Solution Chapter 12

Chapter 12

Problem I

(a)Working Fund Agency .. 5,000 Cash . 5,000 (b)Accounts Receivable ..................................... 50,000 Sales-Agency . 50,000

(c)Cash ..................................... 35,000 Accounts Receivable .. 35,000

(d)Expenses-Agency .. 4,500 Cash . 4,500

(e)Expenses-Agency .. 2,250 Cash . 2,250

(f)Cost of Goods Sold-Agency 36,000 Merchandise Shipments-Agency . 36,000

Problem II

(a) Branch Books:

(a) Cash .. 42,500 Home Office 42,500

(b) Shipments from Home Office 50,200 Home Office ... 50,200

(c) Accounts Receivable . 60,000 Sales .. 60,000

(d) Purchases 22,500 Accounts Payable 22,500

(e) Home Office .. 53,400 Accounts Receivable .. 53,400

(f) Accounts Payable ... 12,250 Cash .. 12,250

(g) Furniture & Fixtures 8,000 Cash .. 8,000

(h) Expenses .. 18,000 Cash .. 18,000

(b) Home Office Books:

(a) Branch . 42,500 Cash . 42,500

(b) Branch 50,200 Shipments to Branch .. 50,200

(c) Accounts Receivable ... 105,000 Sales 105,000

(d) Purchases . 122,500 Accounts Payable . 122,500

(e) Cash .. 113,600 Accounts Receivable 113,600

(f) Accounts Payable . 124,000 Cash 124,000

(g) Expenses 26,600 Cash 26,600

(h) Cash .. 53,400 Branch ... 53,400

(i) Retained Earnings . 10,000 Cash ... 10,000

BARTON CO.

Balance Sheet for Branch

December 31, 20x4

Assets Liabilities

Cash P 4,250 Accounts Payable P 10,250 Accounts Receivable 12,600 Accrued Expenses 300 Merchandise Inv... 23,500 Home Office .. 37,900 Prepaid Expenses 750 Furnitures & Fixtures . P 8,000 Less accum. Depr 650 7,350 Total Assets P48,450 Total Liabilities .P48,450

BARTON CO.

Income Statement for Branch

For Year Ended December 31, 19X6

Sales P66,000 Cost of Goods Sold:

Purchases P22,500

Shipments for home office . 50,200 Merchandise available for sale P72,700 Less merchandise inv, December 31 .. 23,500 Cost of Goods Sold .. 49,200 Gross Profit . P16,800 Expenses 18,200 Net loss ... P 1,400

BARTON CO.


For Year Ended December 31, 20x4

Assets Liabilities & Stockholders Equity

Cash .. P 23,200 Liabilities Accounts Receivable .. 19,050 Accounts payable P 21,300 Merchandise Inventory 48,500 Accrued Expenses . 1,350 P22,650 Prepaid Expenses . 2,050 Stockholders Equity Furniture & Fixtures . P 20,000 Capital stock, P20 par P50,000 Less accum. Depr.. 5,580 14,420 Retained Earnings . 72,740 122,470 Branch 37,900 Total liabilities and stockholders Total Assets ... P145,120 equity P145,120

BARTON CO.

Income Statement for Home Office


Sales ....... P105,000 Cost of goods sold:

Merchandise inventory, January 1 . P 40,120 Purchases ... 122,500 Merchandise available for sale P162,620 Less shipments to branch ... 50,200 Merchandise available for own sale .. P112,420 Less merchandise inventory, December 31 . 48,500 Cost of Goods Sold . 63,920 Gross Profit P 41,080 Expenses 27,630 Net income from own operations .. P 13,450 Deduct branch net loss . 1,400 Total Income . P 12,050

BARTON CO.



Sales . P171,000 Cost of goods sold:

Merchandise inventory, January 1 .. P 40,120 Purchases 145,000 Merchandise available for sale P185,120

Less merchandise inventory, December 31 .. 72,000 Cost of goods sold . 113,120 Gross profit .. P 57,880 Expenses .. 45,830 Net Income . P 12,050

(a) Branch Books:

Expenses . 650 Accumulated Depreciation F&F. 650

Sales 66,000 Merchandise Inventory . 23,500 Income summary .. 89,500

Income Summary 90,900 Shipments from Home Office 50,200 Purchases 22,500 Expenses .. 18,200

Home Office 1,400 Income Summary 1,400

(b) Home Office Books

Expenses . 1,180 Accumulated Depreciation F&F. 1,180

Sales 105,000 Merchandise Inventory . 48,500 Shipments to Branch .. 50,200

Income summary .. 203,700 Income Summary 190,250 Merchandise Inventory 40,120 Purchases . 122,500 Expenses .. 27,630

