Dela Cruz Ac15

DELA CRUZ, JAYPEE P.
ADVANCED ACCOUNTING 2
CBET-01-602P
AC15 FINAL REQUIREMENT
Home Office and Branch Accounting
1. Brew Corporation operates a number of branches in the provinces. On December 31,
2020, its Bulacan branch showed a Home Office account balance of P54,700 and the
home office books showed an Investment in Bulacan Branch account balance +of
P51,100. The following information may help in reconciling both accounts:
1. A P24,000 shipment, charged by Home Office to Bulacan Branch, was actually
sent to and retained by Bataan Branch.
2. A P30,000 shipment, intended and charged to Pampanga Branch was shipped
to Bulacan Branch and retained by the latter.
3. A P4,000 emergency cash transfer from Bataan Branch was not taken up
in the Home Office books.
4. Home office collects a Bulacan Branch accounts receivable of P7,200 and
fails to notify the branch.
5. Home office was charged for P2,400 for merchandise returned by
Bulacan Branch on December 30. The merchandise is in transit.
Home office erroneously recorded Bulacan Branch’s net income for 2020 at P32,550. The
branch reported a net income of P25,350.
What is the adjusted balances of the Home Office and Davao Branch reciprocal accounts
on December 31, 2020?
a. P40,300 c. P47,500
b. P54,700 d. 43,500
2. The Cocoa Corporation decided to establish a branch in Manila. The total amount of
merchandise shipped to the branch was P54,000, which included a 20% cost mark-up.
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, 2020.
Sales on account P74,000
Sales on Cash basis 22,000
Collections of account 60,000
Expenses paid 38,000
Expenses unpaid 12,000
Purchase of merchandise for cash 26,000
Inventory on hand, December 31; 80% from home office 30,000
Remittance to home office 55,000
The branch 12/31 inventory at cost and the branch net income (loss) as far as the home
office is concerned are:
Branch Inventory at Cost Branch Net income(loss)
a. P26,000 (P1,000)
b. P25,000 (P4,000)
c. P26,000 P1,000
d. P20,000 P 800
3. The branch manager of Kylie-Kyrie Cosmetics in Cebu submitted a report as of

May 31, 2020 containing the following information:
Petty Cash Fund P1,500
Sales 198,720
Sales Returns 3,600
Accounts Written Off 1,920
Shipments from Home Office 136,080
Accounts Receivable – May 31, 2019 43,800
Accounts Receivable – May 31, 2020 49,140
Inventory – May 31, 2019 37,170
Inventory – May 31, 2020 41,370
Expenses (reimbursed by H.O.) 57,930
Assuming all cash collected by the branch is remitted to Kylie-Kyrie Cosmetics home office, the
remittances for the period amounted to:
a. P187,860 c. P195,120
b. P189,780 d. P198,720
4. Balenciaga, Philippines has two merchandise outlets, its Home Office in Manila and
its Cebu City branch. For control purposes, all purchases are made by the Home Office
and shipped to the Cebu City branch at cost plus 10%. On January 1, 2020 the
inventories of the Home Office in Manila and the Cebu City branch are P13,600 and
P3,960 respectively. During 2020 the Home Office purchased merchandise costing
P40,000 and shipped 40% of it to the Cebu City branch. At December 31, 2020, the
following journal entry to prepare the books for the next accounting period was
prepared by the branch:
Sales 32,000
Inventory, December 31 4,840
Inventory, January 1 3,960
Shipments from main store 17,600
Expenses 10,480
Home Office 4,800
What was the actual branch income for 2020 on a cost basis assuming the use of the
provisions of the Statement of Financial Accounting Standards?
a. P4,800 c. P6,480
b. P6,320 d. P6,840
ANSWERS AND SOLUTIONS
1. c. 47,500
Home Office Account Investment in Branch
Account
Unadjusted balances, Dec.31,2020 P54,700 P51,1100
Add(deduct) the following adjustments:
1. shipment charged to Bulacan branch but
actually sent to Bataan branch (24,000)
2. shipment charged to Pampanga branch but
actually sent to Bulacan branch 30,000
3. no effect
4. Merchandise returned by Bulacan
branch accounts receivable (7,200)
5. merchandise returned by Bulacan branch
still in transit to home office (2,400)
6. overstatement of Bulacan branch
net income (P32,550-P25,350) (7,200)
Adjusted balances, Dec.31,2020 P47,500 P47,500
2. c. 26,000 & 1,000

Acquired from HO (80% x P30,000 ) / 120% P20,000
Add: Acquired from outsiders (20% x P30,000) 6,000
Branch inventory at cost, 12/31 P26,000
Sales (P74,000 + P22,000) P96,000

