ST.

VINCENT COLLEGE
Leganes Ivisan Pototan

AFAR Review – MIDTERM

BSA 4 – Leganes & Ivisan

QUIZ 1

INSTRUCTION – Select the best answer and WRITE your answers on the
answer sheet provided. You have ____ minutes to finish the examination.

1. On December 31, 2023, the Branch current account had a balance of

P2,625,000. The home office had a balance of P2,000,000. The following errors
were discovered:

• The home office shipped merchandise to the branch at cost of P800,000 and
the merchandise was still in transit as of December 31, 2023.
• The branch paid the accounts payable of the home office in the amount of
P350,000 and the home office recorded the payment as P35,000.
• The branch collected P350,000 from a home office customer but the home
office was not notified of the said transaction.

What is the adjusted balance of the reciprocal accounts?

a. 3,200,000
b. 2,625,000
c. 2,750,000
d. 2,975,000

BONUS- 2,660,000

2. Bacolod Company decided to open a branch in Iloilo. Shipments of merchandise

to the branch totaled P270,000 which included a 25% markup on cost. All
accounting records are kept at the home office. The branch submitted the
following report summarizing the operations for the year ended December 31,
2023:

Sales on account 600,000

Sales on cash basis 250,000
Collections of accounts receivable 400,000
Expenses paid 140,000
Expenses unpaid 60,000
Purchases from outside suppliers for cash 125,000
Inventory on hand, December 31; 80% from home office 150,000
Remittance to home office 275,000

What amount should Bacolod Company report as Iloilo branch net income for
2023?

a. 385,000
b. 490,000
c. 430,000
d. None of these

3. Hope Corporation started operating a branch on May 1, 20x6 with a shipment of

merchandise billed at P250,000. Additional shipments during the month were
billed at P125,000. The branch returned damaged merchandise worth P10,000.
Inter-office shipments are billed uniformly at 125% of cost. On May 31, 20x6, the
branch reported a net loss of P52,500 and an inventory of P150,000. What is the
branch net income (loss) reflected in the combined income statement for May,
20x6?

a. (52,500)

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 b. 95,000
c. (9,500)
d. 43,000

4. Lobster Trading Bills its Iloilo City branch for shipments of goods at 25% above
cost. At the close of business on October 31, 20x6, a fire gutted the branch
warehouse and destroyed 60% of the merchandise stock stored therein.
Thereafter, the following data were gathered:

January 1 inventory, at billed price P 50,000

Shipments from home office Oct. 31 130,000

Net sales to Oct. 31 225,000

If undamaged merchandise recovered are marked to sell for P30,000, the

estimated cost of the merchandise destroyed by the fire was:

a. 21,600
b. 27,500
c. 14,400
d. 24,000

5. Aca, Inc. has several branches. Goods costing P10,000 were transferred by the
head office to Cebu branch with the latter paying P600 for freight cost.
Subsequently, the head office authorized Cebu branch to transfer the goods to
Davao Branch for which the latter was billed for the P10,000 cost of the goods
and freight charge of P50 for the transfer. If the head office had shipped the
goods directly to Davao branch, the freight charge would have been P700. The
P50 difference in freight cost would be disposed as follows:

a. Charged to Cebu Branch

b. Charged to the Head Office
c. Considered as savings
d. Charged to Davao branch

Nos. 6 and 7 are based on the following information:

Selected accounts from the December 31, 20x6 trial balances of Betty Star Co.
and its branch follow:

5-star Branch
Inventory, Jan. 1 P 46,000 P 23,100
Branch current 116,600 -
Purchases 380,000 -
Shipments from home office - 209,000
Freight in - 10,450
Expenses 104,000 58,100
Home office current - (106,600)
Sales (310,000) (280,000)
Shipments to branch (200,000) -
Branch merchandise markup (22,000) -

As of December 31, 20x6, a shipment with a billing price of P11,000 was in

transit to the branch. Freight cost, typically 5% of the billing price, is
inventoriable. Merchandise on hand at year-end were: at home office, P64,000 at
cost; at branch, P33,000 at billing price.

6. Compute the branch net income for 20x6

a. 32,000

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 b. 14,000
c. 33,000
d. 32,000

7. Refer to Betty Star Co., the combined net income for 20x6:

a. 77,000
b. 76,000
c. 84,900
d. 76,100

8. The home office of MacDo ships goods to Iloilo branch billing the branch for the
goods at P45,000, excluding freight of P6,000. Upon receipt of the goods, Iloilo
branch was instructed by the home office to transfer these goods to the Cagayan
de Oro branch. Iloilo branch ships the goods and paid P4,500 for the transfer. If
the goods had been shipped by the home office directly to Cagayan de Oro
branch, the freight would have been P6,500.

What is the journal entry to record the receipt of shipment in the books of
Cagayan de Oro branch?

a. Shipment from home office 45,000

Freight in 6,500
Home office current 51,500

b. Shipment from home office 45,000

Freight in 6,000
Home office current 51,000

c. Shipment from home office. 45,000

Home office current 45,000

d. Shipment from home office 45,000

Freight in 10,500
Home office current 49,500

9. Makati bills its Valenzuela branch for merchandise at 140% of cost. At the end of
January 2019, the branch reported the following information:

Merchandise from Home Office

(at billed price)

Inventory, January 1 P 7,560

Shipments received 28,280
Inventory, January 31 9,800

What should be the balance of the allowance account for overvaluation of the
branch inventory at January 31?

a. 2,800
b. 2,400
c. 8,080
d. None of the above

10. ABC Co. bills its branch for merchandise at 140% of cost. At the end of its first
month, the branch submitted the following data:

Merchandise from home office at billed 98,000

price

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Merchandise purchased locally by the 40,000
branch

Inventory, December 31 of which 28,000

P7,000 are of local purchase

Net sales for the month 180,000

How much is the cost of goods sold at cost?

a. 55,000
b. 87,000
c. 22,000
d. None of these

End

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AFAR Review – Midterm-Q1

ANSWER SHEET

NAME: ___________________________ COURSE: __________________

SUBJECT: _______________________ DATE: _____________________

INSTRUCTION: FILL UP THE ABOVE BLANKS. WRITE YOUR ANSWERS

ON THE BLANKS HEREUNDER PROVIDED AS INSTRUCTED. NO
ERASURE. DO NOT USE PENCIL.

1. 6. 11. 16.
2. 7. 12. 17.
3. 8. 13. 18.
4. 9. 14. 18.
5. 10. 15. 20.

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