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CHAPTER 9 SUGGESTED ANSWERS EXERCISES Exercise 9 - 1 Books of Branch R Home Office Cash
15,000 15,000 Books of Branch S
Cash Home Office
15,000 15,000 Books of the Home Office
Branch S Branch R
15,000 15,000
Exercise 9 - 2 Books of Branch No. 1 Home Office Shipments from Home Office Freight-In
1,950 1,600 350 Books of Branch No. 5
Shipments from Home Office Freight-In Cash Home Office
1,600 400 350 1,650 Books of the Home Office
Branch No. 5 Excess Freight Branch No. 1 Exercise 9 – 3
1,650 300 1,950 Home Office Books
1.
no entry
2.
Branch Shipments to Branch Allowance for Markup in Branch Inventory 120,000/240,000 = 50%
3.
no entry
4.
Branch Advertising Expense Depreciation Expense Utility Expense no entry
5.
360,000 240,000 120,000
134,000 40,000 70,000 24,000
AA1- Chapter 9 (2008 edition)
page 2
Cash Branch 6.
no entry
7.
Branch Branch Income
8.
9.
360,000 360,000
58,000 58,000
Allowance for Markup in Branch Inventory Branch Income P300,000 x 50/150 = P100,000
100,000
Branch Income Income Summary
158,000
100,000
158,000 Branch Books
1. 2. 3. 4.
5.
6.
7.
Purchases s Payable
160,000
Shipments from Home Office Home Office
360,000
s Receivable Sales
652,000
Advertising Expense Depreciation Expense Utility Expense Home Office
40,000 70,000 24,000
160,000 360,000 652,000
134,000
Cash s Receivable
470,000
Home Office Cash
360,000
Merchandise Inventory Sales Purchases Shipments from Home Office Advertising Expense Depreciation Expense Utility Expense Income Summary
60,000 652,000
Income Summary Home Office
Exercise 9 - 4 a. Merchandise inventory, beg. Less Merchandise from home office at billed price
470,000 360,000
160,000 360,000 40,000 70,000 24,000 58,000 58,000 58,000
P150,000
AA1- Chapter 9 (2008 edition)
page 3
Markup on merchandise shipped to branch Markup on current shipment (P96,000 – P80,000) Markup on beginning inventory
P 36,000 16,000 P 20,000 x 120/20
Merchandise purchased from outsiders b.
Allowance for Intercompany Inventory Profit Branch Income Bal. of allowance before adjustment Adjusted balance of allowance acct (P84,000 x 20/120) Realized markup
120,000 P 30,000
22,000 22,000 P36,000 14,000 P22,000
Exercise 9 – 5 1.
Home Office Books Branch Shipments to Branch Allowance for Markup in Branch Inventory 150,000/300,000 = 50%
2.
no entry
3.
Allowance for Markup in Branch Inventory Branch Income Realized markup on beginning inventory P600,000 x 55% = P330,000 x 25/125* Realized markup on current shipments P450,000 x 1/3 = P150,000 x 50/150 Total *(600,000 – 480,000) / 480,000 = 25%
450,000 300,000 150,000
116,000 116,000 P 66,000 50,000 P116,000
Branch Books 1. 2.
3.
Shipments from Home Office Home Office
450,000
s Receivable Sales P590,000 + P280,000 = P870,000
870,000 870,000
no entry
Exercise 9 – 6 1. Branch Cash Shipments to Branch Land Allowance for Markup in Branch Inventory Allowance on Transfer of Land 120,000/240,000 = 50% 2.
450,000
Branch Shipments to Branch
820,000 80,000 240,000 300,000 120,000 80,000 560,000 400,000
AA1- Chapter 9 (2008 edition)
page 4
Allowance for Markup in Branch Inventory 160,000/400,000 = 40% 3. 4.
5.
6.
160,000
Branch Branch Income
130,000
Allowance for Markup in Branch Inventory Branch Income Realized markup on 1st inventory transfer Realized markup on 2nd inventory transfer (P640,000 – P360,000) x 40/140 Total
200,000
130,000 200,000 P120,000 80,000 P200,000
Allowance on Transfer of Land Branch Income
80,000 80,000
Branch Income Income Summary
410,000 410,000
Exercise 9 - 7 Required balance of allowance (markup on branch ending inventory) P9,600 x 20/120 Adjustment for realized markup Balance of allowance before adjustment Allowance on current shipment (P160,000 x 20%) Allowance on branch beginning inventory Markup rate Branch beginning inventory, at cost
P 1,600 36,400 P38,000 32,000 P 6,000 ÷ 20% P30,000
Exercise 9 - 8 a. Merchandise available for sale at billed price (P16,200 + P20,250) Merchandise available for sale at cost (P36,450/135%) Unrealized intercompany inventory profit balance before adjustment b.
Unrealized Intercompany Inventory Profit Branch Income Balance before adjustment Adjusted balance (P18,900 x 35/135) Realized markup
P36,450 27,000 P 9,450 4,550 4,550
P 9,450 4,900 P 4,550
Home Office Books c.
Shipments to Branch Unrealized Intercompany Inventory Profit Branch Branch Books Home Office Shipments from Home Office
400 140 540 540 540
AA1- Chapter 9 (2008 edition)
page 5
Exercise 9 – 9 1. P20,000 ÷ 25/125 = P100,000 2.
Allowance for Markup in Branch Inventory Branch Income P100,000 + P350,000 – P80,000 = P370,000 x 25/125 = P74,000
Exercise 9 - 10 Separate cost of goods sold of the home office: Inventory, beginning Purchases Shipments to branch Cost of goods available for sale Less Inventory, end Separate cost of goods sold of the branch: Inventory, beginning From outside purchases From home office (P36,000 / 120%) Total Purchases Shipments from home office (P720,000 / 120%) Cost of goods available for sale Less Inventory, end: From outside purchases From home office (P42,000 / 120%) Combined cost of goods sold Exercise 9– 11 1. Shipments from home office Shipments to branch Markup
74,000 74,000
P 252,000 2,800,000 ( 600,000) P2,452,000 240,000
P2,212,000
P
12,000 30,000 P 42,000 96,000 600,000 P 738,000 P10,000 35,000
Total P450,000 375,000 P 75,000
45,000
Resold P360,000 300,000* P 60,000
693,000 P2,905,000 On Hand P90,000 75,000** P15,000
75,000 / 375,000 = 20% * ** 2.
