Test bank of Advanced Accounting by Guerrero & Peralta CHAPTER 13

CHAPTER 13
MULTIPLE CHOICE
13-1:

c

13-2:

a
Goods available for sale:
At billed price (P30,000 + P180,000)
At cost (P210,000 / 120%)
Balance of Allowance for Overvaluation account before adjustment

13-3:

c
Inter-company inventory profit (IIP) before closing
Less: IIP from shipment from home office
Billed price
Cost (P300,000 / 120%)

IIP from beginning inventory at billed price
Divided by
Cost of branch’s beginning inventory

13-4:

P300,000
250,000

Billed Price
P15,000
110,000

%
150%
150%

Cost
P10,000
73,333


5,000

150%

3,333

50,000
P 16,000
÷ 20%
P 80,000

Overvaluation
P 5,000
36,667
P41.667
1,667
P40,000

b

Shipment to branch, at billed price
Shipping cost
Total cost
Sold (50%)
Inventory

13-6:

P 66,000

a
Beginning inventory from HO
Shipments
Balance before adjustment
Ending inventory from HO
Required adjustments

13-5:

P210,000

175,000
P 35,000

P375,000
2,000
P377,000
188,500
P188,500

a
Shipment to branch, at cost
Shipping cost
Billed price
Sold (50%)
Inventory, at billed price

P312,500
2,000
P314,500
157,250

P157,250

17

13-7:

c
Home office account balance after closing branch profit
Less: branch profit
Investment in branch account balance before closing branch profit

13-8:

d
Branch ending inventory, at billed price
Acquired from home office, at billed price:
Cost (P6,000 / 20%)
Mark-up
Purchased from outsiders


13-9:

P765,000
130,000
P635,000

P 50,000
P30,000
6,000

36,000
P 14,000

b
Cost of goods sold – Home office
Cost of goods sold – Branch:
Billed price
Less: overvaluation (P110,000 – P90,000)
Combined cost of goods sold


P590,000
P300,000
20,000

280,000
P870,000

13-10: c
13-11: d
Overvaluation of branch ending inventory acquired from HO:
Billed price
Cost (P28,600 / 130%)
Adjusted balance of allowance for overvaluation account

P 28,600
22,000
P 6,600

13-12: b
Shipment from home office

Expenses
Cash remittance to home office
Home Office account balance before closing

P 90,000
17,000
(70,000)
P 37.000

13-13: b
Shipment to branch, at cost
Ending inventory, at cost (P70,000 / 30%)
Cost of goods sold
Freight (P6,000 x P50,400/P72,000)
Total

P 72,000
( 21,600)
P 50,400
4,200

P 54,600

13-14: b (20% of P30,000)
13-15: b (P151,200 / 140%)

18

13-16: c
Sales
Cost of goods sold
Shipments from home office (P151,200/140%) P108,000
Inventory, 1/1 (P28,350 / 140%)
20,250
Inventory, 12/31 (P25,200 / 140%)
( 18,000)
Gross profit
Expenses
Branch profit as far as the home office is concerned

P270,000


110,250
P159,750
90,000
P 69,750

13-17: c
Unsold merchandise
Less: Merchandise acquired from home office, at billed price
Merchandise acquired from outsiders
Merchandise acquired from home, at cost (P7,500 / 20%)
Branch inventory at cost, 12/31

P 60,000
45,000
P 15,000
37,500
P 52,500

13-18: a

Branch inventory, 1/1
Acquired from home office – at billed price:
Overvaluation [P99,900 – (P390,000 – P300,000)]
Cost (P9,900 / 30%)
Purchases from outsiders

P 54,600
P 9,900
33,000

42,900
P 11,700

13-19: c
Acquired from home office [(P60,000 x 80%) ÷ 120%]
Acquired from outsiders (P60,000 x 20%)
Branch inventory, 12/31 – at cost

P 40,000
12,000
P 52,000

13-20: b
Sales (P148,000 + P144,000)
Cost of sales – at cost to home office:
Shipment from home office (P108,000 / 120%) P90,000
Purchases
52,000
Inventory, 12/31 (no. 19 above)
(52,000)
Gross profit
Expenses (P76,000 + P24,000)
Branch net income (actual)

P192,000

90,000
P102,000
100,000
P 2,000

13-21: b
Allowance for overvaluation account balance
Overvaluation on the shipment (P200,000 x 25%)
Overvaluation on the branch beginning inventory
Cost of branch beginning inventory (P7,500 / 25%)
Branch beginning inventory – at billed price

