December 31, 20x7  

1,900 gain
Overall P11,900 gain

5. Transaction gain on FC2:

December 31, 20x6 P  5,200 gain
December 31, 20x7   6,300 gain
Overall P11,500 gain

6. Overall foreign currency transactions gain:

Gain on FC1 transaction P11,900
Gain on FC2 transaction   11,500
P23,400

CDL could have hedged its exposed position. The exposed positions are only those denominated in foreign
currency units. The accounts receivable denominated in FC1 could be hedged by selling FC1 in the forward
market, thereby locking in the value of the FC1. The accounts payable denominated in FC2 could be
hedged by buying FC2 in the forward market, thereby locking in the value of the FC2.

Problem X
Foreign Currency Foreign Currency
Accounts Transaction   Exchange Transaction
Receivable Accounts    Payable    Loss   Exchange Gain

Case 1       NA       P16,000(a)       NA       P2,000(b)

Case 2 P38,000(c)       NA             NA       P2,000(d)

Case 3       NA       P27,000(e)  P3,000(f)       NA     

Case 4 P6,250(g)       NA        P1,250(h)       NA     

(a) LCU 40,000 x P.40

(b) LCU 40,000 x (P.40 - P.45)
(c) LCU 20,000 x P1.90
(d) LCU 20,000 x (P1.90 - P1.80)
(e) LCU 30,000 x P.90
(f) LCU 30,000 x (P.90 - P.80)
(g) LCU 2,500,000 x P.0025
(h) LCU 2,500,000 x (P.0025 - P.003)
Multiple Choice Problems
1. c C$1 / P.90 (C$1.11 = P1.00)

2. d – (correction: the question should be April 20, 20x5 not 20x4)

  20x4     20x5   
P.4895 x FC30,000 P14,685 P.4845 x FC30,000 P14,535 
P.4845 x FC30,000   14,535 P.4945 x FC30,000   14,835 
Gain P    150 Loss P    (300)
3. b
20x4
Date of transaction (12/1/20x4) P .0095
Balance sheet date (12/31/20x4) .0096
 Foreign exchange currency loss per FC P .0001
Multiplied by: No. of FC 1,000,000
Foreign exchange currency loss P 100

20x5
Balance sheet date (12/31/20x4) P.0096
Date of settlement (1/10/20x5) .0094
Foreign exchange currency gain per FC P .0002
Multiplied by: No. of FC 1,000,000
Foreign exchange currency gain P 200

4. c
Balance sheet date (12/31/20x4) P125,000
Date of settlement (7/1/20x5) 140,000
Foreign exchange currency loss P 15,000

5. b January 15
Foreign Currency Units (LCU) 300,000
Exchange Loss 15,000
Accounts Receivable (LCU) 315,000
Collect foreign currency receivable and
recognize foreign currency transaction
loss for changes in exchange rates:
P300,000 = (LCU 900,000 / LCU 3) Jan. 15 value
- 315,000 = Dec. 31 Peso equivalent
P 15,000 Foreign currency transaction loss
December 31, 20x7   1,900 gain
Overall P11,900 gain

5. Transaction gain on FC2:

December 31, 20x6 P  5,200 gain
December 31, 20x7   6,300 gain
Overall P11,500 gain

6. Overall foreign currency transactions gain:

Gain on FC1 transaction P11,900
Gain on FC2 transaction   11,500
P23,400

CDL could have hedged its exposed position. The exposed positions are only those denominated in foreign
currency units. The accounts receivable denominated in FC1 could be hedged by selling FC1 in the forward
market, thereby locking in the value of the FC1. The accounts payable denominated in FC2 could be
hedged by buying FC2 in the forward market, thereby locking in the value of the FC2.

Problem X
Foreign Currency Foreign Currency
Accounts Transaction   Exchange Transaction
Receivable Accounts    Payable    Loss   Exchange Gain

Case 1       NA       P16,000(a)       NA       P2,000(b)

 Case 2 P38,000(c)       NA             NA       P2,000(d)

Case 3       NA       P27,000(e)  P3,000(f)       NA     

Case 4 P6,250(g)       NA        P1,250(h)       NA     

(a) LCU 40,000 x P.40

(b) LCU 40,000 x (P.40 - P.45)
(c) LCU 20,000 x P1.90
(d) LCU 20,000 x (P1.90 - P1.80)
(e) LCU 30,000 x P.90
(f) LCU 30,000 x (P.90 - P.80)
(g) LCU 2,500,000 x P.0025
(h) LCU 2,500,000 x (P.0025 - P.003)
Multiple Choice Problems
1. c C$1 / P.90 (C$1.11 = P1.00)

2. d – (correction: the question should be April 20, 20x5 not 20x4)

  20x4     20x5   
P.4895 x FC30,000 P14,685 P.4845 x FC30,000 P14,535 
P.4845 x FC30,000   14,535 P.4945 x FC30,000   14,835 
Gain P    150 Loss P    (300)
3. b
20x4
Date of transaction (12/1/20x4) P .0095
Balance sheet date (12/31/20x4) .0096
Foreign exchange currency loss per FC P .0001
Multiplied by: No. of FC 1,000,000
Foreign exchange currency loss P 100

20x5
Balance sheet date (12/31/20x4) P .0096
Date of settlement (1/10/20x5) .0094
Foreign exchange currency gain per FC P .0002
Multiplied by: No. of FC 1,000,000
Foreign exchange currency gain P 200

4. c
Balance sheet date (12/31/20x4) P125,000
Date of settlement (7/1/20x5) 140,000
Foreign exchange currency loss P 15,000

5. b January 15
Foreign Currency Units (LCU) 300,000
Exchange Loss 15,000
Accounts Receivable (LCU) 315,000
Collect foreign currency receivable and
recognize foreign currency transaction
loss for changes in exchange rates:
P300,000 = (LCU 900,000 / LCU 3) Jan. 15 value
- 315,000 = Dec. 31 Peso equivalent
P 15,000 Foreign currency transaction loss
January 31, 20x4
 Assets Liabilities

Cash …………............................ P 1,100 Accounts Payable ………………. P 1,550

Accounts Receivable ………….. 3,600 Accrued expenses ………………. 350
Accts. Rec.-home office ………. 850 Home Office ……………………… 14,050
Merchandise Inventory ………… 9,800
Merchandise in Transit …………. 600
Total assets ………………… P15,950 Total Liabilities ……………………. P15,950

EAGLE CO.
Income Statement for Branch
For Month Ended January 31, 20x4

Sales …………………………………………………………………………………………. P 6,200

Cost of Goods Sold:
Merchandise inventory, beginning………………………………..P 0
Add: Purchases ………………………………………………………. 3,000
Shipments from home office (P11,450 +P600, in-transit) 12,050
Merchandise Available for Sale ……………………….. P 15,050
Less: Merchandise inv. Dec 31, 19x4 (P9,800 + P600)…. 10,400
Cost of Goods Sold ……………………………………………………………. 4,650
Gross Profit ………………………………………………………………………………… P 1,550
Expenses …………………………………………………………………………………… 2,110
Net Loss, from own operations………………………………………………………… P 560
EAGLE CO.
Balance Sheet for Home Office
January 31, 20x4

Assets
Cash …………………………………………………………………… P 9,100
Accounts Receivable ……………………………………………… P34,000
Less allowance for doubtful accounts ……………….. 1,050 32,950
Merchandise Inventory ……………………………………………. 44,500
Store furniture and fixtures ………………………………………… P12,000
Less accumulated depreciation ………………………. 3,950 8,050
Store furniture and fixtures-branch ……………………………… P 3,900
Less accumulated depreciation ……………………… 785 3,315
Branch office ………………………………………………………... 14,050
Total Assets ……………………………………………………
P3,000/10 years x 1/12 = P25 (depreciation for one month; Asset life, 10 years); P900 / 7.5 years, remaining life = P120
x 1/12= P10)

