HO Branch

ACTIVITY TO BE SUBMITTED
HOME OFFICE AND BRANCH

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After year-end adjustments but before elimination entries, the balance in the
“allowance for mark-up on shipments to branch”
is equal to zero
represents the realized mark-up
represents the unrealized mark-up
represents profit
When shipments to branch are billed at other than cost, the individual profit
of the branch is not equal to its true profit. The difference pertains to the
unrealized mark-up c. realized mark-up
total mark-up d. errors committed
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.
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
How much is the true profit of the branch?
a. 8,000
b. 9,000
c. 12,000
d. 14,000
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
The combined profit of the entity is equal
to the individual profits of the home office and the branch.
to the individual profits of the home office and the branch after eliminating
any unrealized mark-up during the period.
to the individual profit of home office plus the true profit of the branch.
to the true profit of the home office plus its share in the profit of the branch.
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
Inventory on hand, Dec. 31; 80% from home office 30,000
Remittance to home office 55,000
How much is the branch inventory at cost?
a. 26,000
b. 20,000
c. 22,000
d. 23,000
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
Excess freight on inter-branch transfers of merchandise is
charged as expense in the home office books.
recorded as freight-in in the books of the recipient branch.
charged as expense in the books of the recipient branch.
not recorded.
Freight savings on inter-branch transfers of merchandise is
recognized as gain in the home office books.
recorded as a reduction to the cost of shipments.
recognized as gain in the transferring branch’s books.
not recorded.
APC Marketing operates a branch in Makati. On October 31, 2015, the
branch current account had a balance of P300,000. In the process of
reconciling current accounts, the following items that follow were noted:
The home office had billed the branch P75,000 for merchandise shipment
still in transit as of October 31.
The home office customer’s account for P21,000 collected by the branch on
October 26 has not been reported to the home office.
The branch failed to recognize its 5,000 share of advertising expense paid
for by the home office
The branch reported a net income of P43,500 during the fiscal period then
ended; this was erroneously taken up as P45,500 by the home office
Assuming that all other transactions related to the home office and its
branch are correctly recorded, the adjusted balance of the reciprocal
current accounts as of October 31, 2015 was
P300,000
P314,000
P319,000
P323,000
On December 3, 2008, the home office of Kathy Office supply company
recorded a shipment or merchandise to its Davao branch as follows:
Davao Branch 39,000
Shipments to branch 32,500
Unrealized profit in Branch inventory 5,200
Cash (for freight charges) 1,300
The Davao branch sells 40% of the merchandise to outside entities during
the rest of December 2008. The books of the home office and Kathy office
supply are closed on December 31, of each year.
On January 5, 2009, the Davao branch transfers half of the original shipment
to the Baguio branch, and the Davao branch pays P650 as the shipment.
What amounts should the 60% of the merchandise remaining unsold
at December 31, 2008 be included in (1) the inventory of the Davao
branch at December 31, 2008.
P20,280
22,620
23,400
23,920
What amount should the 60% of the merchandise remaining unsold at
December 31, 2008 be included in the published balance sheet of
Kathy office supply at December 31, 2008 shows inventory at
19,500
20,230
20,800
23,400
The following information was taken from the records of a branch:

Sales by branch 2,800,000
Shipment from home 2,500,000
office
Operating expenses 400,000
Ending inventory at 1,000,000
billed price
The following information was taken from the records of the home office:
Branch current 2,600,000
account
Shipments to branch 2,000,000
Allowance for markup 500,000
- Unadjusted
What is the billing rate based on cost?
20%
25%
120%
125%
How much is the realized markup of the branch?
300,000
240,000
380,000
270,000
How much is the cost of goods sold of the branch to be included in the
combined financial statements?
1,500,000
1,800,000
1,200,000
900,000
How much is the ending inventory of the branch to be included in the
combined financial statements?
1,000,000
8333,333
1,250,000
800,000
How much is the unrealized markup in ending inventory?
a. 200,000
b. 166,667
c. 230,000
d. 266,667
How much is the true profit of the branch?
a. 1,200,000 c. 1,250,000
b. 1,400,000 d. 1,266,667
How much is the adjusted balance of the branch current account
immediately prior to combining the financial statements?
a. 3,200,000 c. 3,500,000
b. 3,400,000 d. 3,666,667
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ACTIVITY TO BE SUBMITTED

HOME OFFICE AND BRANCH

The following information was taken from the records of a branch:

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