P 57,500
50,000
P 7,500
30,000
P 37,500

19

13-22: b
Sales
Cost of goods sold – cost to home office
Beginning inventory
P 30,000
Shipment from home office
200,000
Ending inventory (P40,000 / 125%)
( 32,000)
Gross profit
Expenses
Branch net income as far as the home office is concerned

P400,000

198,000
P202,000
100,000
P102,000

13-23: b
Branch inventory, 1/1
Acquired from home- at billed price
Overvaluation [P24,000 – (P80,000 – P60,000)] P 4,000
At cost [(P4,000 ÷ (P20,000 / P60,000)]
12,000
Acquired from outsiders

P 20,000

16,000
P 4,000

13-24: a
Sales
Cost of sales (at cost to home office)
Inventory, 1/1 (P12,000 + P4,000)
P16,000
Shipments from home office
60,000
Purchases
30,000
Inventory, 12/31 [(P20,000÷133 1/3%) +P6,000] (21,000)
Gross profit
Expenses
Branch net income (actual)

P200,000

85,000
P115,000
60,000
P 55,000

13-25: a
Inventory, 1/1
Shipments from home office
Overvaluation
Cost of goods available for sale
Percentage of mark-up (P72,500 / P362,500)

P 75,000
360,000
( 72,500)
P362,500
20%

13-26: b

20

13-27: a
Billing percentage above cost (P20,000 / P80,000)
Branch inventory, 6/1 – at cost (P12,000 / 125%)
Home office inventory, 6/1
Purchases
Goods available for sale
Inventory, 6/30 – at cost:
Branch (P10,000 / 125%)
Home office
Combined cost of goods sold

25%
P 9,600
40,000
160,000
P209,600
P 8,000
60,000

68,000
P141.600

13-28: d
Sales
Cost of goods sold
Gross profit
Expenses
Combined net income

P450,000
141,600
P308,400
150,000
P158,400

13-29: d
Sales
Cost of goods sold:
Inventory, 1/1: Home office
P57,500
Branch (P22,250 / 125%) 17,800 P 75,300
Purchases
410,000
Goods available for sale
P 485,300
Inventory, 12/31: Home office
P71,250
Branch (P29,250/120%) 24,375
95,625
Gross profit
Expenses
Combined net income

P687,500

389,675
P297,825
241,750
P 56,075

13-30: a
Sales
Cost of goods sold:
Inventory, 1/1:
Home office
Branch [P15,000 + (P49,000 / 122.5%)]
Purchases
Goods available for sale
Inventory, 12/31:
Home office
Branch [P11,000 + (P52,000 / 133 1/3%)]
Gross profit
Expenses
Combined net income

P669,000

P160,000
55,000

P110,000
50,000

P215,000
460,000
P675,000

160,000

515,000
P154,000
145,000
P 9,000

21

13-31: a
The entries made by the branch to record the interbranch transfer of merchandise are:
Books of Branch 1:
Home office
19,500
Freight in
3,500
Shipment from home office
16,000
Books of Branch 3:
Shipment from home office
16,000
Freight in
4,000
Cash
2,500
Home office
17,500
Therefore the home office would make the following entry:
Investment in Branch 3
17,500
Excess freight
2,000
Investment in Branch 1

19,500

13-32: a

Unadjusted balances
Error in recording shipment
Error in recording expense
Unrecorded cash remittance
Adjusted balances

(Home office books)
Investment in branch
77,000

(31,000)
46,000

(Branch books)
Home office
61,000
(10,000)
5,000
46,000

13-33: c
13-34: a
Home office books
Inv in Bacolod 25,000
Inv in Cebu
25,000

Cebu branch books
Home office 25,000
Cash
25,000

Inv in Bacolod 34,300
Inv in Cebu
34,300

Home office 34,300
SD
700
AR
35,000

Inv in Bacolod 62,500
Home office 212,500
Expenses
150,000
Expenses
37,500
Inv in Cebu
212,500
Cash
250,000

Bacolod branch books
Cash
25,000
Home office 25,000
Cash

34,300
Home office 34,300

Expenses
62,500
Home office
62,500

Inv in Cebu 253,000
Freight in
3,000
S to branch
200,000 S from HO 250,000
Allowance
50,000
Home office 253,000
Cash
3,000
Inv in Bacolod 252,700
Home office 253,000
Excess freight
300
S from H
253,000
Inv in Cebu
253,000

