Reference no: EM132833127

Question - Sandy Merchandising Co. operates a branch in Benguet City. At close of the business on December 31, 2016, Benguet Branch account in the home office books showed a debit balance of P242,375. The intercompany accounts were in agreement at the beginning of the year. For purposes of reconciling the intercompany accounts, the following facts were ascertained:

a. Furnitures and Fixtures costing the Home Office P9,500 was picked up by the branch as P950. The branch will maintain the records of the asset used.

b. Freight charge on the merchandise made by the home office for P1,350 was recorded in the branch books as P2,250.

c. The branch failed to take up a P1,500 debit memo from the home office.

d. Home office credit memo for P1,200 was recorded twice by the branch.

e. The home office inadvertently recorded a remittance for P5,500 from its Kalinga branch as remittance from its Benguet Branch.

f. On December 30, 2016, the branch sent a check for P13,500 to the home office to settle its account. The check was not received by the home office until January 4, 2017.

g. On December 27, 2016, the branch returned P5,500 of seasonal merchandise to the home office for the January Clearance sale. The merchandise was not received by the home office until January 5, 2017.

h. The home office allocated general expenses of P2,500 to the branch. The branch had not entered the allocation at the year end.

i. Branch store insurance premiums of P1,600 were paid by the Home Office. The branch recorded the amount of P16,000.

j. A P6,000 branch remittance to the home office initiated on December 28, 2016, was recorded twice by the Home Office on December 29 and on December 30.

k. The Home Office incurred P9,000 of advertising expenses and allocated 1/3 of this amount to the branch on December 17, 2016. The branch recorded this transaction on December 19, 2016 amounting to P4,500.

l. A branch customer remitted P3,750 to the Home Office. The Home Office recorded this cash collection on December 22, 2016. Upon notification on the same year, the branch debited the amount to Accounts Receivable and credited Home Office Current.

m. Inventory Costing P60,950 was sent to the branch by the home office on December 19, 2016. The billing was at cost, but the branch recorded the transaction at P69,050.

n. A P16,000 shipment, charged by the Home Office to Benguet Branch was actually sent to and retained by Baguio Branch.

o. The branch collected a home office accounts receivable of P4,600 but the home office failed to record such collection.

p. The branch writes off uncollectible accounts of P3,750. The allowance for doubtful accounts is maintained on the books of the home office. The home office is not yet notified about the write off.

Required -

1. What is the adjusted balance of branch current account as of December 31, 2016?

2. What is the amount of total adjustments in Home Office Current Account?

3. What is the amount of total adjustments in Branch Current Account?

4. What is the adjusted balance of Home Office Current Account as of December 31, 2016?

5. What will be the adjusting entry for transaction L?