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    HOBA 2 Activity

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    No Notreally
    home office and branch (AFAR)

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    © All Rights Reserved
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    HOBA 2 Activity

    Uploaded by

    No Notreally
    3 views1 page
    home office and branch (AFAR)

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    © © All Rights Reserved

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    PDF, TXT or read online from Scribd

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    home office and branch (AFAR)

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    3 views1 page

    HOBA 2 Activity

    Uploaded by

    No Notreally
    home office and branch (AFAR)

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 1

    HOME OFFICE AND BRANCH ACCOUNTING

    Accounting for Overvaluation and Inventoriable Freight Cost

    Problem 1
    Income statement submitted by the ABC branch to the home office for the month of December
    2021 is shown below. After deducting the necessary adjustments, the true net income of the
    branch was ascertained to be P156,000.
    Sales P600,000
    Cost of sales
    Inventory, December 1 P80,000
    Shipments from HO 350,000
    Local purchases 30,000
    Inventory, December 31 100,000 360,000
    Operating expenses 180,000

    The branch inventories were:


    12/01/2021 12/31/2021
    Merchandise from HO P70,000 P84,000
    Local purchases 10,000 16,000

    Determine the billing price based on cost and the balance of allowance for overvaluation of
    branch on December 31, 2021.

    Problem 2
    On March 1, 2024, ABC’s home office established the Caloocan and Manila branches. The
    home office transferred P5,600,000 cash and merchandise costing P12,000,000 to its Caloocan
    branch. The home office bills merchandise shipments to branches at 110% of cost. On March
    15, the home office instructed the Caloocan to transfer sixty percent of the merchandise and
    cash received to the Manila branch. In addition, on June 6, 2024, the Caloocan branch received
    shipments from the home office billed at P8,800,000. The freight amounting to P455,000 was
    paid by the branch. Seventy percent of the shipments were sold by the Caloocan branch to its
    own customers. On August 27, 2024, upon instruction from the home office, the Caloocan
    branch transferred forty percent of the remaining immediate prior month shipments from the
    home office to the Manila branch. The receiving branch paid additional freight of P105,000. Had
    the merchandise been shipped from ABC directly to the Manila branch, only P133,000 freight
    would have been incurred.

    Determine the following:


    1. Excess freight cost
    2. Balance of the investment in Manila branch in HO book.
    3. Balance of the investment in Caloocan branch in HO book.

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