Branch Income 1,400 Branch . 1,400

Income Summary .. 1,400 Branch Income 1,400

Income Summary .. 12,050 Retained Earnings .. 12,050

Problem III

(a) Branch Books:

Jan. 1 Cash . 1,500 Home Office 1,500

1 Shipments from home office . 10,200 Home Office 10,200

1 Home Office .. 900 Cash .. 900

1 Accts. Rec. Home office . 2,600 Home Office 2,600

1-31 Accts. Rec.-Home Office . 6,200 Sales .. 6,200

1-31 Cash .. 2,600 Accounts Receivable .. 2,600

1-31 Purchases . 3,000 Accounts Payable 3,000

1-31 Accounts Payable . 1,450 Cash .. 1,450

1-31 Expenses .. 1,250 Cash . 1,250

Jan. 1-31 Cash 1,600 Accts. Rec.-Home Office ... 1,600

1-31 Home Office 150 Accts. Rec.-Home Office . 150

1-31 Shipments from Home Office 1,250 Home Office . 1,250

1-31 Home Office 1,000 Cash 1,000


Jan. 1 Branch .. 1,500 Cash 1,500

1 Branch .. 10,200 Shipments to Branch .. 10,200

1 Store Furniture and Fixtures Branch .. 3,000 Store Furniture and Fixtures ... 3,000

1 Accumulated Depr. Store F&F .. 750 Accumulated Depr. Store Furniture

And Fixtures, Branch .. 750

Calculation of depreciation: 2.5years at P300, (10% of

P3,000), or P750

1 Store Furniture and Fixtures Branch .. 900 Branch 900

1 Branch 2,600 Accounts Receivable ......... 2,600

1-31 Accounts Receivable 34,600 Sales ................................ 34,600

1-31 Cash . 40,000 Accounts Receivable 40,000

1-31 Purchases .31,600 Accounts Receivable . 31,600

1-31 Accounts Payable 36,200 Cash ... 36,200

1-31 Accrued Expenses Payable . 250 Expenses . 8,950 Cash .. 9,200

1-31 Allowance for Doubtful Accounts .. 150 Branch .. 150

1-31 Branch . 1,250 Shipments to Branch 1,250

1-31 Cash 1,000 Branch . 1,000

EAGLE CO.

Balance Sheet

January 31, 20x4

Assets Liabilities

Cash ............................ P 1,100 Accounts Payable . P 2,400 Accounts Receivable .. 3,600 Accrued expenses . 400 Accts. Rec.-home office . 850 Home Office 14,050 Merchandise Inventory 9,800 Merchandise in Transit . 600 Total assets P37,200 Total Liabilities . P37,200

EAGLE CO.


For Month Ended January 31, 20x4

Sales . P 6,200 Cost of Goods Sold:

Purchases P 3,000 Shipments from home office . 11,450 Shipments from home office in transit .......... 600 Merchandise Available for Sale .. P15,050 Less merchandise inv. Dec 31, 19X9 ................P9,800 Merchandise in transit .. 600 10,400 Cost of Goods Sold . 4,650

Gross Profit P 1,550 Expenses 2,110 Net Loss .. .. P 560

EAGLE CO.

Balance Sheet for Home Office

January 31, 20x4

Assets

Cash P 9,100 Accounts Receivable P34,000 Less allowance for doubtful accounts .. 1,050 32,950 Merchandise Inventory . 44,500 Store furniture and fixtures P12,000 Less accumulated depreciation . 3,950 8,050 Store furniture and fixtures-branch P 3,900 Less accumulated depreciation 785 3,315 Branch office ... 14,050 Total Assets P111,765

Liabilities

Accounts Payable .. P29,150 Accrued Expenses .. 750 Total Liabilities .. P29,900

Stockholders Equity

Capital Stock P50,000 Retained earnings .. 31,865 Total stockholders equity 81,865 Total liabilities and stockholders equity P111,765

AGLE CO.



Sales P 34,600 Cost of goods sold:

Merchandise inventory, January 1 .. P46,000 Purchases 31,600

Merchandise available for sale 77,600 Less shipments to branch 12,050 Merchandise available for own sales . P65,550 Less merchandise inventory, January 31 44,500 Cost of goods sold 21,050 Gross Profit P 13,650 Expenses 9,325 Net income from own operations . P 4,225 Deduct branch net loss 560 Total Income P 3,665

EAGLE CO.



Assets Liabiities and Stockholders Equity

Liabilities

Cash .. . P 10,200 Accounts Payable P30,700 Accounts receivable .. P38,450 Accrued Expenses 1,100 P 31,800 Less allow for doubt-

Ful accounts .. 1,050 37,400 Merchandise Inventory .. 54,900 Stockholders Equity Store furn. & fixtures P15,900 Capital Stocks P50,000 Less accum depr 4,735 11,165 Retained earnings 31,865 81,865 Total assets P113,665 Total liab. And stockholders equity . P113,665

EAGLE CO.

