from Home Office ………… 1,250

Home Office ……………………. 1,250

1-31 Home Office ……………………………… 1,000

Cash ……………………………… 1,000(b) Home Office Books:

Jan. 1 Branch …………………………………….. 1,500

Cash ……………………………… 1,500

1 Branch …………………………………….. 10,200

Shipments to Branch ………….. 10,200

1 Store Furniture and Fixtures Branch ….. 3,000

Store Furniture and Fixtures …... 3,000

1 Accumulated Depr. Store F&F ……….. 750

Accumulated Depr. Store Furniture

And Fixtures, Branch ………….. 750

Calculation of depreciation: 2.5years at P300, (10% of

P3,000), or P750

1 Store Furniture and Fixtures Branch ….. 900

Branch …………………………… 900

1 Branch …………………………………… 2,600

Accounts Receivable …......... 2,600



1-31 Accounts Receivable ………………… 34,600

Sales ………................................ 34,600

1-31 Cash ………………………………………. 40,000

Accounts Receivable ………… 40,000

1-31 Purchases ………………………………….31,600

Accounts Receivable …………. 31,600

1-31 Accounts Payable ……………………… 36,200

Cash ……………………………... 36,200

1-31 Accrued Expenses Payable …………. 250

Expenses …………………………………. 8,950

Cash …………………………….. 9,200

1-31 Allowance for Doubtful Accounts ….. 150Branch ………………………….. 150

1-31 Branch ……………………………………. 1,250

Shipments to Branch ………… 1,250

1-31 Cash ……………………………………… 1,000

Branch …………………………. 1,000

EAGLE CO.

Balance Sheet

January 31, 20x4

Assets Liabilities

Cash …………............................ P 1,100 Accounts Payable ………………. P 2,400

Accounts Receivable ………….. 3,600 Accrued expenses ………………. 400

Accts. Rec.-home office ………. 850 Home Office ……………………… 14,050

Merchandise Inventory ………… 9,800

Merchandise in Transit …………. 600

Total assets ………………… P37,200 Total Liabilities ……………………. P37,200

EAGLE CO.


For Month Ended January 31, 20x4

Sales …………………………………………………………………………………………. P 6,200

Cost of Goods Sold:

Purchases …………………………………………………… P 3,000

Shipments from home office ……………………………. 11,450

Shipments from home office in transit ………….......... 600

Merchandise Available for Sale ……………………….. P15,050

Less merchandise inv. Dec 31, 19X9 ……................P9,800



Merchandise in transit ………………………….. 600 10,400

Cost of Goods Sold ……………………………………………………………. 4,650

Gross Profit ………………………………………………………………………………… P 1,550

Expenses …………………………………………………………………………………… 2,110

Net Loss ………………………………………………………………………………….. .. P 560

EAGLE CO.Balance Sheet for Home Office

January 31, 20x4

Assets

Cash …………………………………………………………………… P 9,100

Accounts Receivable ………………………………………………P34,000

Less allowance for doubtful accounts ……………….. 1,050 32,950

Merchandise Inventory ……………………………………………. 44,500

Store furniture and fixtures …………………………………………P12,000

Less accumulated depreciation ………………………. 3,950 8,050

Store furniture and fixtures-branch ……………………………… P 3,900

Less accumulated depreciation ……………………… 785 3,315

Branch office ………………………………………………………... 14,050

Total Assets …………………………………………………………… P111,765

Liabilities

Accounts Payable …………………………………………….. P29,150

Accrued Expenses …………………………………………….. 750

Total Liabilities ………………………………………………….. P29,900

Stockholders Equity

Capital Stock …………………………………………………… P50,000

Retained earnings …………………………………………….. 31,865

Total stockholder’s equity …………………………………… 81,865Total liabilities and stockholders equity …………………… P111,765

EAGLE CO.



Sales ……………………………………………………………………………… P 34,600

Cost of goods sold:

Merchandise inventory, January 1 …………………….. P46,000

Purchases …………………………………………………… 31,600

Merchandise available for sale ………………………… 77,600

Less shipments to branch ………………………………… 12,050Merchandise available for own sales …………………. P65,550

Less merchandise inventory, January 31 ……………… 44,500

Cost of goods sold …………………………………………………………… 21,050

Gross Profit ………………………………………………………………………… P 13,650

Expenses …………………………………………………………………………… 9,325

Net income from own operations ……………………………………………. P 4,225

Deduct branch net loss ………………………………………………………… 560

Total Income …………………………………………………………………… P 3,665



EAGLE CO.