Expenses. . . . . . . . . . . . . . 100
Acc. Deprec. – SFF 100
[(P15,000 – P3,000)/10 x 1/12]
d. Included in closing entries
e. Expenses. . . . . . . . . . . . . . 750 Expenses. . . . . . . . . . . . . . 350
Accrued expenses. . . 750 Accrued expenses. . . 350

Closing Entries
Sales. . . . . . .. . . . . . . . . . . 34,600 Sales. . . . . . .. . . . . . . . . . . 6,200
Merch. inventory, ending 44,500 Merch. inventory, ending
Shipments to branch 12,050 (P9,800 + P600) 10,400
Merch. Inv. , beg……. 46,000 Income Summary. . . . . . . 560
 Purchases. . . . . . . . . . 31,600 Merch. Inv. , beg……. 0
Expenses (9,200 – 250 Purchases. . . . . . . . . . 3,000
- 475 + 100 + 750)….. 9,325 Shipments from HO
Income Summary…… 4,225 (P10,200 + P1,250 +P600) 12,050
Expenses (1,250 + 475
+ 35 + 350)……………. 2,110

Branch Income Summary 560 Home Office Current . . . . . . . . 560

Branch Current………. 560 Income Summary . . . . . . . . 560

Income Summary……….. 560

Branch Income Sum 560

Income Summary……….. 3.665

Retained Earnings….. 3,665

EAGLE CO.
Balance Sheet for Branch
January 31, 20x4

Assets Liabilities

Cash …………............................ P 1,100 Accounts Payable ………………. P 1,550

Accounts Receivable ………….. 3,600 Accrued expenses ………………. 350
Accts. Rec.-home office ………. 850 Home Office ……………………… 14,050
Merchandise Inventory ………… 9,800
Merchandise in Transit …………. 600
Total assets ………………… P15,950 Total Liabilities ……………………. P15,950

EAGLE CO.
Income Statement for Branch
For Month Ended January 31, 20x4

Sales …………………………………………………………………………………………. P 6,200

Cost of Goods Sold:
Merchandise inventory, beginning………………………………..P 0
Add: Purchases ………………………………………………………. 3,000
Shipments from home office (P11,450 +P600, in-transit) 12,050
Merchandise Available for Sale ……………………….. P 15,050
Less: Merchandise inv. Dec 31, 19x4 (P9,800 + P600)…. 10,400
Cost of Goods Sold ……………………………………………………………. 4,650
Gross Profit ………………………………………………………………………………… P 1,550
Expenses …………………………………………………………………………………… 2,110
Net Loss, from own operations………………………………………………………… P 560
EAGLE CO.
Balance Sheet for Home Office
January 31, 20x4

Assets
Cash …………………………………………………………………… P 9,100
Accounts Receivable ……………………………………………… P34,000

1,400

Income Summary ………………………………………………….. 12,050

Retained Earnings ……………………………………….. 12,050
Problem III
Journal and Adjusting Entries – Home Office and Branch
Home Office Books Branch Books
INTERCOMPANY / INTER-OFFICE Transactions
1/1 a Branch Current . . . . . . . 1,500 Cash . . . . . . . . . . . . . . . . . . . . . . 1,500
Cash . . . . . . . . . . . . . . . 1,500 Home Office Current. . . . . . 1,500
b Shipment to branch, cost 10,200 Home Office Current . . . . . . . . 10,200
Branch Current . . . . . . 10,200 Shipments from Home Office 10,200
c SFF - Branch 3,000 No entry – eqpt accounts
Store Furniture & Fixt 3,000 maintained in the HO books
Acc. Depreciation – SFF 750 No entry – eqpt accounts
Acc. Deprec. SFF – Br. 750 maintained in the HO books
P3,000 x 10% x 2.5 yrs

SFF – Branch . . . . . . . . . . 900 Home Office Current . . . . . . . . 900

Branch Current . . . . . . 900 Cash . . . . . . . . . . . . . . . . . . . 900
d. Branch Current . . . . . . . 2,600 Accounts Receivable - HO 2,600
Accounts Receivable 2,600 Home Office Current. . . . . . 2,600

1/1 – 1/31 Transaction with Outsiders

Accounts Receivable . . . 34,600 Accounts Receivable . . . 6,200
Sales.. . . . . . . . . . . . . . . 34,600 Sales.. . . . . . . . . . . . . . . 6,200
Cash. . . . . . . . . . . . . . . . . . 40,000 Cash . . . . . . . . . . . . . . . . . . . . . . 2,600
Accounts Receivable 40,000 Accounts Receivable . . . . . 2,600
Purchases . . . . . . . . . . . . 31,600 Purchases. . . . . . . . . . . . . . . . . . 3,000
Accounts Payable . . 31,600 Accounts Payable. . . . . . . . 3,000
Accounts Payable . . . . . 36,200 Accounts Payable . .. . . . . . . . 1,450
Cash. . . . . . . . . . . . . . . 36.200 Cash. . . . . . . . . . . . . . . 1,450
Accrued expenses . . . . . 250 Expenses . .. . . . . . . . . . . . . . . . 1,250
Expenses. . . . . . . . . . . . . . 8,950 Cash. . . . . . . . . . . . . . .. . . . . 1,250
Cash. . . . . . . . . . . . . . . 9,200

1/1 – 1/31 Intercompany / INTER-OFFICE Transactions

Cash . . . . . . . . . . . . . . . . . . . . . . 1,600
Accts. Rec. – HO……………. 1,600
Allowance for D/A. . . . . 150 Home Office Current . . . . . . . . 150
Branch Current . . . . . . 150 Accts. Rec. – HO……………. 150
Shipment to branch ,cost 1,250 Home Office Current . . . . . . . . 1,250
Branch Current . . . . . . 1,250 Shipments from Home Office 1,250
Cash. . . . . . . . . . . . . . . . . 1,000 Home Office Current . . . . . . . . 1,000
Branch Current . . . . . . 1,000 Cash. . . . . . . . . . . . . . . . . . . 1,000
Adjusting Entries
a. Shipment to branch, cost 600 Home Office Current . . . . . . . . 600
Branch Current . . . . . . 600 Shipments from Home Office 600

b. Branch Current . . . . . . .. 475 Expenses. . . . . . . . . . . . . . . . . . . 475

Expenses. . . . . . . . . . . 475 Home Office Current . . . . . . 475

c. Branch Current.. . . . . . .. 35 Expenses. . . . . . . . . . . . . . . . . . . 35

Acc. Deprec. SFF – Br. 35 Home Office Current . . . . . . 35
1,400

Income Summary ………………………………………………….. 1,400

Branch Income …………………………………………… 1,400

Income Summary ………………………………………………….. 12,050

Retained Earnings ……………………………………….. 12,050
Problem III
Journal and Adjusting Entries – Home Office and Branch
Home Office Books Branch Books
INTERCOMPANY / INTER-OFFICE Transactions
1/1 a Branch Current . . . . . . . 1,500 Cash . . . . . . . . . . . . . . . . . . . . . . 1,500
Cash . . . . . . . . . . . . . . . 1,500 Home Office Current. . . . . . 1,500
b Shipment to branch, cost 10,200 Home Office Current . . . . . . . . 10,200
Branch Current . . . . . . 10,200 Shipments from Home Office 10,200
c SFF - Branch 3,000 No entry – eqpt accounts
Store Furniture & Fixt 3,000 maintained in the HO books
Acc. Depreciation – SFF 750 No entry – eqpt accounts
Acc. Deprec. SFF – Br. 750 maintained in the HO books
P3,000 x 10% x 2.5 yrs

SFF – Branch . . . . . . . . . . 900 Home Office Current . . . . . . . . 900

d. Branch Current . . . . . . . 2,600 Accounts Receivable - HO 2,600
Accounts Receivable 2,600 Home Office Current. . . . . . 2,600