22

(Home office books)
Investment in Cebu Branch
25,000
34,300
212,500
253,000
253,000 524,800
271,800

(Bacolod branch books)
Home Office
25,000
34,300
62,500
252,700
374,500

23

PROBLEMS
Problem 13-1
(a)

Journal Entries
Home Office Books

Branch Books

(1) Investment in branch
Cash

18,000

(2) Investment in branch
Cash

3,000

(3) Investment in branch
Shipment to branch
Allowance for overValuation
(4)

Equipment
Home office

18,000

18,000

Rent expense
Home office

3,000

3,000

Shipment from HO
Home office

100,000

80,000

100,000

18,000

3,000

100,000

20,000

No entry

Operating expenses
Cash
Cash

11,000
11,000
105,000

Sales
(5) Cash

60,000
Investment in branch

(b)

60,000

Home office
Cash

105,000
60,000
60,000

Working Paper Elimination Entries
(1)

(2)

(3)

Home office
61,000
Investment in branch
To eliminate reciprocal accounts computed
as follows:
Equipment purchased
P 18,000
Rent paid
3,000
Inventory shipped
100,000
Cash transfer
( 60,000)
Balance
P 61,000
Shipment to branch
Allowance for overvaluation of branch inventory
Shipment from home office
To eliminate inter-company shipments
Inventory, 12/31 (Income statement)
Inventory, 12/31 (Balance Sheet)
To reduce inventory, 12/31 to cost.

61,000

80,000
20,000
100,000

5,000
5,000

24

(c)

Closing Entries – Branch Books
Sales
Inventory, 12/31
Rent expense
Shipment from home office
Operating expenses
Income summary
Income summary
Home office

105,000
25,000
3,000
100,000
11,000
16,000
16,000
16,000

Problem 13-2
a.

Branch Books

-

Equipment
Shipment from home office
Cash
Home office

50,000
60,000
10,000

Purchases
Cash or accounts payable

30,000

Prepaid rent
Home office

10,000

Cash
Accounts receivable
Sales

40,000
50,000

Advertising expense
Salary expense
Cash

8,000
5,000

-

-

-

-

-

-

-

Home office
Cash

120,000

30,000

10,000

90,000

13,000
10,000
10,000

Home office
Accounts receivable

3,000

Rent expense
Prepaid rent

5,000

3,000

5,000

25

Home Office Books
-

-

-

Investment in branch
120,000
Equipment
Shipment to branch
Allowance for overvaluation of branch inventory
Cash
To record assets sent to branch

50,000
40,000
20,000
10,000

Investment in branch
Cash
To record rent expense of the branch

10,000
10,000

Cash

10,000

Investment in branch
To record cash remittance from branch
-

10,000

Cash

3,000

Investment in branch
To record collection of branch receivable.
b.

3,000

Income Statement
Sales
Cost of goods sold
Shipment from home office – at cost
Purchases
Goods available for sale
Ending inventory:
From home office (1/3)
From outsiders (1/4)
Gross profit
Expenses:
Advertising expense
Salary expense
Rent expense
Net income

P90,000
P40,000
30,000
70,000
P13,333
7,500

(20,833)

P 8,000
5,000
5,000

49,167
P40,833

18,000
P22,833

Problem 13-3
a.

Investment in Branch account – beginning balance
Cash transfer
Inventory transfer
Rent allocated
Expenses allocated
Inventory transfer
Transportation allocated
Unadjusted balance – Investment in Branch account

P 86,000
( 32,000)
34,500
1,000
3,000
46,000
3,000
P141,500

26

b.

Home Office account – beginning balance
Inventory transfer
Rent allocated
Expenses allocated
Inventory transfer (error made)
Cash transfer
Home Office account – unadjusted balance

c.

Reconciliation Statement
Unadjusted balances, 1/31
Unrecorded cash transfer
Error in recording transfer (overstated)
Expense allocation not recorded
Adjusted balances, 1/31

P 54,000
34,500
1,000
3,000
64,000
( 74,000)
P 82,500

Investment in Branch
P141,500
( 74,000)

P 67,500

Home Office
P 82,500
18,000
( 3,000)
P 67,500

Problem 13-4
a.

b.

Books of Branch X
Shipment from home office
Freight-in
Home office

5,000
300

Home office
Shipment from office

5,800
5,800

Books of Branch Y
Shipment from home office
Freight-in
Home office

c.