Assets Liabiities and Stockholders Equity

Liabilities

Cash ……………………………..………. P 10,200 Accounts Payable …… P30,700Accounts receivable ……….. P38,450 Accrued Expenses …… 1,100 P 31,800

Less allow for doubt-

Ful accounts ……….. 1,050 37,400

Merchandise Inventory ……………….. 54,900 Stockholders Equity

Store furn. & fixtures ………… P15,900 Capital Stocks …………P50,000

Less accum depr 4,735 11,165 Retained earnings …… 31,865 81,865

Total assets ……………………………… P113,665 Total liab. And stockholders equity . P113,665

EAGLE CO.

Combined Income Statement for Home Office and Branch


Sales ………………………………………………………………………………….. P 40,800

Cost of goods sold:

Merchandise Inventory, January 1 ………………. P46,000

Purchases ……………………………………………... 34,600

Merchandise available for sale …………………... P80,600

Less merchandise inventory, Jan 31 ……………... 54,900

Cost of goods sold …………………………………............................... 25,700

Gross profit …………………………………………………………………………... P 15,100

Expenses … …………………………………………………………………………… 11,435

Net Income ………………………………………………………………………….. P 3,665

(a) Branch Books

Jan. 31 Shipments from Office-in Transit ……………… 600

Home Office ……………………………. 600

31 Expenses …………………………………………. 475

Home Office ……………………………. 475

31 Expenses ………………………………………… 35

Home Office ………………………….. 35

1/120 x P3,000, or P25 (depreciation for one month;

Asset life, 10 years); 1/90 x P900, or P10 (depreciation

For one month; asset life, 7.5 years)

31 Merchandise Inventory ……………………… 9,800

Merchandise in Transit ……………………….. 600

Income Summary …………………… 10,400

31 Expenses ……………………………………….. 350

Accrued Expenses …………………. 350

31 Sales ……………………………………………. 6,200



Income Summary ………………….. 6,200

31 Income Summary ……………………………. 17,160

Shipments from Home Office ……. 11,450

Ship. From Home Office – in Trans . 600

Purchases …………………………… 3,000

Expenses …………………………….. 2,110

31 Home Office ………………………………….. 560

Income Summary …………………... 560

(b) Home Office Books:

31 Branch …………………………………………. 600

Shipments to Branch ………………. 600

31 Branch …………………………………………. 475

Expenses ……………………………... 475

31 Branch …………………………………………. 35

Accumulated Depreciation, Store

Furniture and Fixtures Branch …….. 35

31 Expenses ………………………………………. 100

Accumulated Depreciation store

Furniture and Fixtures branch ……. 100

1/120 x P12,000, or P100 (depreciation for one

Month; asset life, 10 years)

31 Income Summary …………………………… 46,000

Merchandise Inventory …………… 46,000

31 Merchandise Inventory …………………….. 44,500

Income Summary ………………….. 44,500

31 Expenses ………………………………………. 750

Accrued Expenses …………………. 750

31 Sales …………………………………………… 40,925

Purchases …………………………… 31,600

Expenses …………………………….. 9,325

31 Branch Income ………………………………. 560

Branch ……………………………….. 560

31 Income Summary ……………………………. 560

Branch Income ……………………... 560

31 Income Summary ……………………………. 3,665

Retained Earnings ………………….. 3,665



Problem IV

1.

Socrates Company

Home Office and Plato Branch

Reconciliation of Reciprocal Ledger Accounts

June 30, 20x4Investment in

Plato Branch Home Office

Ledger Ledger

Account Account

(Debit) (Credit)

Balances prior to adjustment P85,000 P33,500

Add: Merchandise shipped to branch 24,000

Less: Acquisition of office equipment by branch

(carried in accounting records of home office) (14,500)

Collection of branch trade accounts receivable (9,000)

Payment of cash by branch (22,000) _______

Adjusted balances P48,500 P48,500

2. (a) Accounting records of home office:

Office Equipment: Plato Branch 14,500

Investment in Plato Branch 14,500

To record acquisition of office equipment by branch.

Cash in Transit 22,000

Investment in Plato Branch 22,000

To record cash in transit from branch.

(b) Accounting records of branch:

Home Office 9,000

Trade Accounts Receivable 9,000

To record collection by home office of branch accounts

receivable.

Inventories in Transit 24,000

Home Office 24,000

To record shipment of merchandise in transit from

home office.

