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Module 3b HOBA Special Sample Problems

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Alvey Jane Bucao
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2 views

Module 3b HOBA Special Sample Problems

Uploaded by

Alvey Jane Bucao
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Problem 1

The pre-closing trial balances of EMENEM Corporation and its KITKIT Branch for the year ended December 31, 2024, prior
to adjusting and closing entries are as follows:
HOME OFFICE BRANCH OFFICE
Account Debit Credit Debit Credit
Cash 22,400 6,400
Accounts receivable, net 51,200 32,000
Inventory, Jan. 1, 2024
Acquired from vendors 147,200 32,000
Acquired from HO 12,800
Deferred profit 16,000
Fixed assets, net 556,800 57,600
Investment in branch 99,200
Accounts payable 141,400 28,800
Longe-term debt 256,000
Common stock 192,000
Retained earnings, Jan. 1, 2024 224,000
Home office equity 73,600

Sales 614,400 204,800


Purchases 512,000 76,800
Shipments from HO 57,600
Shipments to Branch 53,760
Operating Expenses 108,800 32,000
Totals 1,497,600 1,497,560 307,200 307,200

Inventory per physical count on December 31, 2024:


From vendors 115,200 12,800
From home office - 19,200

Additional information:
• Inventory transferred to the branch from the home office is billed at 125% of cost
• The home office billed the branch P9,600 for inventory it shipped to the branch on December 28, 2024; the branch
received and recorded this shipment on January 2, 2025
• The branch remitted P16,000 cash to the home office on December 31,2024; the home office received and
recorded this remittance on January 4, 2025
Required:
1. Complete the following analysis of the Branch’s inventory.

Transfers at billed price Transfers at cost Mark-up/AFOV


Beginning inventory
From home office
From outsiders
Add: Purchases
Shipments
Total goods available for sale
Less: Ending inventory
From home office
From outsiders
Cost of Goods Sold
Problem 2
Profit and loss data for Netflex Company and its World Web Branch for 2024 follows:
HOME OFFICE BRANCH
Sales P1,060,000 P315,000
Inventory, Jan. 1 (cost) 115,000
Inventory, Jan. 1:
From HO (at billed price) 50,000
From outsiders (at cost) 35,000
Purchases 820,000 120,000
Shipments to Branch (at cost) 110,000
Shipments from HO (at billed price) 132,000
Inventory, Dec. 31 (at cost) 142,000
Inventory, Dec. 31:
From HO (at billed price) 66,000
From outsiders (at cost) 70,000
Operating Expenses 200,000 100,000

Records show that the World Web Branch was billed for merchandise shipment as follows:
In 2023, cost + 25%
In 2024, cost + 20%

Required:
1. Prepare the income statement of the branch for the year ended
2. Prepare the income statement of the home office for the year ended
3. Prepare the combined income statement of the home office and branch

Problem 3
Selected information from the trial balances for the home office and the branch of KK Company at December 31, 2024 is
provided. The branch acquires merchandise from the home office and outside suppliers.
HOME OFFICE BRANCH
Sales P60,000 P30,000
Shipments to branch 8,000
Allowance for overvaluation 3,600
Shipments from home office 10,000
Purchase (outsiders) 35,000 5,500
Merchandise inventory, Dec. 1, 2024 20,000 15,000
Expenses 14,000 6,000

Additional information:
Merchandise inventory, Dec. 31, 2024:
Home office P20,000
Branch (P7,500 from HO and P2,500 from outsiders) 10,000

Required:
1. The billing rate of home office to branch for merchandise shipment is ______________.
2. How much of the December 1 inventory of the branch represent purchases from outsiders and goods shipped
from home office: Home Office _________ and Outsiders __________
3. The adjustments to allowance for overvaluation of branch inventory at December 31, 2024 is _____________.
4. The net income reported by the branch is _____________.
5. The combined net income for Home Office and branch operations is _____________.
Problem 4
Branch KK is authorized by its home office to send P10,000 cash to Branch JCO.

Required:
1. Prepare the journal entries for the cash transfer in the books of:
a. Branch KK
b. Branch JCO
c. Home Office

Problem 5
Pawer Company maintains branches that market pet supplies. Branches are billed for merchandise at
manufacturing costs with the branches paying freight charges from the home office to the branch.
On December 1, Branch AA ships part of its stock to Branch ZZ upon authorization by the home office. Originally,
Branch AA had been billed for this merchandise at P1,600 and had paid freight charges of P350 on the shipment from the
home office. Branch ZZ upon receiving the merchandise, pays freight charges of P250 on the shipment from Branch AA. If
the shipment had been made from the home office directly to Branch ZZ, the freight cost to Branch ZZ would have been
P400.

Required:
1. Prepare the journal entries for the merchandise transfer in the books of:
a. Branch AA
b. Branch ZZ
c. Home Office

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