Reference no: EM132944107

Question - Topic: Home Office, Branch and Agency Transaction

Problem 1 - The big save-Most home office ships merchandise to its Makati branch at 20 percent above cost. Makati branch's book shows a beginning inventory of P135,000 (50% from outside purchase) and shipments from home office of P405,000. The ending inventory of the Makati branch amounted to P337,500 in which 60% is home office merchandise while the remaining balance is from outside purchases. The Makati branch purchased merchandise costing P317,500. The total sales and operating costs of the branch for the year amounted to P1,040,000 and P220,000 respectively.

Q1-What is the entry of the home office upon shipment of merchandise to the branch?

Q2-What is the pre-closing balance of the Allowance for Overvaluation of Branch inventory account?

Q3-What is the post-closing balance in the Unrealized Profit in Branch Inventory Account?

Q4-What is the amount of overvaluation of Cost of Goods Sold or undervaluation in income?

Q5-The Allowance for Overvaluation of Branch Inventory Account is adjusted to how much?

Q6-The Allowance for Overvaluation of Branch Inventory Account is adjusted by how much?

Q7-What is the Overvaluation of Branch Ending Inventory?

Q8-How much is the true ending inventory of the branch?

Q9-How much is the total Cost of goods sold of the branch?

Q10-How much is the true net income of the branch?

Problem 2 - ROLAND company maintains branches that market the products it produces. Merchandise is billed to the branches at cost, with the branches paying the freight charges from the Home office to the branch. On May 27, LANDERZ-branch ships a portion of its merchandise to ROBINSON-branch upon authorization by Home Office. ROBINSON-branch, upon receiving the merchandise, pays freight charges of P1,875 on the shipment from LANDERZ-branch. If the shipment had been made from the Home office directly to ROBINSON-branch, the freight cost to ROBINSON-branch would have been P4,000.

Q1-How much is the excess freight cost to be credited in the books of Home Office?

Q2-How much is the ROBINSON-branch current in the books of the Home Office?

Q3-Upon receipt of shipment by ROBINSON-branch, freight in is debited in the amount of? Q4-Home office current is debited by LANDERZ-branch by how much?

Problem 3 - Carmela Appliance Company operates a branch in Quezon City. The following are transactions between the home office and branch for the current year.

a. The home office sends P200,000 cash to the branch.

b. Shipments to branch are billed at cost of P78,750.

c. The Home Office pays branch expense of P3,500.

d. Home office expense of 3,375 are paid by the branch.

e. The branch returned merchandise costing P10,000 to the home office.

f. Home office acquires branch furniture for P20,500 cash. The said fixed asset is carried on Branch Books.

g. The annual depreciation on the branch furniture is 5%.

h. The branch sends a P15,000 cash remittance to home office.

Q1-What is the adjusted balance of Branch Current account in the Home Office Books?

Q2-What is the adjusted Home Office Current account in the Home Office Books?

Problem 4 - The Home Office in World City bills its QC branch for shipments of goods at 25% above cost. At the close of the business on April 27, 2016, a fire gutted the branch warehouse and destroyed 70% of the merchandise stock stored therein. Thereafter, the following data were gathered:

January 1 Inventory P672,000

Shipments from Home office, Jan. 1 through April 27 1,008,000

Net Sales, January 1 through April 27 1,428,000

Undamaged merchandise recovered are marked to sell for 378,000

Q1-What is the amount of inventory destroyed by fire per home office records at cost?

Q2-How much is the branch cost of goods sold?

Q3-How much is the overvaluation in branch Cost of Goods Sold?

Q4-How much is the branch net income as provided by GAAP?