Home office and Branch

1. The Carigara branch of the Apparel International, INC is billed for merchandise by the home office at 20% above cost. The branch in turn prices merchandise for sales purposes at 25% above. On October 8, 2012 all of the branch merchandise was destroyed by fire. No insurance was maintained. Branch accounts showed the following information:

Merchandise inventory, January 1 (at billed price)P 126,400 Shipments from home office (January 1 – October 8) 120,000 Sales 115,000
Sales Returns 12,000
Sales allowances 11,000

What was the cost of merchandise destroyed by fire?

2. Bangladesh Branch was billed by Home Office for merchandise at 140% of cost. At the end of its first month, Bangladesh branch submitted among other things, the following data:

Merchandise from Home Office (at billed price)P 98,000
Merchandise purchased locally by branch 40,000
Inventory, December 31 of which P 7,000 are of local purchase 28,000 Net sales for the month 180,000

How much was the branch inventory at cost and the gross profit of the branch as far as the home office is concerned?

3. On December 31, 2012, the Investment in Branch account on the home office’s books has a balance of P 102,000. In analyzing the activity in each of these accounts for December, you find the following differences:

1. A P 12,000 branch remittance to the home office initiated on December 27, 2012, was recorded on the home office books on January 3, 2013.

2. A home office inventory shipment to the branch on December 28, 2012, was recorded by the branch on January 4, 2013; the billing of P 24,000 was at cost.

3. The home office incurred P 14,400 of advertising expenses and allocated P 6,000 of this amount to the branch on December 15, 2012. The branch has not recorded this transaction.

4. A branch customer erroneously remitted P 3,600 to the home office. The home office recorded this cash collection on December 23, 2012. Meanwhile, back at the branch, no entry has been made yet.

5. Inventory costing P 51,600 was sent to the branch by the home office on December 10, 2012. The billing was at cost, but the branch recorded the transaction at P 40,800.

a. Compute the Unadjusted balance of the Home Office account Compute the adjusted balance of the Branch current account.