Combined Income Statement for Home Office and Branch


Sales .. P 40,800 Cost of goods sold:

Merchandise Inventory, January 1 . P46,000 Purchases ... 34,600 Merchandise available for sale ... P80,600 Less merchandise inventory, Jan 31 ... 54,900 Cost of goods sold ............................... 25,700 Gross profit ... P 15,100 Expenses 11,435 Net Income .. P 3,665

(a) Branch Books

Jan. 31 Shipments from Office-in Transit 600 Home Office . 600

31 Expenses . 475 Home Office . 475 31 Expenses 35 Home Office .. 35 1/120 x P3,000, or P25 (depreciation for one month;

Asset life, 10 years); 1/90 x P900, or P10 (depreciation

For one month; asset life, 7.5 years)

31 Merchandise Inventory 9,800 Merchandise in Transit .. 600 Income Summary 10,400

31 Expenses .. 350 Accrued Expenses . 350

31 Sales . 6,200 Income Summary .. 6,200

31 Income Summary . 17,160 Shipments from Home Office . 11,450 Ship. From Home Office in Trans . 600 Purchases 3,000 Expenses .. 2,110

31 Home Office .. 560 Income Summary ... 560


31 Branch . 600 Shipments to Branch . 600

31 Branch . 475 Expenses ... 475

31 Branch . 35 Accumulated Depreciation, Store

Furniture and Fixtures Branch .. 35

31 Expenses . 100 Accumulated Depreciation store

Furniture and Fixtures branch . 100 1/120 x P12,000, or P100 (depreciation for one

Month; asset life, 10 years)

31 Income Summary 46,000 Merchandise Inventory 46,000

31 Merchandise Inventory .. 44,500 Income Summary .. 44,500

31 Expenses . 750 Accrued Expenses . 750

31 Sales 40,925 Purchases 31,600 Expenses .. 9,325

31 Branch Income . 560 Branch .. 560

31 Income Summary . 560 Branch Income ... 560

31 Income Summary . 3,665 Retained Earnings .. 3,665

Problem IV

1.

Socrates Company

Home Office and Plato Branch

Reconciliation of Reciprocal Ledger Accounts

June 30, 20x4

Investment in

Plato Branch Home Office

Ledger Ledger

Account Account

(Debit) (Credit)

Balances prior to adjustment P85,000 P33,500

Add: Merchandise shipped to branch 24,000

Less: Acquisition of office equipment by branch

(carried in accounting records of home office) (14,500)

Collection of branch trade accounts receivable (9,000)

Payment of cash by branch (22,000) _______

Adjusted balances P48,500 P48,500

2. (a) Accounting records of home office:

Office Equipment: Plato Branch 14,500

Investment in Plato Branch 14,500

To record acquisition of office equipment by branch.

Cash in Transit 22,000

Investment in Plato Branch 22,000

To record cash in transit from branch.

(b) Accounting records of branch:

Home Office 9,000

Trade Accounts Receivable 9,000

To record collection by home office of branch accounts

receivable.

Inventories in Transit 24,000

Home Office 24,000

To record shipment of merchandise in transit from

home office.

Problem V

((a) BRANCH HOME OFFICE

ACCOUNT ACCOUNT Balances before Adjustments .. P 8,400 P 9,735 Adjustments:

Additions:

Merchandise in transit to branch . 615 Collection of Home office receivable by Branch 2,500

Understatement of branch net income for Nov.. 90

P10,990 P10,350

Deductions:

Merchandise return to home office in transit . 640 Corrected Balances P10,350 P10,350

(b) Branch Books:

Shipments from Home Office-in Transit . 615 Home Office ... 615

Home Office Books:

Branch 2,500 Accounts Receivable .. 2,500

Branch 90 Retained Earnings . 90

Merchandise Returns from Branch in Transit . 640 Branch .. 640

Multiple Choice Problem

1. d

Branch A Branch B

Assets:

Inventory, January 1 P 21,000 P 19,000

Imprest branch fund 2,000 1,500

Accounts receivable, January 1 55,000 43,500

Total Assets P 78,000 P 64,000

Less: Liabilities -0- -0-

Home Office Current Account P 78,000 P 64,000

2. b

Branch A Branch B

Assets:

Inventory, December 31 P 19,000 P 12,000

Imprest branch fund 2,000 1,500

Accounts receivable, December 31 70,000 53,500


Less: Liabilities -0- -0-


3. d incidentally, the entry in the books of the branch would be as follows: Profit and loss summary xxx Home Office Current. Xxx

4. c

January January 1,

1,20x4 20x5

Assets:

