HOME OFFICE AND BRANCH ACCOUNTING: SPECIAL PROCEDURES
PROBLEM 1
The following information pertains to a home office and its branch
Home Office Branch
Sales P 3,000,000 P 1,200,000
Inventory, Beginning
- From outside purchases 480,000 32,000
- From home office, at 10% mark up 132,000
Purchases from outsiders 1,200,000 320,000
Shipments to branch 360,000
Shipments from branch 416,000
Inventory, Ending
- From outside purchases 300,000 160,000
- From home office 130,000
Operating Expenses 400,000 150,000
On December 31, the home office sent additional merchandise to the branch which was still in transit as of December 31.
The home office consistently sent merchandise to the branch during the year at 30% mark up.
Required:
1. How much is the shipment in transit at cost?
2. How much is the combined cost of goods sold?
3. How much is the combined net income?
4. How much is the combined ending inventory?
PROBLEM 2
Tagum Supply Company is engaged in merchandising both at Home Office in Makati, Metro Manila and a branch in
Davao. Selected accounts in the trial balances of the Home Office and the branch at December 31, 2023 follow:
Home Office Branch
Inventory, January 1, 2023 23,000 11,550
Investment in Davao Branch 58,300
Purchases 190,000 105,000
Freight in from home office 5,500
Sundry expenses 52,000 28,000
Home office
Sales 155,000 53,300
Sales to Branch 110,000 140,000
Allowance for branch inventory, January 1, 2023 1,000
Additional information:
1. Davao branch receives all its merchandise from the home office. The Home Office bills the goods at cost plus 10%
mark-up. At December 31, 20x8, a shipment with a billing value of P5,000 was in transit to the branch. Freight on
this shipment was P250 which is to be treated as part of inventory.
2. December 31, 20x8 inventories excluding the shipment in transit , are:
Home office, at cost 30,000
Davao branch, at billed value(excluding freight of P520) 10,400
Required:
1. The net income of the Home Office from its own operations.
2. The net income (loss) of Davao branch in so far as home office is concerned.
3. The combined net income
PROBLEM 3
Palo Branch is authorized by its Home Office to send to Burauen Branch P10,000 cash. Record this transfer in the books of
the (a) Home office; (b) Palo Branch; and (c) Burauen Branch.
PROBLEM 4:
The home office transfers inventory worth P150,000 to Samar Branch. Freight paid by the home office is P10,000. Later on,
the home office instructed Samar Branch to transfer the merchandise to Leyte Branch. Samar Branch paid freight of P3,000.
Required: Prepare the necessary journal entries, assuming:
a. If the merchandise had been shipped directly from the home office to Leyte Branch, the freight cost would have
been P11,000.
b. f the merchandise had been shipped directly from the home office to Leyte Branch, the freight cost would have
been P14,000.