90,000 / 120% = P75,000
Cost of Goods Sold Inventory P60,000 + P450,000 – P90,000 = P420,000
3. Inventory, beginning Shipments Total Inventory, end Cost of goods sold Exercise 9 - 12 a. Merchandise Inventory, January 1
Billed Price P 60,000 450,000 P510,000 90,000 P420,000
420,000 420,000
Cost P 50,000 375,000 P425,000 75,000 P350,000
Markup P 10,000 75,000 P 85,000 15,000 P 70,000 P26,400
AA1- Chapter 9 (2008 edition)
page 6
Add Shipments from Home Office Cost of Goods Available for Sale Cost of Goods Sold Sales, net of Sales Returns (P15,000 - P2,000) Sales rate Merchandise destroyed by fire at billed price
20,000 P46,400 P13,000 ÷125%
Merchandise destroyed by fire at cost b.
Home Office Books Branch Loss from Fire Allowance for Markup in Branch Inventory Branch Branch Books Home Office Merchandise Inventory
Exercise 9 – 13 1. Branch Income Cost of Goods Sold P230,000 x 15/115 Branch 2. 3.
10,400 P36,000 ÷ 120% P30,000
30,000 6,000 36,000 36,000 36,000 50,000 30,000 20,000
Home Office Branch
520,000 520,000
Allowance for Markup in Branch Inventory Inventory
9,000 9,000
PROBLEMS Problem 9 – 1 Billed Price Beginning inventory: Acquired from vendors Acquired from home office Purchases from vendors Shipments from Home Office P180,000 + P30,000 Total inventory available for sale Less Ending inventory: Acquired from vendors Acquired from home office P60,000 + P30,000 Cost of goods sold
Cost
Markup
P100,000 40,000 240,000 210,000 P590,000
P100,000 32,000 240,000 168,000 P540,000
P 8,000 42,000 P50,000
40,000 90,000 P460,000
40,000 72,000 P428,000
18,000 P32,000
Problem 9 – 2 Home Office Books a. b.
c.
Dagupan Branch Cash
10,000
Dagupan Branch Baguio Branch Shipments to Branch
25,000 40,000
Furniture and Fixtures Cash
17,500
10,000
65,000 17,500
AA1- Chapter 9 (2008 edition)
d. e.
f. g. h. i.
j.
page 7
Expenses Dagupan Branch
800 800
Baguio Branch Sales Discounts s Receivable
29,400 600
Baguio Branch Dagupan Branch
15,000
Shipments to Branch Dagupan Branch
2,500
Dagupan Branch Baguio Branch
1,800
30,000 15,000 2,500 1,800
Dagupan Branch Shipments to Branch Cash
20,100
Baguio Branch Excess Freight Dagupan Branch
20,110 35
20,000 100
20,145 Dagupan Branch Books
a. b.
Cash Home Office
10,000
Shipments from Home Office Home Office
25,000
c.
no entry
d.
Home Office Cash
e. f. g. h. i.
j.
no entry Home Office Cash
10,000 25,000
800 800 15,000 15,000
Home Office Shipments from Home Office
2,500
Expenses Home Office
1,800
2,500 1,800
Shipments from Home Office Freight-In Home Office
20,000 100
Home Office Shipments from Home Office Freight-In
20,145
20,100 20,000 100
AA1- Chapter 9 (2008 edition)
page 8
Cash
45 Baguio Branch Books
a.
no entry
b.
Shipments from Home Office Home Office
40,000 40,000
c.
no entry
d.
no entry
e.
Cash Home Office
29,400
Cash Home Office
15,000
f. g.
no entry
h.
Home Office Cash
i.
no entry
j.
Shipments from Home Office Freight-In Home Office
29,400 15,000
1,800 1,800
20,000 110 20,110
Problem 9 – 3 Requirement 1 1. 2.
3. 4.
Home Office Books Baguio Branch Cash Baguio Branch Shipments to Branch Allowance for Markup in Branch Inventory Cash Baguio Branch
20,000 20,000 259,000 185,000 74,000 245,000 245,000
Baguio Branch Cash
7,000 7,000
5 – 7 - no entry Baguio Branch Books 1. 2. 3.
Cash Home Office
18,000 18,000
Shipments from Home Office Home Office
257,600
Home Office
247,400
257,600
AA1- Chapter 9 (2008 edition)
page 9
Cash
4. 5.
6. 7.
247,400
s Receivable Home Office
2,400
Expenses Home Office
7,000
Cash s Receivable Sales Expenses Cash
2,400 7,000 247,400 40,600 288,000 21,000 21,000
Merchandise Inventory, end P30,100 + P1,400 Sales Income Summary Merchandise Inventory, beginning P257,600 + P1,400 Shipments from Home Office Expenses Income Summary Home Office
Requirement 2 Baguio Branch Branch Income
31,500 288,000 15,000 17,500 259,000 28,000 15,000 15,000 15,000 15,000
Allowance for Markup in Branch Inventory Branch Income (P17,500 + P259,000 – P31,500) x 40/140
70,000
Branch Income Income Summary
85,000
70,000
85,000
Requirement 3 Shipments from Home Office Home Office
1,400
Cash Home Office
2,000
1,400 2,000
Problem 9 - 4 Requirement 1 Triple D Bookstore Statement of Recognized Income and Expenses - Quezon City Branch For the Year Ended December 31, 2008 Sales Cost of Goods Sold: Merchandise Inventory, beginning Shipments from Home Office Cost of Goods Available for Sale Less Merchandise Inventory, end
P192,690 P 31,500 128,000 P159,500 22,750
136,750
AA1- Chapter 9 (2008 edition)
page 10
Gross Profit Operating Expenses: Advertising and Promotion Depreciation Uncollectible s Expense Others Net income
P 55,940 P
6,400 2,400 1,250 36,600 P
Requirement 2 Branch Branch Income
46,680 9,260
9,260 9,260
Allowance for Markup in Branch Inventory Branch Income P136,750 x 25/125
27,350
Branch Income Income Summary
36,610
27,350
36,610
Problem 9 - 5 Branch Books a.
b.
