Ex. 1

The following transactions pertain to a branch's first month's operations:

1. The home office sent P11,250 cash to the branch.

2. The home office shipped inventory costing P50,000 to the branch; the intracompany billing was for P62,500.

3. Branch inventory purchases from outside vendors totalled P37,500.

4. Branch sales on account were P100,000.

5. The home office allocated P2,500 in advertising expense to the branch.

6. Branch collections on accounts receivable were P56,250.

7. Branch operating expenses of P17,500 were incurred, none of which were paid at month-end.

8. The branch remitted P21,250 to the home office.

9. The branch's ending inventory (as reported in its balance sheet) is composed of:

Acquired from outside vendors................. .P15,000

Acquired from home office (at billing price).25,000

Total ........................................................ 40,000

Requirement: Prepare the home office and branch journal entries for these transactions, assuming a periodic inventory system is used.

EX. 2

On December 31, the Inv. in Branch account on the home books shows a balance of P150,000. The following facts are ascertained:

1.Merchandise billed at P5,000 is in transit on December 31, from the home office to the branch.

2.The branch collected a home account receivable for P2,000. The branch did not notify the home office of cash collection.

3.On December 30, the home office mailed a check of P10,000 to the branch but the bookkeeper charged the check to General Expenses; the branch has not received the check as of December 31.

4.Branch profit for December was recorded by the home office at P8,900 instead of P9,800.

5.Branch returned supplies of P1,000 to the home office but the home office has not yet recorded the receipt of the supplies.

Required:

a)Compute the balance of the Home Office account on the branch book as of December 31 before its adjustment.

b)Prepare reconciliation statement to compute the adjusted balances on December 31.