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Question 110
pts
PROBLEM 1 (10 points)
ENG Company opened an agency on Holy Angel University for its University Days. The
following were the transactions in relation to the agency for the month of February:
 February 15. The agency was opened with the establishment of a P45,000
working fund.
 February 20. The agency manager incurred P4,000 for the advertising
expense.
 February 22. ENG Company and HAU Udays Committee signed an
agreement for the rental fee on the space provided for the agency during the
3-day event. They charged P1,500 per day for the rent and should be paid by
the agency on a daily basis.
 February 27. At the start of the University days, the agency made sales of
P15,800. In addition, the agency incurred Miscellaneous expense amounting
to P5,600.
 February 28. The Agency earned a gross profit of P9,700.
 March 1. On the last day of the event, Agency was able to accumulate
P45,400 of total sales for the University days. Moreover, the agency working
fund was replenished on this date.

The agency has an average gross profit rate of 40% and separate the accounting for
the agency and the home office. Cost of goods sold were all carried by the home office.
The agency Manager also prepared a financial statement every day during the
University days event.

Questions:
As of February 28, How much is the sales to be reported by the agency?
As of February 28, How much is the net income of the agency?
What is the remaining balance of the working fund of the agency on February
28?
On the total operation of the agency, How much is the operating expense?
On the total operation of the agency, How much is the agency's Cost of
goods sold?
Question 210 pts
At the end of the year, the Investment in Branch - Sulu account of the home office is
P300,500. However, there are transactions discovered to have errors.
 Sulu branch bought equipment on June 1, 2020 costing P75,000 for the home
office's use and the policy is to record the asset in Sulu's books. During that
time the home office recorded the equipment and credited its reciprocal
account of its Sulu branch
 The policy of the company regarding the equipment's depreciation is that it
has a life of 15 yrs with no salvage value and the straight-line method should
be used. No entry has been made by the home office and branch.
 The home office ships merchandise to Sulu amounting to P96,700. Sulu
recorded the transaction as P97,600
 Sulu collects the home office's debtors in the amount of P32,400 and sends a
credit memo to the home office. Upon receipt of the credit memo, the home
office credited its reciprocal account in the amount of P23,400 twice.

Questions:
What is the unadjusted balance of the home office current account in the
books of Sulu at the end of the year?
What is the net adjustment of the investment in Sulu account at the end of the
year? (Add "DEBIT" or "CREDIT", after your numerical answer. e.g. "40,444.00 DEBIT",
"16,400.00 CREDIT", "143,143.00 DEBIT")
What is the net adjustment of the home office current account in the books of
Sulu branch at the end of the year? (Add "DEBIT" or "CREDIT", after your numerical
answer. e.g. "40,444.00 DEBIT", "16,400.00 CREDIT", "143,143.00 DEBIT")
How much is the adjusted balance of the Home Office Current after reconciling
the transactions?
How much is the Investment in Branch - Sulu Account in the combined

financial statements?
Question 320 pts
A balance sheet for the Biden Company as of January 1, 2021 is as follows:
ASSETS
Cash 56,600
Accounts receivable 168,000
Less: Allowance for doubtful

4,800 163,200
accounts
Merchandise inventory 184,000
Store furniture and fixtures 60,000
Less: Accumulated
15,000 45,000
Depreciation
TOTAL ASSETS 448,800

LIABILITIES &

STOCKHOLDERS’ EQUTY
Accrued expense 1,000
Accounts payable 135,000
Capital stock 200,000
Retained earnings 112,800

TOTAL LIABILITIES &
448,800
STOCKHODERS EQUITY
On this date, a branch sales office is established in Washington. The branch is sent of
the following:
1. Cash, P6,000
2. Merchandise, cost P40,800
3. Store furniture and fixtures previously used by the home office – cost
P12,000, age 2 ½ years: depreciation rate used in the past, 10% a year. The
cost of shipment and installation, P3,750, is paid by the branch. This cost is to
be written off over the remaining life of the assets. The furniture and fixtures
accounts are to be carried on the books of the Home Office. All the furniture
and fixtures of home office were acquired the same date.
4. Accounts receivable, P10,400. Accounts arose from the home office sales to
customers in Chicago. The branch is authorized to take over the accounts
and make collections.

Home office and branch transactions with outsider during year 2021 were:
Home Office Branch
Sales on account 138,400 32,800
Collections on own accounts 160,000 10,400
Purchases on accounts 126,400 12,000
Payments on account 144,800 5,800
Payment of expenses (including

36,800 5,000
accruals as of Jan. 1)
The following took place in respect to accounts received by the branch from the home
office: collections of P6,400 were made; accounts of P600 were uncollectible and were
written-off; it is believed that remaining accounts of P3,400 are collectible.

Inter-office transactions during 2021 were:
1. Merchandise shipment to branch, at cost P 5,000
2. Cash remittance to home office 4,000

The following information is to be recorded on December 31, 2021:
1. Merchandise costing P2,400 was shipped by the home office to the branch on
December 31, this merchandise is in transit and will not reach the branch until
January 2 on next year. (This shipment in not included in transfers previously
mentioned)
2. Expenses that are paid by the home office during the month and that are
chargeable to the branch total P1,900. (These are not included in the
P36,800 expenses paid previously)
3. Depreciation on furniture and fixtures is recorded at the rate of 10% a year.
4. Merchandise inventories on hand are: Home office, P178,000; Branch,
P39,200.
5. Accrued expenses are: Home office, 3,000; Branch, P1,400.

Determine the following:
Branch result of operations for the year 2021.
Branch total assets as of Dec 31, 2021.
Home office account balance before net income.
Home Office’s Net Income for year 2021.
Combined net income for the year 2021.
Combined assets as of Dec 31, 2021.
Combined total liabilities and stockholders equity
Investment in branch as of January 1, 2022 in HO Books.
Investment in Branch as of Dec 31, 2021 in Combined Balance Sheet.

Home Office Current as of Dec 31, 2021 in Branch Books.

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Question 110

How much is the Investment in Branch - Sulu Account in the combined

Accounts receivable 168,000

Less: Allowance for doubtful

Merchandise inventory 184,000

Store furniture and fixtures 60,000

TOTAL ASSETS 448,800

Accrued expense 1,000

Accounts payable 135,000

Capital stock 200,000

Retained earnings 112,800

Home Office Branch

Sales on account 138,400 32,800

Collections on own accounts 160,000 10,400

Purchases on accounts 126,400 12,000

Payments on account 144,800 5,800

Payment of expenses (including

Branch result of operations for the year 2021.

Branch total assets as of Dec 31, 2021.

Home office account balance before net income.

Home Office’s Net Income for year 2021.

Combined net income for the year 2021.

Combined assets as of Dec 31, 2021.

Combined total liabilities and stockholders equity

Investment in branch as of January 1, 2022 in HO Books.

Investment in Branch as of Dec 31, 2021 in Combined Balance Sheet.

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