Inventory P 37,000 P 41,000

Petty cash fund 3,000 3,000

Accounts receivable 43,000 49,000


Less: Liabilities _____-0- _____-0-


5. a refer to No. 4 for computations 6. a

Sales P 74,000

Less: Cost of goods sold:

SFHO P67,680 Less: Inventory, ending 9,180 58,500 Gross profit P 15,500 Less: Expenses 6,820 Net Loss.. P 8,680

7. a

January 1,

20x6

Assets:

Cash P 4,200

Inventory 9,180

Accounts receivable 12,800

Total Assets P 26,180

Less: Liabilities _____-0-

Home Office Current Account P 26,180

8. a nominal accounts have zero beginning balance. 9. d

Branch

Current

H. Office

Current Unadjusted balance, 6/30/20x4 P 225,770 P 226,485*

Add (Deduct): Adjustments

1 Erroneous recording of branch equipment 3150

2. Insurance premium recorded twice ( 675)

3. Erroneous recording of freight ( 90)

4. Discount on merchandise ( 800)

5. Failure by the branch to record share in advertising 700

6. error by the home office to record remittance of Cebu 3,000 ________

Adjusted balance, 6/30/20x4 P 228,770 P 228,770

* The P226,485 is compute simply by working back with P228,770 adjusted balance as the starting point.

10. c

Home Office Books

(Branch Current-

Branch Books

(Home Office Current

P2-07

Dr. balance) Cr. balance)

Unadjusted balance P518,575 P452,276

Add (deduct) adjustments:

In transit 10,500

Remittance ( 17,000)

Returns ( 775)

Cash in transit 25,000

Expenses - HO

Expenses branch Error

( 800)

________

12,000

_____224

Adjusted balance P 500,000 P 500,000

11. d

Home Office Books

(Branch Current-

Dr. balance)

Branch Books

(Home Office Current Cr. balance)



Excess freight ( 750)

Cash in transit ( 11,000)

Returns ( 4,000)

Expenses branch

________ 5,000


12. c refer to No. 11 for computations 13. a refer to No. 11 for computations 14. No answer available P495,750 15. d - No entry should be made in the books of the home office, since the freight should be

chargeable to the branch and the payment of the freight was made by the branch.

16. b

Home Office Books

(Branch Current-

Dr. balance)

Branch Books




Remittance (40,000)

Returns (15,000)

Error by the branch 300

Expenses branch

________ 28,000


17. c

Home Office Books

(Branch Current- Dr.

balance)

Branch Books




In transit 37,500

HO A/R collected by br. 10,500

Supplies returned ( 4,500)

Error in recording Br. NI ( 1,080)

Cash sent to branch

to General Expense by HO

25,000

25,000


18. d refer to No. 17 for computation.

19. a

Home Office Books


balance)

Branch Books




In transit 5,800

HO A/R collected by br. 500

Cash in transit 2,000 2,000

Error in recording Br. NI ( 3,600) _______

Adjusted balance P38,900 P38,900

20. a refer to No. 19 for computations

21. a

Home Office Books


balance)

Branch Books




Collection of branch A/R ( 800)

In transit 3,200

Purchase of furniture ( 1,200)

Return of excess merchandise ( 1,500)

Remittance ( 500) _______

Adjusted balance P46,400 P46,400

22. b refer to No. 21 for computations

23. (C)

Sales (P350,000 + P100,000).P 450,000 Less: Cost of goods sold:

Purchases (P400,000 + P50,000). P 450,000 Less: Inventory, ending 90,000 360,000 Gross profit P 90,000 Less: Expenses Salaries and commission.. P 70,000 Rent 20,000 Advertising supplies (P10,000 P6,000) 4,000 Other expenses. 5,000 99,000 Net Loss.. P( 9,000)

24. a

In adopting the imprest system for the agency working fund, the home office writes a check to the

agency for the amount of the fund. Establishment of the fund is recorded on the home office

books by a debit to the Agency working fund and credit cash. The agency will request fund

replenishment whenever the fund runs low and at the end of each fiscal period. Such a request is

normally accomplished by an itemized and authenticated statement of disbursements and the

paid vouchers. Upon sending the agency a check in replenishment of the fund, the home office

debits expense or other accounts for which disbursements from the fund were reported and

credits cash.

25. d

Normally, transactions of the agency are recorded in the books of the home office separately

identified with the appropriate agency.

Theories

1. True 6. False 11. False 16. b 21. a 26. c 31. b

2. True 7. False 12. False 17. c 22. b 27. b 32. b

3. False 8. False 13. True 18. d 23. b 28. d 33. c

4. False 9. True 14. True 19. a 24. b 29. d 34. c

5. True 10, True 15. True 20. c 25. a 30. c 35. c

36. d

Solution Chapter 12

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Transcript of Solution Chapter 12