5,300

5,000
600
5,600

Books of the Home Office
Investment in branch – X
Shipment to branch – X
Cash

5,300

Investment in branch – Y
Inter-branch freight expense
Investment in branch – X

5,000
600

Shipment to branch – X
Shipment to branch – Y

5,000

5,000
300

5,600

5,000

27

Malakas Company
Combination Worksheet
Year Ended December 31, 2008

Malakas

Davao

Debits
Cash
Accounts receivable
Inventory, 12/31
Investment in branch
Land, bldg, and equipment
Shipment from office
Purchases
Depreciation expense
Advertising expense
Rent expense
Miscellaneous expense
Inventory, 1/1
Total debits

25,000
108,000
209,000
207,000
340,000
348,000
25,000
36,000
12,000
40,000
175,000
1,525,000

18,000
25,000
42,000
112,000
96,000
8,000
15,000
5,000
20,000
35,000
376,000

Credits
Accumulated depreciation
Accounts payable
Notes payable
Home office

80,000
37,000
220,000
-

16,000
15,000
176,000

Common stock
Retained earnings, 1/1
Sales
Shipment to branch
Inventory, 12/31

100,000
240,000
529,000
110,000
209,000

127,000
42,000

Adjustments and
Eliminations
Debit
Credit

(4) 14,000

(5) 16,000
(7)207,000

(3) 14,000

(6)110,000

43,000
133,000
249,000
452,000

(1) 9,000
(1) 6,000
(1) 2,000
(2) 10,000

348,000
33,000
60,000
23,000
62,000
200,000
877,000

(7)207,000

96,000
52,000
220,000
-

(1) 17,000
(3) 14,000

100,000
(2) 10,000

(230,000)
(655,000)

(6)110,000
(5) 16,000

(4) 14,000

Combined net income

(249,000)
(179,000)

Combined retained earnings
Totals

Income
Retained
Statement Earnings Balance
Dr (Cr)
Dr (Cr)
Sheet

(179,000)
(409,000)

1,525,000

376,000

388,000

388,000

(409,000)
877,000

Adjustments and Elimination Entries
(1)

(2)

(3)

Advertising expense
Rent expense
Miscellaneous expenses
Home office
Unrecorded expenses allocated to the branch

9,000
6,000
2,000
17,000

Retained earnings, 1/1
10,000
Inventory, 1-1
To eliminate unrealized inventory profit of preceding year

10,000

Shipment from home office
Home office
Unrecorded shipments

14,000

14,000

28

(4)

(5)

(6)

(7)

Inventory, 12/31 (debits)
Inventory (credits)
Shipment not yet received by the branch

14,000

Inventory, 12/31 (debits)
Inventory (credits)
To reduce ending inventory to cost

16,000

Shipment to branch
Shipment from home office
To eliminate inter-company shipments

110,000

Home office
Investment in branch
To eliminate reciprocal accounts

207,000

14,000

16,000

110,000

207,000

Problem 13-6
a.

Eliminating Entries
(1)

(2)

(3)

(4)

(5)

Home office
Investment in branch – Silver

395,000

Home office
Investment in branch – Opal

260,000

395,000

260,000

Unrealized intra-company profit – Silver
Unrealized intra-company profit – Opal
Inventory – from home office

20,000
16,000

Inventory
Inventory – from home office

90,000

Unrealized intra-company profit – Silver
Equipment

40,000

36,000

90,000

40,000

29

Ginto Company
Balance Sheet Working Paper
December 31, 2008

Cash
Accounts receivable
Inventory
Inventory – from home office
Land
Buildings and equipment
Investment in branch – Silver
Investment in branch – Opal
Total debits
Accumulated depreciation
Accounts payable
Bonds payable
Common stock
Retained earnings
Home office
Unrealized intra-company profit
Silver
Opal
Total credits

b.

Home
Office
81,000
100,000
260,000

Silver
Branch
20,000
40,000
50,000
70,000

Opal
Branch
15,000
25,000
44,000
56,000

70,000
700,000
395,000
260,000
1,866,000

30,000
350,000

20,000
200,000

560,000

360,000

2,055,000

280,000
110,000
400,000
300,000
700,000
-

120,000
45,000

80,000
20,000

480,000
175,000
400,000
300,000
700,000

395,000

260,000

60,000
16,000
1,866,000

560,000

360,000

Eliminations
Debit
Credit

(4) 90,000

Combined
116,000
165,000
444,000

( 3) 36,000
(4) 90,000
(5) 40,000
(1)395,000
(2)260,000

120,000
1,210,000

(1)395,000
(2)260,000
(3) 20,000
(5) 40,000
(3) 16,000
821,000

821,000

2,055,000

Ginto Company
Combined Balance Sheet
December 31, 2008
Assets
Cash
Accounts receivable
Inventory
Land
Buildings and equipment
Less: Accumulated depreciation
Total assets
Liabilities and Stockholders’ Equity
Liabilities
Accounts payable
Bonds payable
Total liabilities
Stockholders’ Equity
Common stock
Retained earnings
Total liabilities and stockholders’ equity