Problem V

((a) BRANCH HOME OFFICE

ACCOUNT ACCOUNT…

Balances before Adjustments ……………………………………….. P 8,400 P 9,735Adjustments:

Additions:

Merchandise in transit to branch …………………. 615

Collection of Home office receivable by Branch 2,500

Understatement of branch net income for Nov.. 90

P10,990 P10,350

Deductions:

Merchandise return to home office in transit ……………. 640



Corrected Balances ……………………………………………… P10,350 P10,350

(b) Branch Books:

Shipments from Home Office-in Transit ……………………. 615

Home Office …………………………………………... 615

Home Office Books:Branch …………………………………………………………… 2,500

Accounts Receivable ……………………………….. 2,500

Branch …………………………………………………………… 90

Retained Earnings ……………………………………. 90

Merchandise Returns from Branch – in Transit ……………. 640

Branch ………………………………………………….. 640

Problem VI

1.

BranchAccount Home officeAccount

Balances before adjustments P 77,150 P 56,450

Adjustments:

Additions:

Advertising charged to branch but not yet recorded

on branch books 600

Merchandise in transit to branch but not yet shown

on branch books 4,400

Collection of home office account by branch not yet

recorded by home office ____750 _______

P77,900 P61,450

Deductions:

Overstatement of branch profit for 20x0 on home

office books 540

Cash in transit to home office but not yet shown on

home office books 16,000

Overstatement of charge for merchandise from

home office on branch books (home office shipped

200 units @ P37.85, or P7,570, and 200 units @ P44,95,

or P8,990, a total of P16,560; branch erroneously

recorded shipment at P16,650, an overstatement of

P90 _______ ___90

Corrected balances P 61360 P 61,360

2. Home office books:Jan. 31 Retained Earnings 540

Wilshire Branch 540

31 Cash in Transit 16,000

Wilshire Branch 16,000

31 Wilshire Branch 750



Accounts Receivable 750

Branch Books:

Jan. 31 Advertising Expense 600

Home Office 600

31 Shipments from Home Office – In Transit 4,400

Home Office 4,400

31 Home Office 90

Shipments from Home Office 90

Problem VII

1.

Branch

Account

Home Office

Account

Balances before adjustments P 59,365 P 57,525

Adjustments:

Additions:

Corrected branch income for January (P1,440 –

P215) 1,225

Understatement of branch paid by home office for

December 310

Expenses of branch paid by home office _______ ____215

P 60,900 P 57,740

Deductions:

Collection by home office of branch receivable 65

Correction of branch income for January 215

Merchandise transferred to Brentwood branch but

incorrectly charged by Beverly Hills branch 1,400

Merchandise returns to home office in transit 840

Uncollectible accounts of branch __1,200 _______

Corrected Balances P 57,460 P 57,460

2. (a) Entries to bring branch books up to date:

Correction in Income of Prior Periods 215

Home Office 215

Home Office 215

Income Summary 215

Home Office 65

Accounts Receivable 65

(b) Entries to bring home office books up to date:

Beverly Hills Branch 1,225

Beverly Hills Branch Income 1,225



Beverly Hills Branch 310

Retained Earnings 310

Shipments to Beverly Hills Branch 1,400


Brentwood Branch 1,400Shipments to Brentwood Branch 1,400

Merchandise Returns from Branch – In Transit – Beverly

Hills Branch 840

Beverly Hills Branch 840

Allowance for Doubtful Accounts – Beverly Hills Branch 1,200


Problem VIII

1.

Home Office(b) Mdse. allowance by home

office 350.00

(a) Charge for office furniture

by home office 780.00

(f) Truck repairs charged by home

office 293.00

(d) Charge for labor by home

office 866.00

(e) Charge for freight by home

office 78.50

(h) Proceeds from sale of truck 475.00

643.00 2,199.50

Net credit Total 1,556.50 _______

1,229.50 2,199.50

Branch(a) Purchase of office furniture for

branch 870.00

(b) Mdse. allowance for

branch 300.00

(c) Branch charge for interest 325.00 (g) Proceeds from sale of

truck

475.00

(d) Branch charge for labor 433.00

(e) Branch charge for freight _785.00 ______

2,413.00 775.00

_______ Net Debit Total 1,638,000

2,413.00 _2,413.00

Balance in branch account per home office book, September 30, 20x2 P 131,690.00

Deduct net debit total per home office books for transactions that involvediscrepancies 1,638.00

P 130,052.00

Add net credit total per branch books for transaction that involve

discrepancies __1,556.50

Balance in home office account per branch books, September 30, 20x2 P 131,608.50



2.

