Chapter 12

Problem I
(a)Working Fund Agency .. 5,000
Cash . 5,000
(b)Accounts Receivable ..................................... 50,000
Sales-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 Inventory - Agency . 36,000

2.
Sales.P 50,000
Less: CGS 36,000
GP.P 14,000
Less: Expenses (P4,500 + P2,250).. 6,750
Net income agency.P 7,250

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 10,250

Accounts 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.
Income Statement for Branch
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
For Year Ended December 31, 20x4

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 41,080
Expenses 27,630
Net income from own operations .. P 13,450
Deduct branch net loss . 1,400
Total Income . P 12,050

BARTON CO.
Income Statement for Home Office
For Year Ended December 31, 20x4

Sales . P171,000
Cost of goods sold:
Merchandise inventory, January 1 .. P 40,120
Purchases 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 66,000
Merchandise 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
Journal and Adjusting Entries Home Office and Branch
Home Office Books Branch Books
INTERCOMPANY / INTER-OFFICE Transactions
1/1 a Branch Current . . . . . . . 1,500 Cash . . . . . . . . . . . . . . . . . . . . . . 1,500
Cash . . . . . . . . . . . . . . . 1,500 Home Office Current. . . . . . 1,500
b Shipment to branch, cost 10,200 Home Office Current . . . . . . . . 10,200
Branch Current . . . . . . 10,200 Shipments from Home Office 10,200
 c SFF - Branch 3,000 No entry eqpt accounts
Store Furniture & Fixt 3,000 maintained in the HO books
Acc. Depreciation SFF 750 No entry eqpt accounts
Acc. Deprec. SFF Br. 750 maintained in the HO books
P3,000 x 10% x 2.5 yrs
SFF Branch . . . . . . . . . . 900 Home Office Current . . . . . . . . 900
Branch Current . . . . . . 900 Cash . . . . . . . . . . . . . . . . . . . 900
d. Branch Current . . . . . . . 2,600 Accounts Receivable - HO 2,600
Accounts Receivable 2,600 Home Office Current. . . . . . 2,600

1/1 1/31 Transaction with Outsiders

Accounts Receivable . . . 34,600 Accounts Receivable . . . 6,200
Sales.. . . . . . . . . . . . . . . 34,600 Sales.. . . . . . . . . . . . . . . 6,200
Cash. . . . . . . . . . . . . . . . . . 40,000 Cash . . . . . . . . . . . . . . . . . . . . . . 2,600
Accounts Receivable 40,000 Accounts Receivable . . . . . 2,600
Purchases . . . . . . . . . . . . 31,600 Purchases. . . . . . . . . . . . . . . . . . 3,000
Accounts Payable . . 31,600 Accounts Payable. . . . . . . . 3,000
Accounts Payable . . . . . 36,200 Accounts Payable . .. . . . . . . . 1,450
Cash. . . . . . . . . . . . . . . 36.200 Cash. . . . . . . . . . . . . . . 1,450
Accrued expenses . . . . . 250 Expenses . .. . . . . . . . . . . . . . . . 1,250
Expenses. . . . . . . . . . . . . . 8,950 Cash. . . . . . . . . . . . . . .. . . . . 1,250
Cash. . . . . . . . . . . . . . . 9,200

1/1 1/31 Intercompany / INTER-OFFICE Transactions

Cash . . . . . . . . . . . . . . . . . . . . . . 1,600
Accts. Rec. HO. 1,600
Allowance for D/A. . . . . 150 Home Office Current . . . . . . . . 150
Branch Current . . . . . . 150 Accts. Rec. HO. 150
Shipment to branch ,cost 1,250 Home Office Current . . . . . . . . 1,250
Branch Current . . . . . . 1,250 Shipments from Home Office 1,250
Cash. . . . . . . . . . . . . . . . . 1,000 Home Office Current . . . . . . . . 1,000
Branch Current . . . . . . 1,000 Cash. . . . . . . . . . . . . . . . . . . 1,000
Adjusting Entries
a. Shipment to branch, cost 600 Home Office Current . . . . . . . . 600
Branch Current . . . . . . 600 Shipments from Home Office 600

b. Branch Current . . . . . . .. 475 Expenses. . . . . . . . . . . . . . . . . . . 475