Sales Merchandise Inventory, end Income Summary Merchandise Inventory, beginning Shipments from Home Office Selling Expenses istrative Expenses Home Office Income Summary
78,000 12,000 10,000 10,000 80,000 4,000 6,000 10,000 10,000 Home Office Books
a.
b. c.
d. e.
Sales Shipments to Branch Merchandise Inventory, end Merchandise Inventory, beginning Purchases Selling Expenses istrative Expenses Income Summary
310,000 64,000 30,000 25,000 300,000 20,000 30,000 29,000
Branch Income Branch
10,000
Allowance for Overvaluation in Branch Inventory Branch Income P18,000 - (P12,000 x 25/125) = P15,600
15,600
Branch Income Income Summary Income Tax Income Tax Payable
10,000 15,600 5,600 5,600 12,110 12,110
AA1- Chapter 9 (2008 edition)
f. g.
page 11
Income Summary Income Tax
12,110
Income Summary Retained Earnings
22,490
12,110 22,490
Problem 9 - 6 Requirement 1 Triple F Products Inc. - Branch Trial Balance December 31, 2008 Debit 12,800 48,160 27,280
Cash s Receivable Merchandise Inventory s Payable Home Office Sales Cost of Sales Operating Expenses
Credit
2,040 68,900 256,000 191,620 47,080 326,940
_______ 326,940
Requirement 2 Home Office Books a.
b. c.
d. e. f. g.
Sales Income Summary Cost of Sales Operating Expenses
640,600 41,360 452,840 146,400
Branch Branch Income
17,300
Allowance for Overvaluation of Branch Inventory Branch Income P191,620 x 10/110 P21,100 ÷ (P202,400 + P29,700 – P21,100) = 10%
17,420
Branch Income Income Summary
34,720
Income Tax Income Tax Payable
26,628
Income Summary Income Tax
26,628
Income Summary Retained Earnings
76,080
17,300 17,420
34,720 26,628 26,628 76,080 Branch Books
AA1- Chapter 9 (2008 edition)
a. b.
page 12
Merchandise Inventory P202,400 – P189,200 Home Office Sales Income Summary Cost of Sales Operating Expenses
c.
Income Summary Home Office Requirement 3
13,200 13,200 256,000 17,300 191,620 47,080 17,300 17,300
Combined net income (P41,360 + P34,720 – P26,628) Combined Merchandise Inventory: Home Office Branch [ P27,280 + P13,200) ÷110%
P49,452 P156,640 36,800
P193,440
Problem 9 - 7 Triple G Company Combined Statement of Recognized Income and Expenses for Home Office and Branch For the Year Ended December 31, 2008 Sales Cost of goods sold: Merchandise inventory, beginning Purchases Cost of goods available for sale Less Merchandise inventory, end Gross profit Operating expenses Net income before Income Tax Income Tax Net Income
P325,000 P107,500 215,000 P322,500 81,300
241,200 P 83,800 50,000 P 33,800 11,830 P 21,970
Inventory: Beginning Ending Home Office P 80,000 Branch P7,500 + (P24,000/120%) 27,500 P5,500 + (P26,000/125%) Total P107,500 ** P37,500 – P30,000 = P7,500/ P30,000 = 25% Requirement 2 Davao Branch Books a. Sales 75,000 Merchandise Inventory, end 31,500 Income Summary Shipments from Home Office Purchases Expenses
P55,000 26,300 P81,300
12,500 37,500 15,000 10,000
AA1- Chapter 9 (2008 edition)
page 13
Merchandise Inventory, beginning
31,500
b.
Income Summary Home Office Requirement 3
12,500 12,500 Home Office Books
a. b.
c.
d. e. f. g.
Davao Branch Branch Income Allowance for Markup in Branch Inventory Branch Income Markup on branch beginning inventory (P24,000 x 20/120) Markup on shipments Allowance balance before adjustments Markup on branch ending inventory (P26,000 x 25/125) Realized markup Sales Shipments to Branch Merchandise Inventory, end Income Summary Purchases Expenses Merchandise Inventory, beginning
12,500 12,500 6,300 6,300 P 4,000 7,500 P11,500 5,200 P 6,300 250,000 30,000 55,000 15,000 200,000 40,000 80,000
Branch Income Income Summary
18,800
Income Tax Income Tax Payable
11,830
Income Summary Income Tax
11,830
Income Summary Retained Earnings
21,970
18,800 11,830 11,830 21,970
Problem 9 – 8 Requirement 2 a. Plant Assets Branch
4,000
b.
Home Office s Receivable
2,000
Cash Branch
5,000
Expenses Home Office
1,000
c. d.
4,000 2,000 5,000 1,000
AA1- Chapter 9 (2008 edition)
e. f.
g. h.
page 14
Shipments from Home Office Home Office
3,000
Retained Earnings Inventory P15,000 x 20/120
2,500
3,000 2,500
Home Office Branch
11,000
Sales Shipments from Home Office
48,000
11,000 48,000
AA1- Chapter 9 (2008 edition)
page 15
MULTIPLE CHOICE 1.
B
3.
C
5.
D
7.
D
AA1- Chapter 9 (2008 edition)
2.
B
9
A
page 16
4.
D
6.
B
10 11 12 13
C C D C
P13,200 + P350 = P13,550 P11,000 + P350 = P11,350
14
A
P12,000 x 20/120 = P2,000
15
D
Inventory, beginning (P165,000 / 125%) Shipments (P110,000 / 125%) Merchandise available for sale from home office at cost Cost of merchandise sold from home at cost Sales, net of returns and allowances Less Sales from merchandise purchased from outsiders (P7,500 x 120%) Sales from merchandise from home office Cost of sales at billed price Billed price rate Inventory destroyed by fire
8.