Balance in home office account per branch books,

September 30, 20x2 P 131,608.50

Add: (a) Failure by branch to take up full furniture charges P 90.00

(b) Recognition by branch of excess merchandise

allowance 50.00

(c) Failure by branch to recognize charge by home

office for interest 325

(e) Failure by branch to recognize full freight

charges 706.50

(f) Truck repairs charge to home office account in

error 293.00 ___1,464.50

P 133,073.00

Deduct: (d) Recognition by branch of excess labor

charges

433.00

(h) Credit entry to home office made in error on

sale of truck __475.00 ___908.00

Corrected interoffice balance, September 30, 20x2 P 132,265.003.

Balance in branch account per home office books,

September 30, 20x2 P 131,690.00

Add credit to branch account made in error for proceeds from sale of

truck _____475.00

Corrected interoffice balance, September 30, 20x2 P 132,265.00

4.

Office Furniture 90.00

Merchandise allowances 50.00

Home office interest charges payable 250.00

Interest expense 75.00

Freight In 706.50Repairs on truck 293.00

Labor 433.00

Trucks 475.00

Home Office 556.50

Multiple Choice Problem1. d

Branch A Branch B

Assets:

Inventory, January 1 P 21,000 P 19,000

Imprest branch fund 2,000 1,500

Accounts receivable, January 1 55,000 43,500Total Assets P 78,000 P 64,000

Less: Liabilities -0- -0-

Home Office Current Account P 78,000 P 64,000

2. b

Branch A Branch B

Assets:

Inventory, December 31 P 19,000 P 12,000




Accounts receivable, December 31 70,000 53,500

Total Assets P 91,000 P 67,000

Less: Liabilities -0- -0-


3. d – incidentally, the entry in the books of the branch would be as follows:

Profit and loss summary ………………………………………………………… xxxHome Office Current……………………………………………………. Xxx

4. c

January 1,20x4 January 1, 20x5

Assets:

Inventory P 37,000 P 41,000

Petty cash fund 3,000 3,000

Accounts receivable 43,000 49,000


Less: Liabilities _____-0- _____-0-


5. a – refer to No. 4 for computations

6. a

Sales P 74,000

Less: Cost of goods sold:

SFHO…………………………………………………………… P67,680

Less: Inventory, ending……………………………………… 9,180 58,500

Gross profit…………………………………………………………… P 15,500

Less: Expenses – 6,820

Net Loss……………………………………………………………….. P 8,680

7. a

January 1, 20x6

Assets:Cash P 4,200

Inventory 9,180

Accounts receivable 12,800

Total Assets P 26,180

Less: Liabilities _____-0-

Home Office Current Account P 26,180

8. a – nominal accounts have zero beginning balance.

9. d

Branch

Current

H. Office

CurrentUnadjusted balance, 6/30/20x4 P 225,770 P 226,485*

Add (Deduct): Adjustments

1 Erroneous recording of branch equipment 3150

2. Insurance premium recorded twice ( 675)

3. Erroneous recording of freight ( 90)

4. Discount on merchandise ( 800)

5. Failure by the branch to record share in advertising 700

6. error by the home office to record remittance of Cebu 3,000 ________

Adjusted balance, 6/30/20x4 P 228,770 P 228,770

* The P226,485 is compute simply by working back with P228,770 adjusted balance as the starting point.



10. c

Home Office Books

(Branch Current-

Dr. balance)

Branch Books

(Home Office Current –

Cr. balance)

Unadjusted balance P518,575 P452,276

Add (deduct) adjustments:In transit 10,500

Remittance ( 17,000)

Returns ( 775)

Cash in transit 25,000

Expenses - HO

Expenses – branch

Error

( 800)

________

12,000

_____224

Adjusted balance P 500,000 P 500,000

11. d

Home Office Books

(Branch Current-Dr. balance)

Branch Books

(Home Office Current – Cr. balance)


Add (deduct) adjustments:

Excess freight ( 750)

Cash in transit ( 11,000)

Returns ( 4,000)

Expenses – branch ________ 5,000


12. c – refer to No. 11 for computations


14. d – refer to No. 11 for computations

15. d - No entry should be made in the books of the home office, since the freight should be

chargeable to the branch and the payment of the freight was made by the branch.

16. a

Home Office Books

(Branch Current-

Dr. balance)

Branch Books


Cr. balance)



Collection of branch receiv ( 9,000)

Shipments in transit 24,000

Purchase by branch of office

equipment ( 14,500)Remittance ( 22,000) _________


17. b

Home Office Books

(Branch Current-

Dr. balance)

Branch Books


Cr. balance)





Remittance (40,000)

Returns (15,000)

Error by the branch 300

Expenses – branch ________ 28,000


18. c

Home Office Books

(Branch Current-

Dr. balance)

Branch Books


Cr. balance)



In transit 37,500

HO A/R collected by br. 10,500

Supplies returned ( 4,500)

Error in recording Br. NI ( 1,080)

Cash sent to branch

to General Expense by HO 25,000 25,000


19. d – refer to No. 18 for computation.