1/1 – 1/31 Transaction with Outsiders

Accounts Receivable . . . 34,600 Accounts Receivable . . . 6,200
Sales.. . . . . . . . . . . . . . . 34,600 Sales.. . . . . . . . . . . . . . . 6,200
Cash. . . . . . . . . . . . . . . . . . 40,000 Cash . . . . . . . . . . . . . . . . . . . . . . 2,600
Accounts Receivable 40,000 Accounts Receivable . . . . . 2,600
Purchases . . . . . . . . . . . . 31,600 Purchases. . . . . . . . . . . . . . . . . . 3,000
Accounts Payable . . 31,600 Accounts Payable. . . . . . . . 3,000
Accounts Payable . . . . . 36,200 Accounts Payable . .. . . . . . . . 1,450
Cash. . . . . . . . . . . . . . . 36.200 Cash. . . . . . . . . . . . . . . 1,450
Accrued expenses . . . . . 250 Expenses . .. . . . . . . . . . . . . . . . 1,250
Expenses. . . . . . . . . . . . . . 8,950 Cash. . . . . . . . . . . . . . .. . . . . 1,250
Cash. . . . . . . . . . . . . . . 9,200

1/1 – 1/31 Intercompany / INTER-OFFICE Transactions

Cash . . . . . . . . . . . . . . . . . . . . . . 1,600
Accts. Rec. – HO……………. 1,600
Allowance for D/A. . . . . 150 Home Office Current . . . . . . . . 150
Branch Current . . . . . . 150 Accts. Rec. – HO……………. 150
Shipment to branch ,cost 1,250 Home Office Current . . . . . . . . 1,250
Branch Current . . . . . . 1,250 Shipments from Home Office 1,250
Cash. . . . . . . . . . . . . . . . . 1,000 Home Office Current . . . . . . . . 1,000
Branch Current . . . . . . 1,000 Cash. . . . . . . . . . . . . . . . . . . 1,000
Adjusting Entries
a. Shipment to branch, cost 600 Home Office Current . . . . . . . . 600
Branch Current . . . . . . 600 Shipments from Home Office 600

b. Branch Current . . . . . . .. 475 Expenses. . . . . . . . . . . . . . . . . . . 475

Expenses. . . . . . . . . . . 475 Home Office Current . . . . . . 475

c. Branch Current.. . . . . . .. 35 Expenses. . . . . . . . . . . . . . . . . . . 35

Acc. Deprec. SFF – Br. 35 Home Office Current . . . . . . 35
1,400

Income Summary ………………………………………………….. 1,400

Branch Income …………………………………………… 1,400

Income Summary ………………………………………………….. 12,050

Retained Earnings ……………………………………….. 12,050

Problem III
Journal and Adjusting Entries – Home Office and Branch
 Home Office Books Branch Books
INTERCOMPANY / INTER-OFFICE Transactions
1/1 a Branch Current . . . . . . . 1,500 Cash . . . . . . . . . . . . . . . . . . . . . . 1,500
Cash . . . . . . . . . . . . . . . 1,500 Home Office Current. . . . . . 1,500
b Shipment to branch, cost 10,200 Home Office Current . . . . . . . . 10,200
Branch Current . . . . . . 10,200 Shipments from Home Office 10,200
c SFF - Branch 3,000 No entry – eqpt accounts
Store Furniture & Fixt 3,000 maintained in the HO books
Acc. Depreciation – SFF 750 No entry – eqpt accounts
Acc. Deprec. SFF – Br. 750 maintained in the HO books
P3,000 x 10% x 2.5 yrs

SFF – Branch . . . . . . . . . . 900 Home Office Current . . . . . . . . 900

Branch Current . . . . . . 900 Cash . . . . . . . . . . . . . . . . . . . 900
d. Branch Current . . . . . . . 2,600 Accounts Receivable - HO 2,600
Accounts Receivable 2,600 Home Office Current. . . . . . 2,600

1/1 – 1/31 Transaction with Outsiders

Accounts Receivable . . . 34,600 Accounts Receivable . . . 6,200
Sales.. . . . . . . . . . . . . . . 34,600 Sales.. . . . . . . . . . . . . . . 6,200
Cash. . . . . . . . . . . . . . . . . . 40,000 Cash . . . . . . . . . . . . . . . . . . . . . . 2,600
Accounts Receivable 40,000 Accounts Receivable . . . . . 2,600
Purchases . . . . . . . . . . . . 31,600 Purchases. . . . . . . . . . . . . . . . . . 3,000
Accounts Payable . . 31,600 Accounts Payable. . . . . . . . 3,000
Accounts Payable . . . . . 36,200 Accounts Payable . .. . . . . . . . 1,450
Cash. . . . . . . . . . . . . . . 36.200 Cash. . . . . . . . . . . . . . . 1,450
Accrued expenses . . . . . 250 Expenses . .. . . . . . . . . . . . . . . . 1,250
Expenses. . . . . . . . . . . . . . 8,950 Cash. . . . . . . . . . . . . . .. . . . . 1,250
Cash. . . . . . . . . . . . . . . 9,200

1/1 – 1/31 Intercompany / INTER-OFFICE Transactions

Cash . . . . . . . . . . . . . . . . . . . . . . 1,600
Accts. Rec. – HO……………. 1,600
Allowance for D/A. . . . . 150 Home Office Current . . . . . . . . 150
Branch Current . . . . . . 150 Accts. Rec. – HO……………. 150
Shipment to branch ,cost 1,250 Home Office Current . . . . . . . . 1,250
Branch Current . . . . . . 1,250 Shipments from Home Office 1,250
Cash. . . . . . . . . . . . . . . . . 1,000 Home Office Current . . . . . . . . 1,000
Branch Current . . . . . . 1,000 Cash. . . . . . . . . . . . . . . . . . . 1,000
Adjusting Entries
a. Shipment to branch, cost 600 Home Office Current . . . . . . . . 600
Branch Current . . . . . . 600 Shipments from Home Office 600

b. Branch Current . . . . . . .. 475 Expenses. . . . . . . . . . . . . . . . . . . 475

Expenses. . . . . . . . . . . 475 Home Office Current . . . . . . 475

c. Branch Current.. . . . . . .. 35 Expenses. . . . . . . . . . . . . . . . . . . 35

Acc. Deprec. SFF – Br. 35 Home Office Current . . . . . . 35
1,400

Income Summary ………………………………………………….. 1,400

Branch Income …………………………………………… 1,400

Income Summary ………………………………………………….. 12,050

Retained Earnings ……………………………………….. 12,050

Problem III
Journal and Adjusting Entries – Home Office and Branch
Home Office Books Branch Books
 INTERCOMPANY / INTER-OFFICE Transactions
1/1 a Branch Current . . . . . . . 1,500 Cash . . . . . . . . . . . . . . . . . . . . . . 1,500
Cash . . . . . . . . . . . . . . . 1,500 Home Office Current. . . . . . 1,500
b Shipment to branch, cost 10,200 Home Office Current . . . . . . . . 10,200
Branch Current . . . . . . 10,200 Shipments from Home Office 10,200
c SFF - Branch 3,000 No entry – eqpt accounts
Store Furniture & Fixt 3,000 maintained in the HO books
Acc. Depreciation – SFF 750 No entry – eqpt accounts
Acc. Deprec. SFF – Br. 750 maintained in the HO books
P3,000 x 10% x 2.5 yrs

SFF – Branch . . . . . . . . . . 900 Home Office Current . . . . . . . . 900

d. Branch Current . . . . . . . 2,600 Accounts Receivable - HO 2,600
Accounts Receivable 2,600 Home Office Current. . . . . . 2,600