P 116,000
165,000
444,000
120,000
P1,210,000
480,000

730,000
P1,575,000

P 175,000
400,000
P 575,000
P 300,000
700,000

1,000,000
P1,575,000

30

Problem 13-7
a.

b.

Books of Branch P
Shipment from home office
Freight-in
Home office

8,000
50

Home office
Shipment from home office
Freight-in
Cash

8,120
8,000
50
70

Books of Branch Q
Shipment from home office
Freight-in
Home office

c.

8,050

8,000
80
8,080

Books of Home Office
Investment in branch – P
Shipment to branch – P
Cash

8,050

Investment in branch – Q
Inter-branch freight expense
Investment in branch – P

8,080
40

Shipment to branch - P
Shipment to branch – Q

8,000

8,000
50

8,120

8,000

Problem 13-8
Debits:
Cash = P36,000 (add the book values and include the P9,000 transfer in transit)
Accounts receivable = P118,000
Inventory, 12/31 = P151,000 (branch balance would be P81,000 when the shipment in transit is
included. This balance must be adjusted to cost of P54,000
(P81,000 ÷ 150%) and then add to home office balance of P97,000.
Investment in branch = 0 (eliminated)
Land, buildings and equipment = P460,000
Shipment from home office = 0 (eliminated)
Purchases = P429,000
Depreciation expense = P28,000 (add the two book values and the year-end allocation)
Advertising expense = P58,000 (add the two book values and the year-end allocation)
Rent expense = P30,000 (add the two book values and the year-end allocation)
Miscellaneous expense = P100,000 (add the two book values and the year-end allocation)
Inventory, 1/1 = P145,000 (branch balance is adjusted to cost of P24,000 (P36,000 / 150%),
and then added to home office balance.
Total debits = P1,555,000 (add the above totals)

31

Credits
Accumulated depreciation = P108,000
Accounts payable = P104,000
Notes payable = P180,000
Home office = 0 (eliminated)
Common stock = P60,000 (home office balance)
Retained earnings, 1/1 = P248,000 (home office balance after reduction of P12,000 unrealized
profit in beginning inventory of branch. Cost is P24,000
(P36,000 / 150%) which indicates the P12,000 unrealized.
Sales = P704,000
Shipment to branch = 0 (eliminated)
Inventory, 12/31 = P151,000
Total credits = P1,555,000 (add the above totals)
Reconciliation Statement
Investment in Branch account balance (Home office books)
Unrecorded cash transfer
Adjusted balance

P177,000
( 9,000)
P168,000

Home Office account balance (Branch books)
Inventory transfer in transit
Expense allocated not yet recorded
Adjusted balance

P123,000
21,000
24,000
P168,000

Problem 13-9
Home Office Books
(1) Investment in branch
Shipment to branch
Unrealized inventory profit
(2) Cash
Investment in branch
Closing entries:
(3) Sales
Inventory, 12/31
Shipment to branch
Purchases
Expenses
Income summary
(4) Investment in branch
Branch income summary
Branch income summary
Investment in branch

Case A
60,000

Case B
75,000
60,000
-

61,200

60,000
15,000
61,200

61,200
130,000
8,000
60,000

60,000
30,000
61,200

61,200
130,000
8,000
60,000

150,000
17,200
30,800

61,200
130,000
8,000
60,000

150,000
17,200
30,800

150,000
17,200
30,800

13,000
13,000
500

14,000
500

13,500

Unrealized inventory profit
Branch income summary
Income summary
Income summary
Retained earnings

Case C
90,000

14,000
27,000

500
13,000
43,800

43,800
43,800

14,000
13,000
43,800

43,800

43,800

32

Ilocos Branch Books

Case A
(1) Shipment from home office
Home office

60,000

(2) Accounts receivable
Sales

81,000

(3) Cash

64,000

Case B
75,000

60,000
81,000

14,000

(5) Home office
Cash

61,200

90,000
81,000

81,000
64,000

64,000

(4) Expenses
Cash

90,000
75,000

81,000

Accounts receivable

Case C

81,000
64,000

64,000
14,000

14,000

64,000
14,000

14,000
61,200

61,200

14,000
61,200

61,200

61,200

Closing entries
(6) Sales
Inventory 12/31
Shipment from HO
Expenses
Income summary