20. a

Home Office Books

(Branch Current- Dr.

balance)

Branch Books


Cr. balance)



In transit 5,800

HO A/R collected by br. 500Cash in transit 2,000 2,000

Error in recording Br. NI ( 3,600) _______

Adjusted balance P38,900 P38,900


22. a

Home Office Books

(Branch Current- Dr.

balance)

Branch Books


Cr. balance)


Add (deduct) adjustments:Collection of branch A/R ( 800)

In transit 3,200

Purchase of furniture ( 1,200)

Return of excess merchandise ( 1,500)

Remittance ( 500) _______

Adjusted balance P46,400 P46,400

23. b – refer to No. 22 for computations



24. (C)

Sales (P350,000 + P100,000)………………………………………………………….P 450,000


Purchases (P400,000 + P50,000)……………………………. P 450,000

Less: Inventory, ending……………………………………… 90,000 360,000

Gross profit…………………………………………………………… P 90,000Less: Expenses –

Salaries and commission…………………………………….. P 70,000

Rent……………………………………………………………… 20,000

Advertising supplies (P10,000 – P6,000)…………………… 4,000

Other expenses………………………………………………. 5,000 99,000

Net Loss……………………………………………………………….. P( 9,000)

25. a

In adopting the imprest system for the agency working fund, the home office writes a check to the

agency for the amount of the fund. Establishment of the fund is recorded on the home office

books by a debit to the Agency working fund and credit cash. The agency will request fund

replenishment whenever the fund runs low and at the end of each fiscal period. Such a request isnormally accomplished by an itemized and authenticated statement of disbursements and the

paid vouchers. Upon sending the agency a check in replenishment of the fund, the home office

debits expense or other accounts for which disbursements from the fund were reported and

credits cash.

26. d

Normally, transactions of the agency are recorded in the books of the home office separately

identified with the appropriate agency.

Quiz- XII1. P78,000

Branch A Branch BAssets:

Inventory, January 1 P 21,000 P 19,000


Accounts receivable, January 1 55,000 43,500


Less: Liabilities _____-0- _____-0-


2. P64,000 – refer to No. 1

3. P10,416

Sales ……….………………………………………………………… P 80,000


Purchases……………………………..………………………. P 25,000

Shipments from home office……………………………… 56,216

Less: Inventory, ending (P3,391 + P7,625)…….………… 11,016 70,200

Gross profit…………………………………………………………… P 9,800

Add (deduct):

Expenses……………………………………………………….. ( 7,500)

Interest expense………………………………………………. ( 684)

Gain on sale…………………………………………………... 8,800



Net Income……………………………………………………………….. P 10,416

4. P31,416 = P21,000 + P10,416

5. Zero, since it is a nominal account

6. P117,420

Home Office Books

(Branch Current-Dr. balance)

Branch Books

(Home Office Current – Cr. balance)



In transit 37,500

HO A/R collected by br. 10,500

Supplies returned ( 4,500)

Error in recording Br. NI ( 1,080)

Cash sent to branch

to General Expense by HO 25,000 25,000


7. P179,920 - refer to No. 6 for computation.8. c

9. a

10. P7,100

Sales P17,600Less: Cost of goods sold 10,500

Gross profit P 7,100

Less: Expenses

Salaries and commission [P1,750 + (5% x (P17,600 – P10,000) P 2,130

Rent expense 800

Advertising expense 325

Samples expense [(P5,000 – P2,000) x 1/6] 500

Advertising materials expense (3/5 x P1,250) 750

Depreciati0n expense [(P2,400 / 5 years) x 1/12] 40Miscellaneous expense ___600 __5,145

Net income P 1,955

11. P5,145 – refer to No. 10

12. P1,955 – refer to No. 10

Theories1. decentralized 11. False 21. False 31. E 41. A

2. Home Office Current 12. False 22. True 32. B 42. C

3. Branch Income 13. False 23. True 33. c 43. B

4. Home Office 14. True 24. True 34. d 44. D

5. intracompany 15. True 25. False 35. A 45. D

6. True 16. False 26. C 36. C 46. C

7. True 17. True 27. A 37. A 47. B

8. False 18. False 28. A 38. B 48. B

9. False 19. True 29. D 39. B 49. C

10, True 20. True 30. A 40. B 50. C

51. C

52. D

solution chapter 12

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