D
P132,000 88,000 P220,000 P165,250 9,000 P156,250 ÷ 125% P125,000 ÷ 125%
100,000 P120,000
16
D
Balance of allowance before adjustment Required balance of allowance (P1,170,000 x 20/120) Realized markup
P370,000 195,000 P175,000
17
C
Sales Cost of goods sold (P120,000 x 3/4 x 125%) Gross profit Operating expenses Net income reported by the branch
P141,000 112.500 P 28,500 27,000 P 1,500
18
A
P50,400/120%
P42,000
19
B
P90,000 + P36,000 – P2,520 – P50,400/120% = P60,900
20
B
Net income (loss) reported by branch Realized markup (P90,000 + P36,000 – P2,520 - P50,400 = P73,080) x 20/120 True net income of the branch
(P 7,800) 12,180 P 4,380
21
B
Net income reported by branch Realized markup [(P3,960 + P17,600 – P4,840) x 10/110] Actual branch income
P 4,800 1,520 P 6,320
22
B
Branch ending inventory, at cost (P4,840 / 110%) Home office ending inventory Ending inventory to be reported in the combined balance sheet
P 4,400 11,200 P15,600
23
D
Net income reported by the branch
P 5,000
AA1- Chapter 9 (2008 edition)
page 17
Realized markup[P280,000 - (P50,000 – P6,600)] x 40/140 True net income of the branch
67,600 P 72,600
24
B
Branch inventory from home office (P43,400 /140%) Branch inventory from outside purchases Total cost of branch inventory, end
P31,000 6,600 P37,600
25
D
P60,000 - P7,500
P52,500
26
A
P60,000 - (P7,500 x 120/20)
P15,000
27
B
Sales Cost of goods sold (P180,000 + P45,000 - P60,000) Operating expenses Realized markup [(P180,000 x 20/120) - P7,500 True net income of the branch
P 292,500 (165,000) ( 72,000) 22,500 P 78,000
28
A
Unadjusted balance of allowance Markup on 2008shipments from home office (P390,000 – P300,000) Markup on beginning inventory Total merchandise inventory beg Merchandise from outside purchases
29
D
Sales Cost of goods sold (P54,600 + P390,000 + P144,600 - P48,750) Operating expenses Realized markup [P99,900 - (P39,000 x 30/130)] True net income of the branch
P99,900 90,000 P 9,900 x 130/30
P 42,900 54,600 P 11,700 P540,000 (540,450) ( 51,000) 90,900 P 39,450
30
C
P39,000 x 30/130 = P9,000
31
D
Sales (net of discount of P1,480) Cost of goods sold (P104,000 - P12,500) Operating expenses Net income reported by branch
P115,520 ( 91,500) ( 20,000) P 4,020
32
C
Net income reported by branch Realized markup (P91,500 x 25/125) True net income of the branch
P 4,020 18,300 P 22,320
33
C
Sales Cost of goods sold (P5,000 + P2,000 + P26,400 – P4,500) Operating expenses Realized markup [P2,800 – (P3,960 x 10/110)] True profit of Cebu branch
P 37,400 ( 28,900) ( 3,000) 2,440 P 7,940
34
D
Sales
P110,000
AA1- Chapter 9 (2008 edition)
page 18
Cost of goods sold (P16,000 + P80,000 – P24,000 – P20,000) Operating expenses Net income of the home office Net income of the branch Combined net income of the home office and branch 35
36
C
A
Sales Cost of sales: Inventory, beginning Purchases Goods available for sale Shipments to branch (P110,000/110%) Goods available for own sale Less Inventory, end Gross profit Expenses Net income Sales Cost of sales: Inventory, beginning (P11,550 – P1,000) Shipments from HO, including freight-in Goods available for sale Less Inventory, end [(P10,400 + P5,000)/110%] + P520 + P250 Gross profit Expenses True branch net income
( 52,000) ( 10,000) P 48,000 7,940 P 55,940 P155,000
P 23,000 190,000 P213,000 100,000 P113,000 30,000
83,000 P 72,000 52,000 P 20,000 P140,000
P 10,550 105,750 P116,300 14,770
101,530 P 38,470 28,400 P 10,470
37
D
(P10,400 + P5,000) x 10/110
P1,400
38
B
Unadjusted balance of allowance Markup on 2008 shipments (P200,000 x 25%) Markup on beginning inventory Branch beginning inventory at billed price
P 57,500 50,000 P 7,500 x 125/25 P 37,500
39
C
Sales Cost of goods sold (P37,500 + P250,000 - P40,000) Operating expenses Net income reported by branch
P400,000 (247,500) (100,000) P 52,500
40
C
Net income reported by branch Realized markup (P247,500 x 25/125) True net income of the branch
P 52,500 49,500 P102,000
41
B
Beginning inventory Purchases
P
8,000 30,000
AA1- Chapter 9 (2008 edition)
Shipments from home office Ending inventory Cost of goods sold reported by branch Realized markup [P19,750 - (P6,000 x 25/125)* Cost of goods sold at cost
page 19
93,750 ( 10,350) P 121,400 ( 18,550) P 102,850
*P93,750 – P75,000 = P18,750/P75,000 = 25% 42
C
The amount of the realized markup of P18,550
43
C
Adjusted net income Reported net income Realized markup Cost of sales at cost (P70,000 + P350,000 – P84,000) – P96,000
P156,000 60,000 P 96,000 ÷ P240,000 140%
44
C
P84,000 x 40/140
P24,000
45
A
72,500 ÷ (75,000 + 444,000 -84,000 – 72,500)
20%
46
D
P444,000 / 120%
P370,000
47
D
Sales Cost of goods sold (P75,000 + P444,000 - P84,000) Operating expenses Realized markup [P72,500 - (P84,000 x 20/120)] Adjusted profit of the branch
P 600,000 (435,000) (200,000) 58,500 P 23,500
48
C
P84,000 x 20/120 = P14,000
49
A
P84,000 – P14,000 = P70,000
50
B
Home office inventory (P160,500 - P10,500) Branch inventory (P108,000/120%) Inventories reported in the combined balance sheet
P 150,000 90,000 P 240,000
15,000 15,000 Books of Branch S
Cash Home Office
15,000 15,000 Books of the Home Office
Branch S Branch R
15,000 15,000
Exercise 9 - 2 Books of Branch No. 1 Home Office Shipments from Home Office Freight-In
1,950 1,600 350 Books of Branch No. 5
Shipments from Home Office Freight-In Cash Home Office
1,600 400 350 1,650 Books of the Home Office
Branch No. 5 Excess Freight Branch No. 1 Exercise 9 – 3
1,650 300 1,950 Home Office Books
1.
no entry
2.
