HOBA - Finals Quiz

SHIPMENTS @ BILLED PRICE
Home office ships to the branch inventory costing 100,000 and bills the branch 120% of the cost.
Home Office Books Branch Books
Investment in branch 120,000 Shipments from HO
Shipments to branch 100,000 Home office
Allowance for markup 20,000
Freight paid by Home Office

Home office pays freight of 10,000.
Shipments to branch 200,000 Freight in
Cash 10,000 Home office
Allowance for markup 40,000
Freight paid by Branch

The branch pays freight of 6,000.
Shipments to branch 80,000 Freight in
Allowance for markup 16,000 Home office
Cash
Purchases from outside paties
Branch purchases inventory from a supplier for 40,000, on branch account. Branch pays freight of 2,000.
NO ENTRY Purchases
Freight in
Accounts Payable
Cash
Revenue
Branch makes total sales of 500,000 on account.
NO ENTRY Accounts Receivable
Sales
Expenses
Branch incurs utilities expense of 100,000; 20,000 of which were allocated from the home office.
Investment in branch 20,000 Utilities expense
Utilities expense 20,000 Home office
Cash
Individual Profit of the Branch
The branch has an ending inventory of 250,000 inclusive of freight. The branch's individual profit is computed as follows
Sales 500,000
Cost of Sales:
Inventory, beg. -
Shipments from home office (120k+240+96k) 456,000
Freight in (10k+6k+2k) 18,000
Purchases 40,000
Total Goods available for sale 514,000
Inventory,end. 250,000 264,000
Individual gross profit of branch 236,000
Operating expenses 100,000
Individual profit of branch 136,000
True Profit of the Branch

The branch has an ending inventory of 250,000 consists of 240,000 shipments from home office and 10,000 purchases f
In so far as the home office is concerned, the true profit of the branch is as follows:
Sales 500,000
Cost of Sales:
Inventory, beg. -
Shipments from home office, @COST (456k/120%) 380,000
Freight in (10k+6k+2k) 18,000
Purchases 40,000
Total Goods available for sale 438,000
Inventory,end., @COST (240k/120%)+10k) 210,000 228,000
Individual gross profit of branch 272,000
Operating expenses 100,000
True profit of branch 172,000
Alternative Solution
Add the realized mark-up to the individual profit. The realized mark-up is the mark-up on the shipments that were sold to exte
Total mark-up (20k+40k+16k)

76,000
or (the unajusted balance of the Allowance account)
or (456k total shipments from HO*20%/120%) 76,000
Less: Unrealized mark-up in ending inventory (240k*20%/120%) 40000
Realized mark-up 36,000
Individual profit branch 136,000

Add: Realized mark-up 36,000
True profit of branch 172,000
True Profit of the Branch

The branch has an ending inventory of 250,000 consists of 240,000 shipments from home office and 10,000 purchases f
In so far as the home office is concerned, the true profit of the branch is as follows:
Investment in Branch 20,000 Utilities expense 100,000
Utilities expense 20,000 Home office
Cash
Note: Notice that the true profit is computed simply by restating the merchandise received from the H.O to their original cost
120,000
120,000
240,000
10,000
250,000
96,000
6,000
96,000
6,000
ght of 2,000.
40,000
2,000
40,000
2,000
500,000
500,000
100,000
20,000
80,000
rofit is computed as follows:

ffice and 10,000 purchases from supplier.
ments that were sold to external parties.
89922.48
ffice and 10,000 purchases from supplier.

20,000
80,000
he H.O to their original costs.

COMBINED FS-SHIPMENTS @ BILLED PRICE
When combined financial statements are prepared, the allowance account is eliminated together with the “shipments” accou
in order to remove the mark-up and restate the branch’s cost of goods sold and ending inventory to their original costs.
Cash 1,100,000 66,000

Accounts receivable 180,000 100,000
Inventory, Beg. 300,000 - Sales (1.6M+500K)
Shipments from HO (billed at 120% above cost) - 456,000 Cost of Sales
Purchases 1,200,000 40,000
Freight- in 32,000 18,000
Shipments to branch (380,000)
Investments to branch 600,000
Allowance for mark-up (76,000)
Equipment 720,000 400,000
Accumulated Depreciation-equipment (72,000) (40,000)
Accounts payable (72,000) (40,000)
Share capital (2,000,000)
Retained-earnings-beg. (152,000)
Home Office (600,000)
Sales (1,600,000) (500,000)
Operating Expenses 220,000 100,000
Totals - -
Home Office Branch

Dr (Cr) Dr (Cr)
Inventory,end.
From outside purchases 460,000 10,000
From Home Office 240,000
Shipments to branch are billed at 120% above cost.
Requirement: Prepare the Combined FS.