Cost of sales insofar as Home office is concerned
Shipment from HO, at cost(P54,000/120%) P45,000
Purchases 26,000
Cost of goods available for sale 71,000
Inventory, at cost 12/31: 26,000 45,000
Gross profit P51,000
Expenses (P38,000+P12,000) 50,000
Branch net income insofar as Home office is concerned P1,000
3. a. P187,860
Accounts receivable, 5/31/12 P43,800
Net sales (P198,720 – P3,600) 195,120
Total P238,920
Less: Accounts receivable, 5/31/120 P49,140
Accounts written off 1,920 51,060
Remittance P187,860
4. b. P6,320
Sales P32,000
Cost of sales
Inventory, Jan. 1 P3,960
Shipment from home office 17,600
Inventory, dec. 31 (4,840) 16,720
Gross profit P15,280
Expenses 10,480
Net income per branch books P4,800
Add: overvaluation of COS
Billed price (above) 16,720
Cost to HO (16,720/110%) 15,200 1,520
Actual branch income at cost basis P6,320
Financial Currency and Translation
1. On January 1, 2021, Pegler Corporation, a US company, acquired 100% of Selmic
Corporation of Canada, paying an excess of 90,000 Canadian dollars over the book value
of Selmic’s net assets. The excess was allocated to undervalued equipment with a three-
year remaining useful life. Selmic’s functional currency is the Canadian dollar. Exchange
rates for Canadian dollars for 2021 are:
January 1, 2021 $.77
Average rate for 2021 .75
December 31, 2021 .73
Determine the depreciation expense stated in US dollars on the excess allocated to
equipment for 2021.
a. 20,000 c. 22,500
b. 23,000 d. 19,000
2. Using the same information in no. 1, determine the unamortized excess allocated to
equipment on December 31, 2021.
a. 43,800 c. 42,200
b. 41,500 d. 40,100
3. Using the same information in no. 1, if Selmic’s functional currency was the US dollar,
what would be the depreciation expense on the excess allocated to the equipment for
2021?
a. 69,300 c. 45,500
b. 23,100 d. 33,100
ANSWERS AND SOLUTIONS

1. c. 22,500
Depreciation expense in 2021
$90,000/3 years x $.75= $22,500 depreciation expense
2. a. 43,800
Unamortized excess at December 31, 2021
$90,000 x 2/3 x $.73 = $43,800 unamortized excess on equipment
3. b. 23,100
Remeasured depreciation expense
$90,000 x $.77= $69,300 excess
$69,300/3 years = $23,100 depreciation expense
Derivatives and Hedge Accounting

1. On Dec. 15, 2020, Zeus Co. purchased goods from Korean firm for 10,000 wons. Zeus Co.
was concerned about the fluctuation in the Korean won, so in this date, Zeus Co.
entered into a 30-day forward contract to buy 10,000 wons for P12,400 from a bank at
the forward rate of P1.24.
Relevant rates are shown below:
Dec.15,2020 Dec.31,2020 Jan.15,2021
Spot Rate 1.20 1.26 1.30
Forward Rate 1.24 1.27 1.30
What will be the journal entries on December 1, 2020?
Hedge item- Accts.Payable Hedging Instrument-Forward Contract
a. Inventory 12,400 No Entry
Accts. Payable 12,400
b. Inventory 12,000 No Entry
c. No Entry Forward Contract 12,400
d. No Entry No Entry
2. On Dec. 15, 2020, Groo Co. sold goods to a Japanese firm for 1,000,000 yens. Groo Co.
was concerned about the fluctuation in the Japanese yen, so in this date, Groo Co.
entered into a 30-day forward contract to sell 1,000,000 yens for P470,000 to a bank at
a forward rate of P0.47.
Relevant rates are shown below:
Dec.15,2020 Dec.31,2020 Jan.15,2021
Spot Rate P0.48 P0.49 P0.46
Forward Rate P0.47 P0.485 P0.46
What amount will be the gain/loss on forward contract on Jan.15, 2021?
a. 10,000 c. 25,000
b. (15,000) d. (5,000)
3. Using the same information in No. 2, what will be the amount of FOREX gain/loss?
a. 25,000 gain c. 30,000 gain
b. 25,000 loss d. 30,000 loss
ANSWERS AND SOLUTIONS:

1. b.
Dec. 15,2020 10,000 wons x 1.20 spot rate = 12,000
Hedging Instrument No Entry
2. c. 25,000
Fair Value, Jan.15
[(.46 current forward rate - .47 initial forward rate) x 1M] 10,000 asset
Less: Fair Value, Dec.31
[(.485 current forward rate - .47 initial forward rate) x 1M] (15,000) liability
Gain on Forward Contract 25,000
3. d. 30,000 loss
Cash-foreign currency (1M x 0.46 current spot rate) 460,000
Accounts Receivable (480,000 + 10,000) (490,000)
FOREX Gain/Loss (30,000)

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DELA CRUZ, JAYPEE P.

3. The branch manager of Kylie-Kyrie Cosmetics in Cebu submitted a report as of

2. c. 26,000 & 1,000

Sales (P74,000 + P22,000) P96,000

ANSWERS AND SOLUTIONS

Derivatives and Hedge Accounting

ANSWERS AND SOLUTIONS:

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