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Problem 5. "The Capitol" Inc. has established a branch in District 5 by sending goods costing P184,900 and P80,000 cash on July 1, 2013. Home office initiated transactions for the remainder of the year are found below. At the end of the year, the ""AGENCY, HOME OFFICE AND BRANCH ACCOUNTING. P2 105 5 GMT -01:00 Page 2 W/www.councher.com/file/23594517/200335187-12-105-Agency-Home Office and-Branch-Accounting-Ley-Answers/ company's controller has found out that Seneca Crane. the accounting staff assigned in recording the transactions between home office and the branches, had failed to record all the transactions initiated by the branch. Because of this, there is a significant discrepancy between the balances of the reciprocal accounts. The home office acquired computer equipment amounting to P420,000 for the branch on August 1, 2013, As per agreement, the branch will keep all the property. plant and equipment records. Goods costing P320,000 were shipped from the home office to branch on November 9, 2013. Additional cash amounting to P53,000 was transferred to the branch on December 2, 2013, A branch customer has incorrectly paid P25.000 cash to the home office on December 16, 2013. The home office incurred P65,000 o advertising cost and P96,000 of salaries. District 5 branch is to shoulder 30% and 20%% of these expenses, respectively. For purpose of reconciling the reciprocal accounts, the controller has instructed the branch accountant to send a copy of the Home Office Current general leger to the home office. Home Office Current 8/3 Equipment acquisition P420,000 7/1 Goods from HO P184.900 11/5 Cash remittance 78,000 7/1 Cash 80,000 12/20 Return of goods to HO 49.000 8/15 Collection of HO's AR 113,600 11/10 Goods from HO 230.000 12/4 Cash 50,300 P111,800 Determine the following: 1. Unadjusted balance of the Investment in District 5 account: a. P1,142,800 b. P1,044.800 c. P1,071,600 d. P1,058,200 2. Net adjustment in the Home Office Current account, Indicate whether net debit or net credit: 3. P946,400 net debit b. P946,400 net credit c. P996.400 net debit d. P946,400 net creditProblem 4. The District 4 branch of The Capitol Inc. submitted trial balance as of December 31, 2013 after the first year of operations: Debit Credit Cash P10.400 Accounts receivable 63.200 Shipments from home office 168.000 Expenses 10.800 3/6 Sales P134.400 Home office current 118,000 Merchandise Inventory, December 31 - P50,400 Shipments to the branch are billed at 140% of cost Questions: 1. The adjustment to the cost of goods sold of the Branch account amounts to: a. P-0- b. P14.400 C. P33,600 d. P68,600 2. The true net income of the branch during 2013 was a. PO- b. P6.000 C. P33.600 d. P39.600 3. The overstatement in the branch inventory at December 31, 2013 was a. P-0- b. P6.000 C. P14.400 d. P29.400