81,000
6,000

(7) Income summary
Home office

13,000

Home office
Income summary

81,000
7,500
60,000
14,000
13,000

81,000
9,000
75,000
14,000

500

90,000
14,000
14,000

13,000
14,000

500
500

14,000

33

Working Paper for Combined Financial Statements
December 31, 2008

Home Office

Branch

Eliminations
Debit
Credit

Combined

Income Statement
Sales
Merchandise inventory, 12/31
Shipment to branch
Total credits

130,000
8,000
60,000
198,000

Shipment from home office
Purchases
Expenses
Total debits
Net income(loss) carried forward

150,000
17,200
167,200
30,800

14,000
104,000
(14,000)

150,000
31,200
181,200
43,800

81,000
9,000

211,000
14,000
225,000

(3) 3,000
(2) 60,000

90,000
90,000

(2) 90,000

Retained Earnings Statement
Net income (loss) from above
Retained earnings, 12/31 Carried forward

30,800

(14,000)

43,800

30,800

(14,000)

43,800

Balance Sheet
Cash (overdraft)
Accounts receivable
Merchandise inventory, 12/31
Investment in branch
Total debits

39,000
45,000
8,000
28,800
120,800

(11,200)
17,000
9,000

27,800
62,000
14,000
103,800

Accounts payable
Unrealized inventory profit
Capital stock
Retained earnings, from above
Home office
Total credits

20,000
30,000
40,000
30,800
120,800

(3) 3,000
(1) 28,800

14,800

(2) 30,000
(14,000)
28,800
14,800

(1) 28,800
121,800

121,800

20,000
40,000
43,800
103,800

34

Problem 13-10
(1)

Consolidated Working Paper
Home
Office

Branch A

Branch B

Debits
Cash
Inventories

33,000
70,000

22,000
21,000

13,000
15,000

Other current assets
Investment in Branch A
Investment in Branch B
Cost of sales *

50,000
45,000
42,000
80,000

25,000

23,000

57,000

45,000

Expenses

90,000
410,000

25,000
150,000

20,000
116,000

40,000
100,000
50,000

15,000

11,000

45,000

30,000

Credits
Current liabilities
Capital stock
Retained earnings, Jan. 1
Home Office
Allow. for overvaluation of
Branch inv. – Branch A
Allow. for overvaluation of
Branch inv. – Branch B
Sales

13,000
12,000
195,000
410,000

Adj. & Elim.
(dr) Cr

Balance
Sheet
68,000

A (12,000)
B 8,000
D 45,000
D 42,000
B (8,000)
C 25,000

110,000
98,000

(165,000)
(135,000)
276,000

66,000
100,000
50,000
A 12,000
D (87,000)
C (13,000)
C (12,000)

90,000
150,000

75,000
116,000

360,000

Net income



Income
Statement

60,000

60,000
276,000

Book value of cost of sales from home office and branches

Home Office
Inventory, January 1,
Purchases
Shipment to branch
Shipment from home office
Goods available for sale
Inventory, Dec. 31
Cost of sales

P 80,000
160,000
( 90,000)
P150,000
( 70,000)
P 80,000

Investment in
Branch A

Investment in
Branch B

P 18,000

P24,000

60,000
P 78,000
( 21,000)
P 57,000

36,000
P 60,000
(15,000)
P 45,000

35

(2) Reconciliation of Home Office and Investment in Branch accounts.

Unadjusted balances, Dec.31

Books of Home Office
Investment
Investment
In Branch A In Branch B
P 45,000
P 42,000

Books of
Branch A
Home Office
P 45,000

Shipments in transit to Branch B
Branch Profit (Schedule 1)
Adjusted balances, December 31

Books of
Branch B
Home Office
P 30,000
12,000

8,000
P 53,000

10,000
P 52,000

8,000

10,000

P 53,000

P 52,000

Schedule 1:

Sales
Cost of sales:
Beginning inventory
Shipment from home office
Goods available for sale
Ending inventory
Cost of sales
Gross profit
Expenses
Net profit

Branch A
P90,000

Branch B
P75,000

P18,000
60,000
78,000
21,000
57,000
33,000
25,000
P 8,000

P24,000
48,000
72,000
27,000
45,000
30,000
20,000
P10,000

36