1/1 – 1/31 Transaction with Outsiders

Accounts Receivable . . . 34,600 Accounts Receivable . . . 6,200
Sales.. . . . . . . . . . . . . . . 34,600 Sales.. . . . . . . . . . . . . . . 6,200
Cash. . . . . . . . . . . . . . . . . . 40,000 Cash . . . . . . . . . . . . . . . . . . . . . . 2,600
Accounts Receivable 40,000 Accounts Receivable . . . . . 2,600
Purchases . . . . . . . . . . . . 31,600 Purchases. . . . . . . . . . . . . . . . . . 3,000
Accounts Payable . . 31,600 Accounts Payable. . . . . . . . 3,000
Accounts Payable . . . . . 36,200 Accounts Payable . .. . . . . . . . 1,450
Cash. . . . . . . . . . . . . . . 36.200 Cash. . . . . . . . . . . . . . . 1,450
Accrued expenses . . . . . 250 Expenses . .. . . . . . . . . . . . . . . . 1,250
Expenses. . . . . . . . . . . . . . 8,950 Cash. . . . . . . . . . . . . . .. . . . . 1,250
Cash. . . . . . . . . . . . . . . 9,200

1/1 – 1/31 Intercompany / INTER-OFFICE Transactions

Cash . . . . . . . . . . . . . . . . . . . . . . 1,600
Accts. Rec. – HO……………. 1,600
Allowance for D/A. . . . . 150 Home Office Current . . . . . . . . 150
Branch Current . . . . . . 150 Accts. Rec. – HO……………. 150
Shipment to branch ,cost 1,250 Home Office Current . . . . . . . . 1,250
Branch Current . . . . . . 1,250 Shipments from Home Office 1,250
Cash. . . . . . . . . . . . . . . . . 1,000 Home Office Current . . . . . . . . 1,000
Branch Current . . . . . . 1,000 Cash. . . . . . . . . . . . . . . . . . . 1,000
Adjusting Entries
a. Shipment to branch, cost 600 Home Office Current . . . . . . . . 600
Branch Current . . . . . . 600 Shipments from Home Office 600

b. Branch Current . . . . . . .. 475 Expenses. . . . . . . . . . . . . . . . . . . 475

Expenses. . . . . . . . . . . 475 Home Office Current . . . . . . 475

c. Branch Current.. . . . . . .. 35 Expenses. . . . . . . . . . . . . . . . . . . 35

Acc. Deprec. SFF – Br. 35 Home Office Current . . . . . . 35
1,400

Income Summary ………………………………………………….. 1,400

Branch Income …………………………………………… 1,400

Income Summary ………………………………………………….. 12,050

Retained Earnings ……………………………………….. 12,050

Problem III
Journal and Adjusting Entries – Home Office and Branch
Home Office Books Branch Books
INTERCOMPANY / INTER-OFFICE Transactions
1/1 a Branch Current . . . . . . . 1,500 Cash . . . . . . . . . . . . . . . . . . . . . . 1,500
 Cash . . . . . . . . . . . . . . . 1,500 Home Office Current. . . . . . 1,500
b Shipment to branch, cost 10,200 Home Office Current . . . . . . . . 10,200
Branch Current . . . . . . 10,200 Shipments from Home Office 10,200
c SFF - Branch 3,000 No entry – eqpt accounts
Store Furniture & Fixt 3,000 maintained in the HO books
Acc. Depreciation – SFF 750 No entry – eqpt accounts
Acc. Deprec. SFF – Br. 750 maintained in the HO books
P3,000 x 10% x 2.5 yrs

SFF – Branch . . . . . . . . . . 900 Home Office Current . . . . . . . . 900

Branch Current . . . . . . 900 Cash . . . . . . . . . . . . . . . . . . . 900
d. Branch Current . . . . . . . 2,600 Accounts Receivable - HO 2,600
Accounts Receivable 2,600 Home Office Current. . . . . . 2,600

1/1 – 1/31 Transaction with Outsiders

Accounts Receivable . . . 34,600 Accounts Receivable . . . 6,200
Sales.. . . . . . . . . . . . . . . 34,600 Sales.. . . . . . . . . . . . . . . 6,200
Cash. . . . . . . . . . . . . . . . . . 40,000 Cash . . . . . . . . . . . . . . . . . . . . . . 2,600
Accounts Receivable 40,000 Accounts Receivable . . . . . 2,600
Purchases . . . . . . . . . . . . 31,600 Purchases. . . . . . . . . . . . . . . . . . 3,000
Accounts Payable . . 31,600 Accounts Payable. . . . . . . . 3,000
Accounts Payable . . . . . 36,200 Accounts Payable . .. . . . . . . . 1,450
Cash. . . . . . . . . . . . . . . 36.200 Cash. . . . . . . . . . . . . . . 1,450
Accrued expenses . . . . . 250 Expenses . .. . . . . . . . . . . . . . . . 1,250
Expenses. . . . . . . . . . . . . . 8,950 Cash. . . . . . . . . . . . . . .. . . . . 1,250
Cash. . . . . . . . . . . . . . . 9,200

1/1 – 1/31 Intercompany / INTER-OFFICE Transactions

Cash . . . . . . . . . . . . . . . . . . . . . . 1,600
Accts. Rec. – HO……………. 1,600
Allowance for D/A. . . . . 150 Home Office Current . . . . . . . . 150
Branch Current . . . . . . 150 Accts. Rec. – HO……………. 150
Shipment to branch ,cost 1,250 Home Office Current . . . . . . . . 1,250
Branch Current . . . . . . 1,250 Shipments from Home Office 1,250
Cash. . . . . . . . . . . . . . . . . 1,000 Home Office Current . . . . . . . . 1,000
Branch Current . . . . . . 1,000 Cash. . . . . . . . . . . . . . . . . . . 1,000
Adjusting Entries
a. Shipment to branch, cost 600 Home Office Current . . . . . . . . 600
Branch Current . . . . . . 600 Shipments from Home Office 600

b. Branch Current . . . . . . .. 475 Expenses. . . . . . . . . . . . . . . . . . . 475

Expenses. . . . . . . . . . . 475 Home Office Current . . . . . . 475

c. Branch Current.. . . . . . .. 35 Expenses. . . . . . . . . . . . . . . . . . . 35

Acc. Deprec. SFF – Br. 35 Home Office Current . . . . . . 35
1,400

Income Summary ………………………………………………….. 1,400

Branch Income …………………………………………… 1,400

Income Summary ………………………………………………….. 12,050

Retained Earnings ……………………………………….. 12,050

Problem III
Journal and Adjusting Entries – Home Office and Branch
Home Office Books Branch Books
INTERCOMPANY / INTER-OFFICE Transactions
1/1 a Branch Current . . . . . . . 1,500 Cash . . . . . . . . . . . . . . . . . . . . . . 1,500
Cash . . . . . . . . . . . . . . . 1,500 Home Office Current. . . . . . 1,500
 b Shipment to branch, cost 10,200 Home Office Current . . . . . . . . 10,200
Branch Current . . . . . . 10,200 Shipments from Home Office 10,200
c SFF - Branch 3,000 No entry – eqpt accounts
Store Furniture & Fixt 3,000 maintained in the HO books
Acc. Depreciation – SFF 750 No entry – eqpt accounts
Acc. Deprec. SFF – Br. 750 maintained in the HO books
P3,000 x 10% x 2.5 yrs

SFF – Branch . . . . . . . . . . 900 Home Office Current . . . . . . . . 900

ble …………………………………… 22,500

(a) Home Office ……………………………………………….. 53,400

Accounts Receivable ………………………….. 53,400

(b) Accounts Payable ………………………………………... 12,250

Cash …………………………………………………….. 12,250

(c) Furniture & Fixtures ………………………………………… 8,000

Cash …………………………………………………….. 8,000

(d) Expenses …………………………………………………….. 18,000

Chapter 12
Problem I
(a)Working Fund – Agency ……………………………… ……………………….. 5,000
Cash …………………………………………………………………………. 5,000
(b)Accounts Receivable …………………………………..................................... 50,000
Sales-Agency ………………………………………………………………. 50,000