Branch Shipments to Branch Allowance for Markup in Branch Inventory 120,000/240,000 = 50%
3.
no entry
4.
Branch Advertising Expense Depreciation Expense Utility Expense no entry
5.
360,000 240,000 120,000
134,000 40,000 70,000 24,000
AA1- Chapter 9 (2008 edition)
page 2
Cash Branch 6.
no entry
7.
Branch Branch Income
8.
9.
360,000 360,000
58,000 58,000
Allowance for Markup in Branch Inventory Branch Income P300,000 x 50/150 = P100,000
100,000
Branch Income Income Summary
158,000
100,000
158,000 Branch Books
1. 2. 3. 4.
5.
6.
7.
Purchases s Payable
160,000
Shipments from Home Office Home Office
360,000
s Receivable Sales
652,000
Advertising Expense Depreciation Expense Utility Expense Home Office
40,000 70,000 24,000
160,000 360,000 652,000
134,000
Cash s Receivable
470,000
Home Office Cash
360,000
Merchandise Inventory Sales Purchases Shipments from Home Office Advertising Expense Depreciation Expense Utility Expense Income Summary
60,000 652,000
Income Summary Home Office
Exercise 9 - 4 a. Merchandise inventory, beg. Less Merchandise from home office at billed price
470,000 360,000
160,000 360,000 40,000 70,000 24,000 58,000 58,000 58,000
P150,000
AA1- Chapter 9 (2008 edition)
page 3
Markup on merchandise shipped to branch Markup on current shipment (P96,000 – P80,000) Markup on beginning inventory
P 36,000 16,000 P 20,000 x 120/20
Merchandise purchased from outsiders b.
Allowance for Intercompany Inventory Profit Branch Income Bal. of allowance before adjustment Adjusted balance of allowance acct (P84,000 x 20/120) Realized markup
120,000 P 30,000
22,000 22,000 P36,000 14,000 P22,000
Exercise 9 – 5 1.
Home Office Books Branch Shipments to Branch Allowance for Markup in Branch Inventory 150,000/300,000 = 50%
2.
no entry
3.
Allowance for Markup in Branch Inventory Branch Income Realized markup on beginning inventory P600,000 x 55% = P330,000 x 25/125* Realized markup on current shipments P450,000 x 1/3 = P150,000 x 50/150 Total *(600,000 – 480,000) / 480,000 = 25%
450,000 300,000 150,000
116,000 116,000 P 66,000 50,000 P116,000
Branch Books 1. 2.
3.
Shipments from Home Office Home Office
450,000
s Receivable Sales P590,000 + P280,000 = P870,000
870,000 870,000
no entry
Exercise 9 – 6 1. Branch Cash Shipments to Branch Land Allowance for Markup in Branch Inventory Allowance on Transfer of Land 120,000/240,000 = 50% 2.
450,000
Branch Shipments to Branch
820,000 80,000 240,000 300,000 120,000 80,000 560,000 400,000
AA1- Chapter 9 (2008 edition)
page 4
Allowance for Markup in Branch Inventory 160,000/400,000 = 40% 3. 4.
5.
6.
160,000
Branch Branch Income
130,000
Allowance for Markup in Branch Inventory Branch Income Realized markup on 1st inventory transfer Realized markup on 2nd inventory transfer (P640,000 – P360,000) x 40/140 Total
200,000
130,000 200,000 P120,000 80,000 P200,000
Allowance on Transfer of Land Branch Income
80,000 80,000
Branch Income Income Summary
410,000 410,000
Exercise 9 - 7 Required balance of allowance (markup on branch ending inventory) P9,600 x 20/120 Adjustment for realized markup Balance of allowance before adjustment Allowance on current shipment (P160,000 x 20%) Allowance on branch beginning inventory Markup rate Branch beginning inventory, at cost
P 1,600 36,400 P38,000 32,000 P 6,000 ÷ 20% P30,000
Exercise 9 - 8 a. Merchandise available for sale at billed price (P16,200 + P20,250) Merchandise available for sale at cost (P36,450/135%) Unrealized intercompany inventory profit balance before adjustment b.
Unrealized Intercompany Inventory Profit Branch Income Balance before adjustment Adjusted balance (P18,900 x 35/135) Realized markup
P36,450 27,000 P 9,450 4,550 4,550
P 9,450 4,900 P 4,550
Home Office Books c.
Shipments to Branch Unrealized Intercompany Inventory Profit Branch Branch Books Home Office Shipments from Home Office
400 140 540 540 540
AA1- Chapter 9 (2008 edition)
page 5
Exercise 9 – 9 1. P20,000 ÷ 25/125 = P100,000 2.
Allowance for Markup in Branch Inventory Branch Income P100,000 + P350,000 – P80,000 = P370,000 x 25/125 = P74,000
Exercise 9 - 10 Separate cost of goods sold of the home office: Inventory, beginning Purchases Shipments to branch Cost of goods available for sale Less Inventory, end Separate cost of goods sold of the branch: Inventory, beginning From outside purchases From home office (P36,000 / 120%) Total Purchases Shipments from home office (P720,000 / 120%) Cost of goods available for sale Less Inventory, end: From outside purchases From home office (P42,000 / 120%) Combined cost of goods sold Exercise 9– 11 1. Shipments from home office Shipments to branch Markup
74,000 74,000
P 252,000 2,800,000 ( 600,000) P2,452,000 240,000
P2,212,000
P
12,000 30,000 P 42,000 96,000 600,000 P 738,000 P10,000 35,000
Total P450,000 375,000 P 75,000
45,000
Resold P360,000 300,000* P 60,000
693,000 P2,905,000 On Hand P90,000 75,000** P15,000
75,000 / 375,000 = 20% * ** 2.
