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Exercise

The document contains 10 multiple choice questions related to accounting for intercompany transactions and consolidated financial statements. It provides various details on shipments, billings, inventories, expenses, and other financial information for home offices and branches. Readers are asked to calculate amounts like unadjusted balances, combined profit, inventory values, profit/loss amounts, and realized markup based on the data given for each question.

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Mae Rx
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Download as DOCX, PDF, TXT or read online on Scribd
473 views

Exercise

The document contains 10 multiple choice questions related to accounting for intercompany transactions and consolidated financial statements. It provides various details on shipments, billings, inventories, expenses, and other financial information for home offices and branches. Readers are asked to calculate amounts like unadjusted balances, combined profit, inventory values, profit/loss amounts, and realized markup based on the data given for each question.

Uploaded by

Mae Rx
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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EXERCISE 1

1. ASTATIC UNSTABLE Co. is currently preparing its combined financial statements. At


December 31, 20x1, the home office shows a ₱728,000 balance in its “Investment in branch”
account. The following information has been gathered during the reconciliation process:
a. A credit memo sent by the home office to the branch amounting to ₱48,000 was not recorded
by the branch.
b. A debit memo sent by the home office to the branch amounting to ₱36,000 was not recorded
by the branch.
c. A credit memo sent by the branch to the home office amounting to ₱80,000 was recorded by
the home office twice.
d. A debit memo sent by the branch to the home office amounting to ₱120,000 was recorded by
the home office as ₱12,000.
e. The branch sent by mistake a credit memo amounting to ₱28,000 to the home office. The
home office did not record it.

How much is the unadjusted balance of the “Home office” account?


a. 450,000
b. 540,000
c. 580,000
c. 620,000

2. ABET ENCOURAGE Co. has several branches. On December 31, 20x1, the “Home office” account
maintained by Alpha Branch shows a balance of ₱580,000. The following information was
determined:
a. The home office charged Alpha Branch for a ₱60,000 shipment which was actually sent to
Beta Branch and retained by the latter. Alpha Branch was not notified of the intended
shipment.
b. The home office charged Charlie Branch for a ₱64,000 shipment which was actually sent to
Alpha Branch. Alpha Branch retained the shipment.
c. The home office erroneously recorded a remittance for ₱20,000 from its Delta Branch as
coming from Alpha Branch.
d. Utilities expense of ₱16,000 that is allocable to Echo Branch was recorded by the home office
in Alpha Branch’s account. Alpha Branch has inappropriately recorded the related debit
memo from the home office.

How much is the unadjusted balance of the “Investment in Alpha Branch” account in the home
office books?
a. 654,000
b. 564,000
c. 556,000
d. 565,000
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3. The following information was taken from the books of the home office and its branch.
Shipments to branch are billed at 120% above cost.
  Home office Branch
  Dr. (Cr.) Dr. (Cr.)
Cash 4,400,000 264,000
Accounts receivable 720,000 400,000
Inventory, beg. 1,200,000 -
Shipments from home office 1,824,000
Purchases 4,800,000 160,000
Freight-in 128,000 72,000
Shipments to branch (1,520,000)
Investment in branch 2,400,000
Allowance for markup (304,000)
Equipment 2,880,000 1,600,000
Accumulated depreciation - equipment (288,000) (160,000)
Accounts payable (288,000) (160,000)
Share capital (8,000,000)
Retained earnings - beg. (608,000)
Home office (2,400,000)
Sales (6,400,000) (2,000,000)
Operating expenses 880,000 400,000
Totals - -

Inventory, end.
- From outside purchases 1,840,000 40,000
- From home office 960,000

How much is the combined profit?


a. 4,340,000
b. 3,440,000
c. 4,300,000
d. 3,400,000

Use the following information for the next two questions:


ABC Co. decided to open a branch in Manila. Shipments of merchandise to the branch totaled
₱54,000 which included a 20% mark-up on cost. All accounting records are to be kept at the home
office. The branch submitted the following report summarizing its operations for the period ended
December 31, 20x1.

Sales on account 74,000


Sales on cash basis 22,000
Collection of account 60,000
Expenses paid 38,000
Expenses unpaid 12,000
Purchase of merchandise for cash 26,000
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Inventory on hand, Dec. 31; 80% from home office 30,000


Remittance to home office 55,000

4. How much is the branch inventory at cost?


a. 26,000 b. 20,000 c. 22,000 d. 23,000

5. How much is the profit (loss) of the branch as far as the home office is concerned?
a. (1,000) b. (4,000) c. 1,000 d. 800

Use the following information for the next two questions:


ABC Co. operates a branch in Davao. There are shipments in transit from home office to the branch.
The home office ships merchandise to the branch at 125% of cost in year 20x1. Profit and loss data for
the home office and branch for 20x1 follows:
Home Office Branch
Sales 250,000 75,000
Purchase from outsiders 200,000 15,000
Shipments to branch:
Cost to Home Office 30,000
Billing price to branch 32,500
Expenses 40,000 10,000
Inventories, Jan. 1, 20x1:
Home Office, acquired from outsiders, at cost 80,000
Branch: Acquired from outsiders at cost 7,500
Acquired from home office at billing price
which averaged 20% above cost 24,000
Inventories, Dec. 31, 20x1:
Home Office, acquired from outsiders at cost 55,000
Branch: Acquired from outsiders at cost 5,500
Acquired from Home Office, in 20x1, at billed
price (physical count) 21,000

6. How much is the amount of merchandise in transit at billed price?


a. 3,000 b. 3,500 c. 5,000 d. 5,500

7. How much is the combined cost of goods sold?


a. 241,200 b. 240,000 c. 242,400 d. 245,200

Use the following information for the next two questions:


Shipments received from the home office are billed at 120% above cost. During the year, the branch
received shipments billed at ₱480,000 and returned damaged goods with billed price of ₱72,000. The
branch has an ending inventory of ₱120,000, at billed price. The branch reported loss of ₱40,000 in
its individual financial statements.

8. How much is the balance of the “allowance for markup” account before year-end adjustments?
a. 86,000 b. 72,000 c. 68,000 d. 64,000
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9. How much is the true profit of the branch to be taken up in the home office books?
a. 8,000 b. 9,000 c. 12,000 d. 14,000

10. The home office bills shipments of merchandise to its branch at a markup of 20% on the billed
price. At the beginning of the period, the “Allowance for markup” account has a credit balance
of ₱16,000. During the period, the home office made shipments of goods worth ₱960,000 at cost.
The branch reported an ending inventory of ₱480,000 at billed price.

How much is the realized markup?


a. 120,000 b. 160,000 c. 180,000 d. 240,000

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