(c)Cash ………………………………………………………..................................... 35,000

Accounts Receivable …………………………………………………….. 35,000

(d)Expenses-Agency ……………………………………………………………….. 4,500

Cash …………………………………………………………………………. 4,500

(e)Expenses-Agency ……………………………………………………………….. 2,250

Cash …………………………………………………………………………. 2,250

(f) Cost of Goods Sold-Agency …………………………………………………… 36,000

Merchandise Inventory - Agency ………………………………………. 36,000

2.
Sales……………………………………………………………………………….P 50,000
Less: CGS………………………………………………………………………… 36,000
GP………………………………………………………………………………….P 14,000
Less: Expenses (P4,500 + P2,250)…………………………………………….. 6,750
Net income – agency………………………………………………………….P 7,250

Problem II
(a) Branch Books:

(e) Cash ………………………………………………………….. 42,500

Home Office …………………………………………… 42,500
 (f) Shipments from Home Office …………………………… 50,200
Home Office …………………………………………... 50,200

(g) Accounts Receivable ……………………………………. 60,000

Sales …………………………………………………….. 60,000

(h) Purchases …………………………………………………… 22,500

Accounts Payable …………………………………… 22,500

(i) Home Office ……………………………………………….. 53,400

Accounts Receivable ………………………….. 53,400

(j) Accounts Payable ………………………………………... 12,250

Cash …………………………………………………….. 12,250

(k) Furniture & Fixtures ………………………………………… 8,000

Cash …………………………………………………….. 8,000

(l) Expenses …………………………………………………….. 18,000

Chapter 12
Problem I
(a)Working Fund – Agency ……………………………… ……………………….. 5,000
Cash …………………………………………………………………………. 5,000
(b)Accounts Receivable …………………………………..................................... 50,000
Sales-Agency ………………………………………………………………. 50,000

(c)Cash …………… Cash ……………………………………………………..

18,000

(b) Home

Branch …………………………………… P111,765

Liabilities

Accounts Payable …………………………………………….. P29,150

Accrued Expenses …………………………………………….. 750
Total Liabilities ………………………………………………….. P29,900
Stockholders’ Equity

Capital Stock …………………………………………………… P50,000

Retained earnings …………………………………………….. 31,865
Total stockholder’s equity …………………………………… 81,865
Total liabilities and stockholders’ equity …………………… P111,765

EAGLE CO.
Income Statement for Home Office
For Month Ended January 31, 20x4

Sales ……………………………………………………………………………… P 34,600

Cost of goods sold:
Merchandise inventory, January 1 …………………….. P46,000
 Purchases …………………………………………………… 31,600
Merchandise available for sale ………………………… 77,600
Less shipments to branch ………………………………… 12,050
Merchandise available for own sales …………………. P65,550
Less merchandise inventory, January 31 ……………… 44,500
Cost of goods sold …………………………………………………………… 21,050
Gross Profit ………………………………………………………………………… P 13,650
Expenses …………………………………………………………………………… 9,325
Net income from own operations ……………………………………………. P 4,225
Deduct branch net loss ………………………………………………………… 560
Total Income …………………………………………………………………… P 3,665

EAGLE CO.
Income Statement for Home Office
For Month Ended January 31, 20x4
Assets Liabilities’ and Stockholders’ Equity
Liabilities
Cash …………………………….. ………. P 10,200 Accounts Payable …… P30,700
Accounts receivable ……….. P38,450 Accrued Expenses …… 1,100 P 31,800
Less allow for doubt-
Ful accounts ……….. 1,050 37,400
Merchandise Inventory ……………….. 54,900 Stockholders Equity
Store furn. & fixtures ………… P15,900 Capital Stocks …………P50,000
Less accum depr 4,735 11,165 Retained earnings …… 31,865 81,865
Total assets ……………………………… P113,665 Total liab. And stockholders’ equity . P113,665

EAGLE CO.
Combined Income Statement for Home Office and Branch
For Month Ended January 31, 20x4

Sales ………………………………………………………………………………….. P 40,800

Cost of goods sold:
Merchandise Inventory, January 1 ………………. P46,000
Purchases ……………………………………………... 34,600
Merchandise available for sale …………………... P80,600
Less merchandise inventory, Jan 31 ……………... 54,900
Cost of goods sold …………………………………............................... 25,700
Gross profit …………………………………………………………………………... P 15,100
Expenses ……………………………………………………………………………… 11,435
Net Income ………………………………………………………………………….. P 3,665

EAGLE CO.
Combined Balance Sheet
January 31, 20x4
Assets
Cash ……………………………………………………… Chapter 12
Problem I
(a)Working Fund – Agency ……………………………… ……………………….. 5,000
Cash …………………………………………………………………………. 5,000
(b)Accounts Receivable …………………………………..................................... 50,000
Sales-Agency ………………………………………………………………. 50,000
(c)Cash ………………………………………………………..................................... 35,000
Accounts Receivable …………………………………………………….. 35,000

(d)Expenses-Agency ……………………………………………………………….. 4,500

Cash …………………………………………………………………………. 4,500

(e)Expenses-Agency ……………………………………………………………….. 2,250

Cash …………………………………………………………………………. 2,250

(f) Cost of Goods Sold-Agency …………………………………………………… 36,000

Merchandise Inventory - Agency ……………… 1,400

Income Summary ………………………………………………….. 1,400

Branch Income …………………………………………… 1,400

Income Summary ………………………………………………….. 12,050

Retained Earnings ……………………………………….. 12,050

Problem III
Journal and Adjusting Entries – Home Office and Branch
Home Office Books Branch Books
INTERCOMPANY / INTER-OFFICE Transactions
1/1 a Branch Current . . . . . . . 1,500 Cash . . . . . . . . . . . . . . . . . . . . . . 1,500
Cash . . . . . . . . . . . . . . . 1,500 Home Office Current. . . . . . 1,500
b Shipment to branch, cost 10,200 Home Office Current . . . . . . . . 10,200
Branch Current . . . . . . 10,200 Shipments from Home Office 10,200
c SFF - Branch 3,000 No entry – eqpt accounts
Store Furniture & Fixt 3,000 maintained in the HO books
Acc. Depreciation – SFF 750 No entry – eqpt accounts
Acc. Deprec. SFF – Br. 750 maintained in the HO books
P3,000 x 10% x 2.5 yrs

