Um Digos College Department of Accounting Education Acp 312 - First Exam

UM DIGOS COLLEGE
DEPARTMENT OF ACCOUNTING EDUCATION

ACP 312 – FIRST EXAM
INSTRUCTION: In a clean paper, solve the problems below by showing your solution and encircling/double
ruling your final answer. Take note of the criteria below. Criteria is applicable every problem. Total points for
the exam is 45 points. STRICTLY NO CHEATING.
Problem I
The Agila Company recently made the decision to open a branch of its business in Tarlac. Since that time, the
transactions have occurred in connection with this new operation:
 The home office acquired P 18,000 in equipment to be used (and recorded) by the branch
 The home office paid P 3,000 to lease a building for the last six months of this year. This cost was
charged to the branch
 Inventory costing P 80,000 was shipped to branch by the home office at a transfer price of P100,000.
The home office separately records all of its unrealized gains.
 The branch paid P 11,000 for various operating expenses
 The branch sold 75 percent of the inventory received, collecting P 105,000 in cash
 The branch transferred P 60,000 in cash to the home office
Required:
1. Prepare journal entries for both the home office and the branch to record the previous transactions.
2. Prepare the worksheet entries that would bring about the combination of the home office and branch at
the end of the period.
3. Produce entries to close out the operations of the branch at the end of the period.
4. Why is important to consolidate transactions of the home and branch?
Problem II
Maganda Company’s home office has the following transactions with one of its branch operations located in
Baguio:
2020
January 1 The beginning Investment in Branch account holds a debit balance of P 86,000.
January 2 The home office receives notice of a P 32,000 cash transfer deposited on
December 31, 2020 by the Baguio branch. The home office had made no previous recording.
January 6 The home office ships P 30,000 in inventory to this branch a P 34,500 transfer price.
January 10 The home office pays P 1,000 monthly rent to the owner of the Baguio branch's
building. This cost is assigned to the operations of the branch (communication is made
immediately).
January 12 The home office allocates P 3,000 of general corporate expenses to the branch
(communication is made immediately).
January 14 The home office ships P 40,000 in inventory to the Baguio branch at a transfer
price of P 46,000. The branch erroneously records the shipment as P 64,000
Page 1 of 2
January 31 The home office allocates P 3,000 in transportation costs (that were incurred during January) to
the branch. The assignment is not communicated to the branch until February 2, 2020.
February 1 Notification of a P 74,000 cash transfer is received by the home office. The
deposit was made in Baguio on January 31, 2020
Required:
1. What is the unadjusted balance of the Investment in Branch account on the home office's books as of
January 31, 2020?
2. What is the unadjusted balance of the Home Office account on the branch's financial records as of January
31, 2020?
3. What is the reconciled value for the Home Office/Branch accounts as of January 31, 2020?
4. What is the importance of reconciling the home and branch reciprocal accounts?
Problem III
The following information is extracted from the books and record of Melba Corporation and its branch. The
balances are at December 31, 2020, the third year of the corporation’s existence.
Home Office Books Branch Books
Sales P600,000
Expenses 200,000
Shipments from Home Office 360,000
Allowance for overvaluation of inventory P72,500
The branch acquires all of its merchandise from the home office. The inventories of the branch at billed prices
are as follows:
January 1, 2020 75,000 December 31, 2020 84,000
1. The percentage of profit on cost that the home office uses the bill merchandise shipped to branch is:
2. The balance of the shipments to branch account before the books are closed is:
3. The adjusted profit of the branch is:
4. What is the accounting treatment of Allowance for overvaluation of inventory account?
Criteria 5 points 3 points 2 points Weight

Completeness 0-1 missing item 2-5 missing items More than 5
missing items 1 x _____
Presentation 0-1 erasure 2-5 erasures More than 5
erasures 1 x _____
Accuracy 0-1 mistake 2-5 mistakes More than 5
mistakes 1 x _____
TOTAL 15 POINTS
Page 2 of 2

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UM DIGOS COLLEGE

DEPARTMENT OF ACCOUNTING EDUCATION

Criteria 5 points 3 points 2 points Weight

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