Activity 1

Activity 1 (HOME OFFICE AND BRANCH ACCOUNTING)
INSTRUCTION: Answer the following items, a google form (TITLE: ACTIVITY 1 ANSWERS) will be provided
where you will encode you answers.
MULTIPLE CHOICE. Choose the best answer.

1. Unlike for a “sales agency” a “branch” has its own separate books of accounts and prepares its
own financial statements.
A. TRUE
B. FALSE
2. Sale transactions between the home office and its branch are taxable because the home office
and the branch are separate legal entities.
A. TRUE
B. FALSE
3. The “Investment in branch” is an asset account in the branch’s individual financial statements.
A. TRUE
B. FALSE
4. The home office records inventory shipments to the branch by debiting the “shipments to
branch account”.
A. TRUE
B. FALSE
5. The branch nonetheless records the depreciation for an asset that is uses even if the asset is
carried the home office books.
A. TRUE
B. FALSE
6. Transaction between a home office and its branch are accounted for in reciprocal accounts. The
reciprocal account maintained in the branch books is called.
A. Investment in branch
B. Home Office
C. Purchase from home office
D. Any of these
7. The branch records a debit memo received from the home as
A. Debit to home office account
B. Debit to allocated expense
C. Debit to investment account
D. Credit to home office account
8. The freight on shipments to the branch paid by the home office is recorded by the office as
A. Debit to freight-in
B. Credit to freight-in
C. Credit to investment account
D. Credit to cash
9. The depreciation expense on equipment carried in the books of the home office but used by the
branch is recorded in the branch’s books as
A. Debit to investment in branch and credit to accumulated depreciation
B. Debit to depreciation expense and credit to investment in branch
C. Debit to depreciation expense and credit to home office account
D. Not recorded
10. Transactions between branches are recorded by the transacting branches
A. As if each of them is transacting with the home office.
B. By debiting or crediting their own inter-branch accounts.
C. As if each of them is transacting with the home office and by debiting or crediting their own
inter-branch accounts.
D. Not accounted for by the branches
PROBLEMS (5 POINTS EACH)

The trial balances of INTERIM TEMPORARY Co.’s home office and branch are shown below:
INTERIM TEMPORARY Co.

Trial balance
December 31, 20x1
Home office Branch

Dr. (Cr.) Dr. (Cr.)
Cash 4,400,000 1,668,000
Accounts receivable 720,000 400,000
Inventory, beg. 2,600,000 -
Shipments from home office - 920,000
Purchases 288,000 160,000
Freight-in 88,000 72,000
Shipments to branch (920,000)
Investment in branch 3,308,000
Equipment 2,880,000 1,600,000
Accumulated depreciation - equipment (288,000) (160,000)
Furniture 360,000 200,000
Accumulated depreciation - furniture (36,000) (20,000)
Accounts payable (288,000) (160,000)
Accrued expenses (180,000) (100,000)
Share capital (8,000,000)
Share premium (2,000,000)
Retained earnings - beg. (824,800)
Home office - (3,308,000)
Sales (3,600,000) (2,000,000)
Depreciation expense 672,000 272,000
Utilities expense 72,000 40,000
General overhead expense 28,800 16,000
Various operating expenses 720,000 400,000
Totals - -
The home office and the branch have ending inventories of ₱1,080,000 and ₱600,000, respectively.
REQUIREMENTS:
11. How much is the total assets in the combined statement of financial position?
12. How much is the total profit in the combined statement of profit or loss?
13. AMNESTY PARDON Co. is currently preparing its combined financial statements. At December 31,
20x1, the home office shows a ₱624,000 balance in its “Investment in branch” account while the
branch showed a ₱280,800 balance in its “Home office” account. The following information has
been gathered:
(a) The home office shipped merchandise worth ₱80,000 to the branch during December 20x1
which the latter has received and recorded only in January 20x2.
(b) The home office collected ₱40,000 accounts receivable on behalf of the branch. The branch did
not yet receive the credit memo sent by the home office.
(c) The branch returned damaged merchandise worth ₱120,000 to the home office. The home
office did not yet receive the debit memo sent by the branch.
(d) A remittance of cash collections amounting to ₱160,000 was not yet recorded by the home
office.
(e) The home office allocated overhead cost of ₱20,000 to the branch which the latter has recorded
twice.
(f) Freight charge of ₱48,000 paid by the home office for shipments of merchandise to the branch
was recorded by the latter as ₱4,800.
REQUIREMENT: How much is the adjusted balance of the “home office” account?
14. ABASE HUMILIATE Co. is currently preparing its combined financial statements for the year
ended December 31, 20x1. As of this date, the “Investment in branch” account has a balance of
₱380,000 while the “Home office” account has a balance of ₱528,000. The following information
has been gathered:
(a) The home office allocated unpaid utilities expenses amounting to ₱40,000 to the branch which
the branch did not record in full. Instead, the branch sent a wrong adjusting memo to the home
office reducing the charge by ₱10,000 and setting up a liability for the remaining amount.
(b) The home office erroneously credited the branch for a return of shipment of merchandise worth
₱100,000. The branch did not make any return of merchandise.
(c) The branch mistakenly received a copy of the home office correcting entry for item (b) above
dated January 3, 20x2 and entered a credit in favor of the home office on December 31, 20x1.
(d) The branch mistakenly sent the home office a debit memo amounting to ₱12,000 for an
apparent remittance of collections which did not happen. The home office did not record the
debit memo.
REQUIREMENT: How much is the net adjustment to the “Home office” account? increase (decrease)
15. ABOMINABLE VERY BAD Co. has several branches. On December 31, 20x1, the “Investment in
Branch One” maintained by the home office shows a balance of ₱400,000 while the “Home
office” account maintained by Branch One shows a balance of ₱568,000. The following
information was determined:
(a) Branch Two acquired equipment for ₱120,000 to be maintained in the books of the home office.
This was recorded by the home office as a transaction with Branch One.
(b) Branch One acquired equipment for ₱160,000 to be maintained in its books. This was not
recorded by the home office.
(c) Branch Four remitted cash collections of ₱40,000 to the home office which the latter failed to
record.
(d) The home office erroneously charged Branch One for a debit memo of ₱48,000 received from
Branch Five.
(e) Branch One reversed a previous debit memo from Branch Six amounting to ₱24,000. The home
office decided that this charge is appropriately Branch Seven’s cost.
REQUIREMENT: How much is adjusted balance of the “Home Office” account?
16. 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.
REQUIREMENT: How much is the unadjusted balance of the “Home office” account?

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Activity 1 (HOME OFFICE AND BRANCH ACCOUNTING)

MULTIPLE CHOICE. Choose the best answer.

PROBLEMS (5 POINTS EACH)

INTERIM TEMPORARY Co.

Home office Branch

REQUIREMENT: How much is adjusted balance of the “Home Office” account?

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