SFF – Branch . . . . . . . . . . 900 Home Office Current . . . . . . . . 900

Branch Current . . . . . . 900 Cash . . . . . . . . . . . . . . . . . . . 900
(a) ……… P111,765
(b)
(c) Liabilities
(d)
(e) Accounts Payable …………………………………………….. P29,150
(f) Accrued Expenses …………………………………………….. 750
(g) Total Liabilities ………………………………………………….. P29,900
(h) Stockholders’ Equity
(i)
(j) Capital Stock …………………………………………………… P50,000
(k) Retained earnings …………………………………………….. 31,865
(l) Total stockholder’s equity …………………………………… 81,865
(m) Total liabilities and stockholders’ equity …………………… P111,765
(n)
(o) EAGLE CO.
(p) Income Statement for Home Office
(q) For Month Ended January 31, 20x4
(r)
(s) Sales ……………………………………………………………………………… P 34,600
(t) Cost of goods sold:
(u) Merchandise inventory, January 1 …………………….. P46,000
(v) Purchases …………………………………………………… 31,600
(w) Merchandise available for sale ………………………… 77,600
(x) Less shipments to branch ………………………………… 12,050
(y) Merchandise available for own sales …………………. P65,550
(z) Less merchandise inventory, January 31 ……………… 44,500
(aa) Cost of goods sold …………………………………………………………… 21,050
(bb) Gross Profit ………………………………………………………………………… P 13,650
(cc) Expenses …………………………………………………………………………… 9,325
(dd) Net income from own operations ……………………………………………. P 4,225
(ee) Deduct branch net loss ………………………………………………………… 560
(ff) Total Income …………………………………………………………………… P 3,665
(gg) EAGLE CO.
(hh) Income Statement for Home Office
(ii) For Month Ended January 31, 20x4
(jj) Assets Liabilities’ and Stockholders’ Equity
(kk) Liabilities
(ll) Cash …………………………….. ………. P 10,200 Accounts Payable …… P30,700
(mm) Accounts receivable ……….. P38,450 Accrued Expenses …… 1,100 P
31,800
(nn) Less allow for doubt-
(oo) Ful accounts ……….. 1,050 37,400
(pp) Merchandise Inventory ……………….. 54,900 Stockholders Equity
(qq) Store furn. & fixtures ………… P15,900 Capital Stocks …………P50,000
(rr) Less accum depr 4,735 11,165 Retained earnings …… 31,865 81,865
(ss) Total assets ……………………………… P113,665 Total liab. And stockholders’ equity .
P113,665
(tt)
(uu)
(vv) EAGLE CO.
(ww) Combined Income Statement for Home Office and Branch
(xx) For Month Ended January 31, 20x4
(yy)
(zz) Sales ………………………………………………………………………………….. P 40,800
(aaa) Cost of goods sold:
(bbb) Merchandise Inventory, January 1 ………………. P46,000
(ccc) Purchases ……………………………………………... 34,600
(ddd) Merchandise available for sale …………………... P80,600
(eee) Less merchandise inventory, Jan 31 ……………... 54,900
(fff) Cost of goods sold …………………………………............................... 25,700
(ggg) Gross profit …………………………………………………………………………... P
15,100
(hhh) Expenses ………………………………………………………………………………
11,435
(iii) Net Income ………………………………………………………………………….. P 3,665
(jjj)
(kkk) EAGLE CO.
(lll) Combined Balance Sheet
(mmm) January 31, 20x4
(nnn) Assets
 (ooo) Cash ……………………………………………………… Chapter 12
(ppp)
(qqq) Problem I
(rrr) (a)Working Fund – Agency ……………………………………………………….. 5,000
(sss) Cash ………………………………………………………………………….
5,000
(ttt) (b)Accounts Receivable …………………………………..................................... 50,000
(uuu) Sales-Agency ……………………………………………………………….
50,000
(vvv)
(www) (c)Cash ………………………………………………………..................................... 35,000
(xxx) Accounts Receivable ……………………………………………………..
35,000
(yyy)
(zzz) (d)Expenses-Agency ……………………………………………………………….. 4,500
(aaaa) Cash ………………………………………………………………………….
4,500
(bbbb)
(cccc) (e)Expenses-Agency ……………………………………………………………….. 2,250
(dddd) Cash ………………………………………………………………………….
2,250
(eeee)
(ffff) (f) Cost of Goods Sold-Agency …………………………………………………… 36,000
(gggg) Merchandise Inventory - Agency ……………… 1,400
(hhhh)
(iiii)Income Summary ………………………………………………….. 1,400
(jjjj) Branch Income …………………………………………… 1,400
(kkkk)
(llll)Income Summary ………………………………………………….. 12,050
(mmmm) Retained Earnings ………………………………………..
12,050
(nnnn)
(oooo) Problem III
(pppp) Journal and Adjusting Entries – Home Office and Branch

Home Office Books Branch Books

INTERCOMPANY / INTER-OFFICE Transactions
1/1 a Branch Current . . . . . . . 1,500 Cash . . . . . . . . . . . . . . . . . . . . . . 1,500
Cash . . . . . . . . . . . . . . . 1,500 Home Office Current. . . . . . 1,500
b Shipment to branch, cost 10,200 Home Office Current . . . . . . . . 10,200
Branch Current . . . . . . 10,200 Shipments from Home Office 10,200
c SFF - Branch 3,000 No entry – eqpt accounts
Store Furniture & Fixt 3,000 maintained in the HO books
Acc. Depreciation – SFF 750 No entry – eqpt accounts
Acc. Deprec. SFF – Br. 750 maintained in the HO books
P3,000 x 10% x 2.5 yrs

SFF – Branch . . . . . . . . . . 900 Home Office Current . . . . . . . . 900

Branch Current . . . . . . 900 Cash . . . . . . . . . . . . . . . . . . . 900
(qqqq) ……… P111,765
(rrrr)
(ssss) Liabilities
(tttt)
(uuuu) Accounts Payable …………………………………………….. P29,150
(vvvv) Accrued Expenses …………………………………………….. 750
(wwww)Total Liabilities …………………………………………………..
P29,900
(xxxx) Stockholders’ Equity
(yyyy)
(zzzz) Capital Stock …………………………………………………… P50,000
(aaaaa) Retained earnings …………………………………………….. 31,865
(bbbbb) Total stockholder’s equity …………………………………… 81,865
(ccccc) Total liabilities and stockholders’ equity …………………… P111,765
(ddddd)
(eeeee) EAGLE CO.
(fffff) Income Statement for Home Office
(ggggg) For Month Ended January 31, 20x4
(hhhhh)
(iiiii) Sales ……………………………………………………………………………… P
34,600
(jjjjj) Cost of goods sold:
(kkkkk) Merchandise inventory, January 1 …………………….. P46,000
(lllll) Purchases …………………………………………………… 31,600
(mmmmm) Merchandise available for sale ………………………… 77,600
(nnnnn) Less shipments to branch ………………………………… 12,050
(ooooo) Merchandise available for own sales …………………. P65,550
(ppppp) Less merchandise inventory, January 31 ……………… 44,500
(qqqqq) Cost of goods sold ……………………………………………………………
21,050
(rrrrr) Gross Profit ………………………………………………………………………… P
13,650
(sssss) Expenses ……………………………………………………………………………
9,325
(ttttt) Net income from own operations ……………………………………………. P 4,225
(uuuuu) Deduct branch net loss ………………………………………………………… 560
(vvvvv) Total Income …………………………………………………………………… P 3,665
(wwwww) EAGLE CO.
(xxxxx) Income Statement for Home Office
(yyyyy) For Month Ended January 31, 20x4
(zzzzz) Assets Liabilities’ and Stockholders’ Equity
(aaaaaa) Liabilities
(bbbbbb) Cash …………………………….. ………. P 10,200 Accounts Payable …… P30,700
(cccccc) Accounts receivable ……….. P38,450 Accrued Expenses …… 1,100 P
31,800
(dddddd) Less allow for doubt-
(eeeeee) Ful accounts ……….. 1,050 37,400
(ffffff) Merchandise Inventory ……………….. 54,900 Stockholders
Equity
(gggggg) Store furn. & fixtures ………… P15,900 Capital Stocks …………P50,000
(hhhhhh) Less accum depr 4,735 11,165 Retained earnings …… 31,865
81,865
(iiiiii) Total assets ……………………………… P113,665 Total liab. And stockholders’ equity .
P113,665
(jjjjjj)
(kkkkkk)
(llllll) EAGLE CO.
(mmmmmm) Combined Income Statement for Home Office and Branch
(nnnnnn) For Month Ended January 31, 20x4
(oooooo)
(pppppp) Sales …………………………………………………………………………………..
P 40,800
(qqqqqq) Cost of goods sold:
(rrrrrr) Merchandise Inventory, January 1 ………………. P46,000
(ssssss) Purchases ……………………………………………... 34,600
(tttttt) Merchandise available for sale …………………... P80,600
(uuuuuu) Less merchandise inventory, Jan 31 ……………... 54,900
(vvvvvv) Cost of goods sold …………………………………...............................
25,700
(wwwwww) Gross profit …………………………………………………………………………...
P 15,100
(xxxxxx) Expenses ………………………………………………………………………………
11,435
(yyyyyy) Net Income …………………………………………………………………………..
P 3,665
(zzzzzz)
(aaaaaaa) EAGLE CO.
(bbbbbbb) Combined Balance Sheet
(ccccccc) January 31, 20x4
(ddddddd) Assets