with the “shipments” account
to their original costs.
Sales (1.6M+500K)
Cost of Sales
Inventory, Beg.
Purchases (1.2M+40K)
The trial balances of SINOVAC Corp. and its two branches, Alpha and Delta as of December 31, 2020 are presented below.
Additional information:
1. Ending inventories excluding the goods in transit (for branches) are P32,000. P8,400 and P4,800 for the Home Office, Alpha
2. Cash of P2,000 was sent by the home office to Alpha and is yet to be received by Alpha as at December 31, 2020.
Cash sent in the amount of P4,000 by Delta to home office is yet to be received by the home office as at December 31, 2020.
3. Unrealized profit account represents allowance for overvaluation in beginning inventories of Alpha and Delta.
Home Office Alpha Branch Delta Branch

Cash 18,000 5,000 15,000
Accounts Receivable 30,000 12,000 26,000
Inventory, 1/1/20 36,000 7,200 5,400
PPE and Intangibles 200,000 42,800 47,600
Branch Current-Alpha 50,000
Branch Current-Delta 68,000
Shipments from HO 30,000 27,000
Purchases 120,000
Operating Expenses 78,000 35,000 40,000
600,000 132,000 161,000
Accounts Payable 40,000 10,000 30,000

Share Capital 200,000
Retained Earnings 41,900
Home Office 42,000 61,000
Shipments to Alpha 36,000
Shipments to Delta 30,000
Unrealized profit-Branch Inventories 2,100
Sales 250,000 80,000 70,000
600,000 132,000 161,000
Required:
The adjusted balance of Home Office Current that will appear on the individual financial statements of Alpha Branch is
The adjusted balance of Home Office Current that will appear on the individual financial statements of Delta Branch is
The mark-up rate based on cost is _____% 20
Individual profit of Alpha Branch is 16200
Individual profit of Delta Branch is 2400
Realized profit as an adjustment by the home office in computing the true net income of Alpha Branch is
Realized profit as an adjustment by the home office in computing the true net income of Delta Branch is
Correct net income - Alpha Branch is 21000
Correct net income - Delta Branch is 7000
Adjusted balance of unrealized profit-branch inventories at December 31, 2020 is
Cost of sales that must appear on the published financial statements of SINOVAC Corp. at December 31, 2020
How much is the shipments in transit that Alpha Branch failed to record? 6000
How much is the shipments in transit that Delta Branch failed to record? 3000
Ending inventory at cost of Alpha Branch is 12000
Ending inventory at cost of Delta Branch 6500
The ending inventory of SINOVAC Corp. at December 31, 2020 is 50500
Adjusted cash balance of home office is 22000
Adjusted cash balance of Alpha Branch is 7000
Adjusted cash balance of Delta Branch is 15000
How much is the beginning inventory of SINOVAC Corp.? 46500
, 2020 are presented below.
,800 for the Home Office, Alpha and Delta, respectively.

t December 31, 2020.
office as at December 31, 2020.
of Alpha and Delta.
ments of Alpha Branch is 66200

ments of Delta Branch is 66400
a Branch is 4800
a Branch is 4600
3700
ember 31, 2020 116000
On December 7,2020, the home office of HOBA Company recorded a shipment of merchandise to its Tarlac Branch as follows:
Tarlac Branch 30,000

Shipments to Branch 25,000
Unrealized profit-branch inventory 4,000
Cash (freight charge) 1,000
The Tarlac branch sells 40% of the merchandise to outside entities during the month of December 2020.
On January 2,2021, Tarlac branch transfers half of the original shipment to Aurora branch and Tarlac branch pays 500 as shipm
The freight cost of the merchandise from the home office to Aurora branch would have been 600.
Required:
The entry on the books of Tarlac Branch to record the transfer on January 2, 2021 would include a debit to home office curren
The entry on the books of Aurora Branch to record the transfer on January 2, 2021 would include a credit to home office curre
The ending inventory of Tarlac Branch to be reported in its individual balance sheet as of December 31, 2020 is:
The ending inventory of Tarlac Branch to be reported in the published balance sheet of HOBA Company as of December 31, 20
The realized profit to adjust the individual net income of Tarlac Branch is: 1600
se to its Tarlac Branch as follows:
d Tarlac branch pays 500 as shipment.
ude a debit to home office current of: 15500

ude a credit to home office current of: 15100
ember 31, 2020 is: 18000
A Company as of December 31, 2020 is: 15600

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SHIPMENTS @ BILLED PRICE

Freight paid by Home Office

Freight paid by Branch

True Profit of the Branch

Total mark-up (20k+40k+16k)

Individual profit branch 136,000

True Profit of the Branch

rofit is computed as follows:

ments that were sold to external parties.

ffice and 10,000 purchases from supplier.

he H.O to their original costs.

Cash​ 1,100,000​ 66,000​

Home Office Branch

Shipments to branch are billed at 120% above cost.

Requirement: Prepare the Combined FS.

Home Office Alpha Branch Delta Branch

Accounts Payable 40,000 10,000 30,000

,800 for the Home Office, Alpha and Delta, respectively.

ments of Alpha Branch is 66200

Tarlac Branch 30,000

d Tarlac branch pays 500 as shipment.

ude a debit to home office current of: 15500

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Cash 1,100,000 66,000