90,000 / 120% = P75,000
Cost of Goods Sold Inventory P60,000 + P450,000 – P90,000 = P420,000
3. Inventory, beginning Shipments Total Inventory, end Cost of goods sold Exercise 9 - 12 a. Merchandise Inventory, January 1
Billed Price P 60,000 450,000 P510,000 90,000 P420,000
420,000 420,000
Cost P 50,000 375,000 P425,000 75,000 P350,000
Markup P 10,000 75,000 P 85,000 15,000 P 70,000 P26,400
AA1- Chapter 9 (2008 edition)
page 6
Add Shipments from Home Office Cost of Goods Available for Sale Cost of Goods Sold Sales, net of Sales Returns (P15,000 - P2,000) Sales rate Merchandise destroyed by fire at billed price
20,000 P46,400 P13,000 ÷125%
Merchandise destroyed by fire at cost b.
Home Office Books Branch Loss from Fire Allowance for Markup in Branch Inventory Branch Branch Books Home Office Merchandise Inventory
Exercise 9 – 13 1. Branch Income Cost of Goods Sold P230,000 x 15/115 Branch 2. 3.
10,400 P36,000 ÷ 120% P30,000
30,000 6,000 36,000 36,000 36,000 50,000 30,000 20,000
Home Office Branch
520,000 520,000
Allowance for Markup in Branch Inventory Inventory
9,000 9,000
PROBLEMS Problem 9 – 1 Billed Price Beginning inventory: Acquired from vendors Acquired from home office Purchases from vendors Shipments from Home Office P180,000 + P30,000 Total inventory available for sale Less Ending inventory: Acquired from vendors Acquired from home office P60,000 + P30,000 Cost of goods sold
Cost
Markup
P100,000 40,000 240,000 210,000 P590,000
P100,000 32,000 240,000 168,000 P540,000
P 8,000 42,000 P50,000
40,000 90,000 P460,000
40,000 72,000 P428,000
18,000 P32,000
Problem 9 – 2 Home Office Books a. b.
c.
Dagupan Branch Cash
10,000
Dagupan Branch Baguio Branch Shipments to Branch
25,000 40,000
Furniture and Fixtures Cash
17,500
10,000
65,000 17,500
AA1- Chapter 9 (2008 edition)
d. e.
f. g. h. i.
j.
page 7
Expenses Dagupan Branch
800 800
Baguio Branch Sales Discounts s Receivable
29,400 600
Baguio Branch Dagupan Branch
15,000
Shipments to Branch Dagupan Branch
2,500
Dagupan Branch Baguio Branch
1,800
30,000 15,000 2,500 1,800
Dagupan Branch Shipments to Branch Cash
20,100
Baguio Branch Excess Freight Dagupan Branch
20,110 35
20,000 100
20,145 Dagupan Branch Books
a. b.
Cash Home Office
10,000
Shipments from Home Office Home Office
25,000
c.
no entry
d.
Home Office Cash
e. f. g. h. i.
j.
no entry Home Office Cash
10,000 25,000
800 800 15,000 15,000
Home Office Shipments from Home Office
2,500
Expenses Home Office
1,800
2,500 1,800
Shipments from Home Office Freight-In Home Office
20,000 100
Home Office Shipments from Home Office Freight-In
20,145
20,100 20,000 100
AA1- Chapter 9 (2008 edition)
page 8
Cash
45 Baguio Branch Books
a.
no entry
b.
Shipments from Home Office Home Office
40,000 40,000
c.
no entry
d.
no entry
e.
Cash Home Office
29,400
Cash Home Office
15,000
f. g.
no entry
h.
Home Office Cash
i.
no entry
j.
Shipments from Home Office Freight-In Home Office
29,400 15,000
1,800 1,800
20,000 110 20,110
Problem 9 – 3 Requirement 1 1. 2.
3. 4.
Home Office Books Baguio Branch Cash Baguio Branch Shipments to Branch Allowance for Markup in Branch Inventory Cash Baguio Branch
20,000 20,000 259,000 185,000 74,000 245,000 245,000
Baguio Branch Cash
7,000 7,000
5 – 7 - no entry Baguio Branch Books 1. 2. 3.
Cash Home Office
18,000 18,000
Shipments from Home Office Home Office
257,600
Home Office
247,400
257,600
AA1- Chapter 9 (2008 edition)
page 9
Cash
4. 5.
6. 7.
247,400
s Receivable Home Office
2,400
Expenses Home Office
7,000
Cash s Receivable Sales Expenses Cash
2,400 7,000 247,400 40,600 288,000 21,000 21,000
Merchandise Inventory, end P30,100 + P1,400 Sales Income Summary Merchandise Inventory, beginning P257,600 + P1,400 Shipments from Home Office Expenses Income Summary Home Office
Requirement 2 Baguio Branch Branch Income
31,500 288,000 15,000 17,500 259,000 28,000 15,000 15,000 15,000 15,000
Allowance for Markup in Branch Inventory Branch Income (P17,500 + P259,000 – P31,500) x 40/140
70,000
Branch Income Income Summary
85,000
70,000
85,000
Requirement 3 Shipments from Home Office Home Office
1,400
Cash Home Office
2,000
1,400 2,000
Problem 9 - 4 Requirement 1 Triple D Bookstore Statement of Recognized Income and Expenses - Quezon City Branch For the Year Ended December 31, 2008 Sales Cost of Goods Sold: Merchandise Inventory, beginning Shipments from Home Office Cost of Goods Available for Sale Less Merchandise Inventory, end
P192,690 P 31,500 128,000 P159,500 22,750
136,750
AA1- Chapter 9 (2008 edition)
page 10
Gross Profit Operating Expenses: Advertising and Promotion Depreciation Uncollectible s Expense Others Net income
P 55,940 P
6,400 2,400 1,250 36,600 P
Requirement 2 Branch Branch Income
46,680 9,260
9,260 9,260
Allowance for Markup in Branch Inventory Branch Income P136,750 x 25/125
27,350
Branch Income Income Summary
36,610
27,350
36,610
Problem 9 - 5 Branch Books a.
b.