(eeeeeee) Cash ……………………………………………………… Chapter 12

(fffffff)
(ggggggg) Problem I
(hhhhhhh) (a)Working Fund – Agency ……………………………… ………………………..
5,000
(iiiiiii) Cash ………………………………………………………………………….
5,000
(jjjjjjj) (b)Accounts Receivable …………………………………..................................... 50,000
(kkkkkkk) Sales-Agency ……………………………………………………………….
50,000
(lllllll)
(mmmmmmm) (c)Cash ……………………………………………………….....................................
35,000
(nnnnnnn) Accounts Receivable ……………………………………………………..
35,000
(ooooooo)
(ppppppp) (d)Expenses-Agency ………………………………………………………………..
4,500
 (qqqqqqq) Cash ………………………………………………………………………….
4,500
(rrrrrrr)
(sssssss) (e)Expenses-Agency ……………………………………………………………….. 2,250
(ttttttt) Cash ………………………………………………………………………….
2,250
(uuuuuuu)
(vvvvvvv) (f) Cost of Goods Sold-Agency ……………………………………………………
36,000
(wwwwwww) Merchandise Inventory - Agency ……………… 1,400
(xxxxxxx)
(yyyyyyy) Income Summary ………………………………………………….. 1,400
(zzzzzzz) Branch Income ……………………………………………
1,400
(aaaaaaaa)
(bbbbbbbb) Income Summary ………………………………………………….. 12,050
(cccccccc) Retained Earnings ………………………………………..
12,050
(dddddddd)
(eeeeeeee) Problem III
(ffffffff) Journal and Adjusting Entries – Home Office and Branch

Home Office Books Branch Books

INTERCOMPANY / INTER-OFFICE Transactions
1/1 a Branch Current . . . . . . . 1,500 Cash . . . . . . . . . . . . . . . . . . . . . . 1,500
Cash . . . . . . . . . . . . . . . 1,500 Home Office Current. . . . . . 1,500
b Shipment to branch, cost 10,200 Home Office Current . . . . . . . . 10,200
Branch Current . . . . . . 10,200 Shipments from Home Office 10,200
c SFF - Branch 3,000 No entry – eqpt accounts
Store Furniture & Fixt 3,000 maintained in the HO books
Acc. Depreciation – SFF 750 No entry – eqpt accounts
Acc. Deprec. SFF – Br. 750 maintained in the HO books
P3,000 x 10% x 2.5 yrs

SFF – Branch . . . . . . . . . . 900 Home Office Current . . . . . . . . 900

Branch Current . . . . . . 900 Cash . . . . . . . . . . . . . . . . . . . 900
(gggggggg) …………………………. 42,500
Cash ……………………………………………………. 42,500

(hhhhhhhh) Branch ……………………………………………………… 50,200

Shipments to Branch ……………………………….. 50,200

(iiiiiiii) Accounts Receivable …………………………………... 105,000

Sales …………………………………………………… 105,000

(jjjjjjjj) Purchases …………………………………………………. 122,500

Accounts Payable …………………………………. 122,500

(kkkkkkkk) Cash ……………………………………………………….. 113,600

Accounts Receivable ……………………………… 113,600

(llllllll) Accounts Payable ………………………………………. 124,000

Cash …………………………………………………… 124,000
 (mmmmmmmm) Expenses …………………………………………………… 26,600
Cash …………………………………………………… 26,600

(nnnnnnnn) Cash ……………………………………………………….. 53,400

Branch ………………………………………………... 53,400

(oooooooo) Retained Earnings ………………………………………. 10,000

Cash …………………………………………………... 10,000

BARTON CO.
Balance Sheet for Branch
December 31, 20x4

Assets Liabilities

Cash …………………………… P 4,250 Accounts Payable ………… P 10,250

Accounts Receivable ……… 12,600 Accrued Expenses …………… 300
Merchandise Inv……………... 23,500 Home Office ………………….. 37,900
Prepaid Expenses …………… 750
Furnitures & Fixtures …. P 8,000
Less accum. Depr …… 650 7,350
Total Assets …………………… P48,450 Total Liabilities ………………….P48,450

BARTON CO.
Income Statement for Branch
For Year Ended December 31, 19X6

Sales …………………………………………………………………………… P66,000

Cost of Goods Sold:
Purchases …………………………………………………………… P22,500
Shipments for home office ………………………………………. 50,200
Merchandise available for sale ………………………………… P72,700
Less merchandise inv, December 31 ………………………….. 23,500
Cost of Goods Sold ……………………………………………….. 49,200
Gross Profit ……………………………………………………………………. P16,800
Expenses ……………………………………………………………………… 18,200
Net loss ………………………………………………………………………... P 1,400
BARTON CO.
Income Statement for Branch
For Year Ended December 31, 20x4

Assets Liabilities & Stockholders’ Equity

Cash …………………………….. P 23,200 Liabilities

Accounts Receivable ……….. 19,050 Accounts payable ………… P 21,300
Merchandise Inventory……… 48,500 Accrued Expenses …………. 1,350 P22,650
Prepaid Expenses ……………. 2,050 Stockholders Equity
Furniture & Fixtures …. P 20,000 Capital stock, P20 par……… P50,000
Less accum. Depr….. 5,580 14,420 Retained Earnings …………. 72,740 122,470
Branch ………………………… 37,900 Total liabilities and stockholders’
Total Assets …………………... P145,120 equity ………………… P145,120

BARTON CO.
Income Statement for Home Office
 For Year Ended December 31, 20x4

Sales ……………………………………………………………………………....... P105,000

Cost of goods sold:
Merchandise inventory, January 1 …………………………………. P 40,120
Purchases ………………………………………………………………... 122,500
Merchandise available for sale ……………………………………… P162,620
Less shipments to branch ……………………………………………... 50,200
Merchandise available for own sale ……………………………….. P112,420
Less merchandise inventory, December 31 ………………………. 48,500
Cost of Goods Sold ……………………………………………………. 63,920
Gross Profit ………………………………………………………………………… P 41,080
Expenses …………………………………………………………………………… 27,630
Net income from own operations …………………………………………….. P 13,450
Deduct branch net loss …………………………………………………………. 1,400
Total Income ………………………………………………………………………. P 12,050

BARTON CO.
Income Statement for Home Office
For Year Ended December 31, 20x4

Sales …………………………………………………………………………………. P171,000

Cost of goods sold:
Merchandise inventory, January 1 ………………………………….. P 40,120
Purchases ………………………………………………………………… 145,000
Merchandise available for sale ……………………………………… P185,120
Less merchandise inventory, December 31 ……………………….. 72,000
Cost of goods sold ………………………………………………………. 113,120
Gross profit ………………………………………………………………………….. P 57,880
Expenses …………………………………………………………………………….. 45,830
Net Income …………………………………………………………………………. P 12,050

(a) Branch Books:

Expenses ………………………………………………………………. 650
Accumulated Depreciation – F&F………………………. 650
Sales …………………………………………………………………… 66,000
Merchandise Inventory ……………………………………………. 23,500
Income summary ………………………………………….. 89,500

Income Summary …………………………………………………… 90,900

Shipments from Home Office …………………………… 50,200
Purchases …………………………………………………… 22,500
Expenses …………………………………………………….. 18,200

Home Office ………………………………………………………… 1,400

Income Summary ………………………………………… 1,400

(b) Home Office Books

Expenses ………………………………………………………………. 1,180
Accumulated Depreciation – F&F………………………. 1,180