Expenses. . . . . . . . . . . 475 Home Office Current . . . . . . 475

c. Branch Current.. . . . . . .. 35 Expenses. . . . . . . . . . . . . . . . . . . 35

Acc. Deprec. SFF Br. 35 Home Office Current . . . . . . 35
P3,000/10 years x 1/12 = P25 (depreciation for one month; Asset life, 10 years); P900 / 7.5 years, remaining
life = P120 x 1/12= P10)

Expenses. . . . . . . . . . . . . . 100
Acc. Deprec. SFF 100
[(P15,000 P3,000)/10 x 1/12]
d. Included in closing entries
e. Expenses. . . . . . . . . . . . . . 750 Expenses. . . . . . . . . . . . . . 350
Accrued expenses. . . 750 Accrued expenses. . . 350

Closing Entries
Sales. . . . . . .. . . . . . . . . . . 34,600 Sales. . . . . . .. . . . . . . . . . . 6,200
Merch. inventory, ending 44,500 Merch. inventory, ending
Shipments to branch 12,050 (P9,800 + P600) 10,400
Merch. Inv. , beg. 46,000 Income Summary. . . . . . . 560
Purchases. . . . . . . . . . 31,600 Merch. Inv. , beg. 0
Expenses (9,200 250 Purchases. . . . . . . . . . 3,000
- 475 + 100 + 750).. 9,325 Shipments from HO
 Income Summary 4,225 (P10,200 + P1,250 +P600) 12,050
Expenses (1,250 + 475
+ 35 + 350). 2,110

Branch Income Summary 560 Home Office Current . . . . . . . . 560

Branch Current. 560 Income Summary . . . . . . . . 560

Income Summary.. 560

Branch Income Sum 560

Income Summary.. 3.665

Retained Earnings.. 3,665

EAGLE CO.
Balance Sheet for Branch
January 31, 20x4

Assets Liabilities

Cash ............................ P 1,100 Accounts Payable . P 1,550

Accounts Receivable .. 3,600 Accrued expenses . 350
Accts. Rec.-home office . 850 Home Office 14,050
Merchandise Inventory 9,800
Merchandise in Transit . 600
Total assets P15,950 Total Liabilities . P15,950

EAGLE CO.
Income Statement for Branch
For Month Ended January 31, 20x4

Sales . P 6,200
Cost of Goods Sold:
Merchandise inventory, beginning..P 0
Add: Purchases . 3,000
Shipments from home office (P11,450 +P600, in-transit) 12,050
Merchandise Available for Sale .. P 15,050
Less: Merchandise inv. Dec 31, 19x4 (P9,800 + P600). 10,400
Cost of Goods Sold . 4,650
Gross Profit P 1,550
Expenses 2,110
Net Loss, from own operations 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 stockholders equity 81,865
Total liabilities and stockholders equity P111,765

EAGLE CO.
Income Statement for Home Office
For Month Ended January 31, 20x4

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 12,050
Merchandise 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.
Income Statement for Home Office
For Month Ended January 31, 20x4
Assets Liabilities and Stockholders Equity
Liabilities
Cash .. . P 10,200 Accounts Payable P30,700
Accounts 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
 For Month Ended January 31, 20x4

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

EAGLE CO.
Combined Balance Sheet
January 31, 20x4
Assets
Cash P 10,200
Accounts Receivable P38,450
Less: Allowance for doubtful accounts 1,050 37,400
Merchandise Inventory . 54,900
Store furniture and fixtures P15,900
Less: Accumulated depreciation .. 4,735 _ 11,165
Total Assets P113,665
Liabilities
Accounts Payable .. P30,700
Accrued Expenses .. 1,100
Total Liabilities .. P 31,800
Stockholders Equity