Sales Merchandise Inventory, end Income Summary Merchandise Inventory, beginning Shipments from Home Office Selling Expenses istrative Expenses Home Office Income Summary
78,000 12,000 10,000 10,000 80,000 4,000 6,000 10,000 10,000 Home Office Books
a.
b. c.
d. e.
Sales Shipments to Branch Merchandise Inventory, end Merchandise Inventory, beginning Purchases Selling Expenses istrative Expenses Income Summary
310,000 64,000 30,000 25,000 300,000 20,000 30,000 29,000
Branch Income Branch
10,000
Allowance for Overvaluation in Branch Inventory Branch Income P18,000 - (P12,000 x 25/125) = P15,600
15,600
Branch Income Income Summary Income Tax Income Tax Payable
10,000 15,600 5,600 5,600 12,110 12,110
AA1- Chapter 9 (2008 edition)
f. g.
page 11
Income Summary Income Tax
12,110
Income Summary Retained Earnings
22,490
12,110 22,490
Problem 9 - 6 Requirement 1 Triple F Products Inc. - Branch Trial Balance December 31, 2008 Debit 12,800 48,160 27,280
Cash s Receivable Merchandise Inventory s Payable Home Office Sales Cost of Sales Operating Expenses
Credit
2,040 68,900 256,000 191,620 47,080 326,940
_______ 326,940
Requirement 2 Home Office Books a.
b. c.
d. e. f. g.
Sales Income Summary Cost of Sales Operating Expenses
640,600 41,360 452,840 146,400
Branch Branch Income
17,300
Allowance for Overvaluation of Branch Inventory Branch Income P191,620 x 10/110 P21,100 ÷ (P202,400 + P29,700 – P21,100) = 10%
17,420
Branch Income Income Summary
34,720
Income Tax Income Tax Payable
26,628
Income Summary Income Tax
26,628
Income Summary Retained Earnings
76,080
17,300 17,420
34,720 26,628 26,628 76,080 Branch Books
AA1- Chapter 9 (2008 edition)
a. b.
page 12
Merchandise Inventory P202,400 – P189,200 Home Office Sales Income Summary Cost of Sales Operating Expenses
c.
Income Summary Home Office Requirement 3
13,200 13,200 256,000 17,300 191,620 47,080 17,300 17,300
Combined net income (P41,360 + P34,720 – P26,628) Combined Merchandise Inventory: Home Office Branch [ P27,280 + P13,200) ÷110%
P49,452 P156,640 36,800
P193,440
Problem 9 - 7 Triple G Company Combined Statement of Recognized Income and Expenses for Home Office and Branch For the Year Ended December 31, 2008 Sales Cost of goods sold: Merchandise inventory, beginning Purchases Cost of goods available for sale Less Merchandise inventory, end Gross profit Operating expenses Net income before Income Tax Income Tax Net Income
P325,000 P107,500 215,000 P322,500 81,300
241,200 P 83,800 50,000 P 33,800 11,830 P 21,970
Inventory: Beginning Ending Home Office P 80,000 Branch P7,500 + (P24,000/120%) 27,500 P5,500 + (P26,000/125%) Total P107,500 ** P37,500 – P30,000 = P7,500/ P30,000 = 25% Requirement 2 Davao Branch Books a. Sales 75,000 Merchandise Inventory, end 31,500 Income Summary Shipments from Home Office Purchases Expenses
P55,000 26,300 P81,300
12,500 37,500 15,000 10,000
AA1- Chapter 9 (2008 edition)
page 13
Merchandise Inventory, beginning
31,500
b.
Income Summary Home Office Requirement 3
12,500 12,500 Home Office Books
a. b.
c.
d. e. f. g.
Davao Branch Branch Income Allowance for Markup in Branch Inventory Branch Income Markup on branch beginning inventory (P24,000 x 20/120) Markup on shipments Allowance balance before adjustments Markup on branch ending inventory (P26,000 x 25/125) Realized markup Sales Shipments to Branch Merchandise Inventory, end Income Summary Purchases Expenses Merchandise Inventory, beginning
12,500 12,500 6,300 6,300 P 4,000 7,500 P11,500 5,200 P 6,300 250,000 30,000 55,000 15,000 200,000 40,000 80,000
Branch Income Income Summary
18,800
Income Tax Income Tax Payable
11,830
Income Summary Income Tax
11,830
Income Summary Retained Earnings
21,970
18,800 11,830 11,830 21,970
Problem 9 – 8 Requirement 2 a. Plant Assets Branch
4,000
b.
Home Office s Receivable
2,000
Cash Branch
5,000
Expenses Home Office
1,000
c. d.
4,000 2,000 5,000 1,000
AA1- Chapter 9 (2008 edition)
e. f.
g. h.
page 14
Shipments from Home Office Home Office
3,000
Retained Earnings Inventory P15,000 x 20/120
2,500
3,000 2,500
Home Office Branch
11,000
Sales Shipments from Home Office
48,000
11,000 48,000
AA1- Chapter 9 (2008 edition)
page 15
MULTIPLE CHOICE 1.
B
3.
C
5.
D
7.
D
AA1- Chapter 9 (2008 edition)
2.
B
9
A
page 16
4.
D
6.
B
10 11 12 13
C C D C
P13,200 + P350 = P13,550 P11,000 + P350 = P11,350
14
A
P12,000 x 20/120 = P2,000
15
D
Inventory, beginning (P165,000 / 125%) Shipments (P110,000 / 125%) Merchandise available for sale from home office at cost Cost of merchandise sold from home at cost Sales, net of returns and allowances Less Sales from merchandise purchased from outsiders (P7,500 x 120%) Sales from merchandise from home office Cost of sales at billed price Billed price rate Inventory destroyed by fire
8.