Sales …………………………………………………………………… 105,000

Merchandise Inventory ……………………………………………. 48,500
Shipments to Branch ……………………………………………….. 50,200
 Income summary ………………………………………….. 203,700

Income Summary …………………………………………………… 190,250

Merchandise Inventory …………………………………… 40,120
Purchases ……………………………………………………. 122,500
Expenses …………………………………………………….. 27,630

Branch Income ……………………………………………………… 1,400

Branch ………………………………………………………. Cash

Less merchandise inventory, December 31 ………………………. 48,500

Cost of Goods Sold ……………………………………………………. 63,920
Gross Profit ………………………………………………………………………… P 41,080
Expenses …………………………………………………………………………… 27,630
Net income from own operations …………………………………………….. P 13,450
Deduct branch net loss …………………………………………………………. 1,400
Total Income ………………………………………………………………………. P 12,050

BARTON CO.
Income Statement for Home Office
For Year Ended December 31, 20x4

Sales …………………………………………………………………………………. P171,000

Cost of goods sold:
Merchandise inventory, January 1 ………………………………….. P 40,120
Purchases ………………………………………………………………… 145,000
Merchandise available for sale ……………………………………… P185,120
Less merchandise inventory, December 31 ……………………….. 72,000
Cost of goods sold ………………………………………………………. 113,120
Gross profit ………………………………………………………………………….. P 57,880
Expenses …………………………………………………………………………….. 45,830
Net Income …………………………………………………………………………. P 12,050

(c) Branch Books:

Expenses ………………………………………………………………. 650
Accumulated Depreciation – F&F………………………. 650
Sales …………………………………………………………………… 66,000
Merchandise Inventory ……………………………………………. 23,500
Income summary ………………………………………….. 89,500

Income Summary …………………………………………………… 90,900

Shipments from Home Office …………………………… 50,200
Purchases …………………………………………………… 22,500
Expenses …………………………………………………….. 18,200

Home Office ………………………………………………………… 1,400

Income Summary ………………………………………… 1,400

(d) Home Office Books

Expenses ………………………………………………………………. 1,180
Accumulated Depreciation – F&F………………………. 1,180

Sales …………………………………………………………………… 105,000

 Merchandise Inventory ……………………………………………. 48,500
Shipments to Branch ……………………………………………….. 50,200
Income summary ………………………………………….. 203,700

Income Summary …………………………………………………… 190,250

Merchandise Inventory …………………………………… 40,120
Purchases ……………………………………………………. 122,500
Expenses …………………………………………………….. 27,630

Branch Income ……………………………………………………… 1,400

Branch ……………………………………………………….
…………………………………………..................................... 35,000
Accounts Receivable …………………………………………………….. 35,000

(d)Expenses-Agency ……………………………………………………………….. 4,500

Cash …………………………………………………………………………. 4,500

(e)Expenses-Agency ……………………………………………………………….. 2,250

Cash …………………………………………………………………………. 2,250

(f) Cost of Goods Sold-Agency …………………………………………………… 36,000

Merchandise Inventory - Agency ………………………………………. 36,000

2.
Sales……………………………………………………………………………….P 50,000
Less: CGS………………………………………………………………………… 36,000
GP………………………………………………………………………………….P 14,000
Less: Expenses (P4,500 + P2,250)…………………………………………….. 6,750
Net income – agency………………………………………………………….P 7,250

Problem II
(c) Branch Books:

(m) Cash ………………………………………………………….. 42,500

Home Office …………………………………………… 42,500

(n) Shipments from Home Office …………………………… 50,200

Home Office …………………………………………... 50,200

(o) Accounts Receivable ……………………………………. 60,000

Sales …………………………………………………….. 60,000

(p) Purchases …………………………………………………… 22,500

Accounts Payable …………………………………… 22,500

(q) Home Office ……………………………………………….. 53,400

Accounts Receivable ………………………….. 53,400

(r) Accounts Payable ………………………………………... 12,250

Cash …………………………………………………….. 12,250

(s) Furniture & Fixtures ………………………………………… 8,000

Cash …………………………………………………….. 8,000
 (t) Expenses …………………………………………………….. 18,000

Chapter 12
Problem I
(a)Working Fund – Agency ……………………………… ……………………….. 5,000
Cash …………………………………………………………………………. 5,000
(b)Accounts Receivable …………………………………..................................... 50,000
Sales-Agency ………………………………………………………………. 50,000

(c)Cash ………………………………………………………..................................... 35,000

Accounts Receivable …………………………………………………….. 35,000

(d)Expenses-Agency ……………………………………………………………….. 4,500

Cash …………………………………………………………………………. 4,500

(e)Expenses-Agency ……………………………………………………………….. 2,250

Cash …………………………………………………………………………. 2,250

(f) Cost of Goods Sold-Agency …………………………………………………… 36,000

Merchandise Inventory - Agency ………………………………………. 36,000

2.
Sales……………………………………………………………………………….P 50,000
Less: CGS………………………………………………………………………… 36,000
GP………………………………………………………………………………….P 14,000
Less: Expenses (P4,500 + P2,250)…………………………………………….. 6,750
Net income – agency………………………………………………………….P 7,250

Problem II
(d) Branch Books:

(u) Cash ………………………………………………………….. 42,500

Home Office …………………………………………… 42,500

(v) Shipments from Home Office …………………………… 50,200

Home Office …………………………………………... 50,200

(w) Accounts Receivable ……………………………………. 60,000

Sales …………………………………………………….. 60,000

(x) Purchases …………………………………………………… 22,500

Accounts

Problem V
((a) BRANCH HOME OFFICE
ACCOUNT ACCOUNT…
Balances before Adjustments ……………………………………….. P 8,400 P 9,735
Adjustments:
Additions:
Merchandise in transit to branch …………………. 615
Collection of Home office receivable by Branch 2,500
Understatement of branch net income for Nov.. 90
P10,990 P10,350
 Deductions:
Merchandise return to home office in transit ……………. 640
Corrected Balances ……………………………………………… P10,350 P10,350

(b) Branch Books:

Shipments from Home Office-in Transit ……………………. 615
Home Office …………………………………………... 615

Home Office Books:

Branch …………………………………………………………… 2,500
Accounts Receivable ……………………………….. 2,500

Branch …………………………………………………………… 90
Retained Earnings ……………………………………. 90

Merchandise Returns from Branch – in Transit ……………. 640

Branch ………………………………………………….. 640

Problem VI
1.
Branch Home office
Account Account
Balances before adjustments P 77,150 P 56,450
Adjustments:
Additions:
Advertising charged to branch but not yet recorded on branch
books 600
Merchandise in transit to branch but not yet shown on branch
books 4,400
Collection of home office account by branch not yet recorded by
home office ____750 _______
P77,900 P61,450
Deductions:
Overstatement of branch profit for 20x0 on home office books
540
Cash in transit to home office but not yet shown on home office
books 16,000
Overstatement of charge for merchandise from home office on
branch books (home office shipped 200 units @ P37.85, or
P7,570, and 200 units @ P44,95, or P8,990, a total of P16,560;
branch erroneously recorded shipment at P16,650, an
overstatement of P90
_______ ___90
Corrected balances P 61360 P 61,360

2. Home office books:

Jan. 31 Retained Earnings 540
Wilshire Branch 540

31 Cash in Transit 16,000

Wilshire Branch 16,000

31 Wilshire Branch 750

 Accounts Receivable 750

Branch Books:
Jan. 31 Advertising Expense 600
Home Office 600

31 Shipments from Home Office – In Transit 4,400

Home Office 4,400

31 Home Office 90
Shipments from Home Office 90

Problem VII
1.
Branch Home Office
Account Account
Balances before adjustments P 59,365 P 57,525
Adjustments:
Additions:
Corrected branch income for January (P1,440 – P215)
1,225