Capital Stock P50,000

Retained earnings .. 31,865
Total stockholders equity 81,865
Total liabilities and stockholders equity P113,665

Problem IV
1.
Socrates Company
Home Office and Plato Branch
Reconciliation of Reciprocal Ledger Accounts
June 30, 20x4
Investment 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 9,735
Adjustments:
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.
Branch Home office
Account Account
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 Home Office
Account 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

Beverly Hills Branch 1,400

Brentwood Branch 1,400

Shipments 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

Beverly Hills Branch 1,200
Problem VIII
1.
Home Office
(b) Mdse. allowance by home (a) Charge for office furniture
office 350.00 by home office 780.00
(f) Truck repairs charged by home (d) Charge for labor by home
office 293.00 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 (b) Mdse. allowance for
branch 870.00 branch 300.00
(c) Branch charge for interest 325.00 (g) Proceeds from sale of 475.00
truck
(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 involve
discrepancies 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 132,265.00
3.
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 706.50
Repairs on truck 293.00
Labor 433.00
Trucks 475.00
Home Office 556.50

Multiple Choice Problem

1. 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 43,500
Total 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
Imprest branch fund 2,000 1,500
Accounts receivable, December 31 70,000 53,500
Total Assets P 91,000 P 67,000
Less: Liabilities -0- -0-
Home Office Current Account P 91,000 P 67,000

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

Profit and loss summary xxx
Home 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
Total Assets P 83,000 P 93,000
Less: Liabilities _____-0- _____-0-
Home Office Current Account P 83,000 P 93,000
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 H. Office
Current Current
Unadjusted 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 Books
(Branch Current- (Home Office Current
Dr. balance) 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 ( 800)
Expenses branch 12,000
Error ________ _____224
Adjusted balance P 500,000 P 500,000

11. d
 Home Office Books Branch Books
(Branch Current- (Home Office Current
Dr. balance) Cr. balance)
Unadjusted balance P515,000 P495,750
Add (deduct) adjustments:
Excess freight ( 750)
Cash in transit ( 11,000)
Returns ( 4,000)
Expenses branch ________ 5,000

Adjusted balance P 500,000 P 500,000

12. c refer to No. 11 for computations

13. a 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 Books
(Branch Current- (Home Office Current
Dr. balance) Cr. balance)
Unadjusted balance P85,000 P33,500
Add (deduct) adjustments:
Collection of branch receiv ( 9,000)
Shipments in transit 24,000
Purchase by branch of office
equipment ( 14,500)
Remittance ( 22,000) _________
Adjusted balance P 48,500 P 48,500

17. b
Home Office Books Branch Books
(Branch Current- (Home Office Current
Dr. balance) Cr. balance)
Unadjusted balance P590,000 P506,700
Add (deduct) adjustments:
Remittance (40,000)
Returns (15,000)
Error by the branch 300
Expenses branch ________ 28,000

Adjusted balance P 535,000 P 535,000

18. c
Home Office Books Branch Books
(Branch Current- (Home Office Current
Dr. balance) Cr. balance)
Unadjusted balance P150,000 P117,420
Add (deduct) adjustments:
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
Adjusted balance P 179,920 P 179,920

19. d refer to No. 18 for computation.

20. a
Home Office Books Branch Books
(Branch Current- Dr. (Home Office Current
balance) Cr. balance)
Unadjusted balance P40,000 P31,100
Add (deduct) adjustments:
In transit 5,800
HO A/R collected by br. 500
Cash in transit 2,000 2,000
Error in recording Br. NI ( 3,600) _______
Adjusted balance P38,900 P38,900

21. a refer to No. 20 for computations

22. a
Home Office Books Branch Books
(Branch Current- Dr. (Home Office Current
balance) Cr. balance)
Unadjusted balance P49,600 P44,00
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
Less: Cost of goods sold:
Purchases (P400,000 + P50,000). P 450,000
Less: Inventory, ending 90,000 360,000
Gross profit P 90,000
Less: 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 is normally
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.

Theories
1. 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