D
P132,000 88,000 P220,000 P165,250 9,000 P156,250 ÷ 125% P125,000 ÷ 125%
100,000 P120,000
16
D
Balance of allowance before adjustment Required balance of allowance (P1,170,000 x 20/120) Realized markup
P370,000 195,000 P175,000
17
C
Sales Cost of goods sold (P120,000 x 3/4 x 125%) Gross profit Operating expenses Net income reported by the branch
P141,000 112.500 P 28,500 27,000 P 1,500
18
A
P50,400/120%
P42,000
19
B
P90,000 + P36,000 – P2,520 – P50,400/120% = P60,900
20
B
Net income (loss) reported by branch Realized markup (P90,000 + P36,000 – P2,520 - P50,400 = P73,080) x 20/120 True net income of the branch
(P 7,800) 12,180 P 4,380
21
B
Net income reported by branch Realized markup [(P3,960 + P17,600 – P4,840) x 10/110] Actual branch income
P 4,800 1,520 P 6,320
22
B
Branch ending inventory, at cost (P4,840 / 110%) Home office ending inventory Ending inventory to be reported in the combined balance sheet
P 4,400 11,200 P15,600
23
D
Net income reported by the branch
P 5,000
AA1- Chapter 9 (2008 edition)
page 17
Realized markup[P280,000 - (P50,000 – P6,600)] x 40/140 True net income of the branch
67,600 P 72,600
24
B
Branch inventory from home office (P43,400 /140%) Branch inventory from outside purchases Total cost of branch inventory, end
P31,000 6,600 P37,600
25
D
P60,000 - P7,500
P52,500
26
A
P60,000 - (P7,500 x 120/20)
P15,000
27
B
Sales Cost of goods sold (P180,000 + P45,000 - P60,000) Operating expenses Realized markup [(P180,000 x 20/120) - P7,500 True net income of the branch
P 292,500 (165,000) ( 72,000) 22,500 P 78,000
28
A
Unadjusted balance of allowance Markup on 2008shipments from home office (P390,000 – P300,000) Markup on beginning inventory Total merchandise inventory beg Merchandise from outside purchases
29
D
Sales Cost of goods sold (P54,600 + P390,000 + P144,600 - P48,750) Operating expenses Realized markup [P99,900 - (P39,000 x 30/130)] True net income of the branch
P99,900 90,000 P 9,900 x 130/30
P 42,900 54,600 P 11,700 P540,000 (540,450) ( 51,000) 90,900 P 39,450
30
C
P39,000 x 30/130 = P9,000
31
D
Sales (net of discount of P1,480) Cost of goods sold (P104,000 - P12,500) Operating expenses Net income reported by branch
P115,520 ( 91,500) ( 20,000) P 4,020
32
C
Net income reported by branch Realized markup (P91,500 x 25/125) True net income of the branch
P 4,020 18,300 P 22,320
33
C
Sales Cost of goods sold (P5,000 + P2,000 + P26,400 – P4,500) Operating expenses Realized markup [P2,800 – (P3,960 x 10/110)] True profit of Cebu branch
P 37,400 ( 28,900) ( 3,000) 2,440 P 7,940
34
D
Sales
P110,000
AA1- Chapter 9 (2008 edition)
page 18
Cost of goods sold (P16,000 + P80,000 – P24,000 – P20,000) Operating expenses Net income of the home office Net income of the branch Combined net income of the home office and branch 35
36
C
A
Sales Cost of sales: Inventory, beginning Purchases Goods available for sale Shipments to branch (P110,000/110%) Goods available for own sale Less Inventory, end Gross profit Expenses Net income Sales Cost of sales: Inventory, beginning (P11,550 – P1,000) Shipments from HO, including freight-in Goods available for sale Less Inventory, end [(P10,400 + P5,000)/110%] + P520 + P250 Gross profit Expenses True branch net income
( 52,000) ( 10,000) P 48,000 7,940 P 55,940 P155,000
P 23,000 190,000 P213,000 100,000 P113,000 30,000
83,000 P 72,000 52,000 P 20,000 P140,000
P 10,550 105,750 P116,300 14,770
101,530 P 38,470 28,400 P 10,470
37
D
(P10,400 + P5,000) x 10/110
P1,400
38
B
Unadjusted balance of allowance Markup on 2008 shipments (P200,000 x 25%) Markup on beginning inventory Branch beginning inventory at billed price
P 57,500 50,000 P 7,500 x 125/25 P 37,500
39
C
Sales Cost of goods sold (P37,500 + P250,000 - P40,000) Operating expenses Net income reported by branch
P400,000 (247,500) (100,000) P 52,500
40
C
Net income reported by branch Realized markup (P247,500 x 25/125) True net income of the branch
P 52,500 49,500 P102,000
41
B
Beginning inventory Purchases
P
8,000 30,000
AA1- Chapter 9 (2008 edition)
Shipments from home office Ending inventory Cost of goods sold reported by branch Realized markup [P19,750 - (P6,000 x 25/125)* Cost of goods sold at cost
page 19
93,750 ( 10,350) P 121,400 ( 18,550) P 102,850
*P93,750 – P75,000 = P18,750/P75,000 = 25% 42
C
The amount of the realized markup of P18,550
43
C
Adjusted net income Reported net income Realized markup Cost of sales at cost (P70,000 + P350,000 – P84,000) – P96,000
P156,000 60,000 P 96,000 ÷ P240,000 140%
44
C
P84,000 x 40/140
P24,000
45
A
72,500 ÷ (75,000 + 444,000 -84,000 – 72,500)
20%
46
D
P444,000 / 120%
P370,000
47
D
Sales Cost of goods sold (P75,000 + P444,000 - P84,000) Operating expenses Realized markup [P72,500 - (P84,000 x 20/120)] Adjusted profit of the branch
P 600,000 (435,000) (200,000) 58,500 P 23,500
48
C
P84,000 x 20/120 = P14,000
49
A
P84,000 – P14,000 = P70,000
50
B
Home office inventory (P160,500 - P10,500) Branch inventory (P108,000/120%) Inventories reported in the combined balance sheet
P 150,000 90,000 P 240,000
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