Advanced Accounting Part2 Dayag 2015 Chapter 13 PDF

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Chapter 13 Problem I 1. Home Office Books Branch Current Shipments to Branch Branch Books Unrealized Int Inv. Profit 50,00 0 Shipm from Home Office Home Office Current 55,00 0 Billed price Cost Allowance for overvaluation of branch Unrealized Intercompany Inventory Profit P 2. Sales....................

Description

Chapter 13 Problem I

1. Home Office Books Branch Current Shipments to Branch

Branch Books

55,000

Unrealized Int Inv. Profit

50,00 0 5,000

Shipm from Home Office Home Office Current

55,000 55,00 0

Billed price P55,000 / 110% Cost 50,000 Allowance for overvaluation of branch inventory/ _______ Unrealized Intercompany Inventory Profit/Deferred Profit P 5,000 2.

Sales.................................................................................................................... .................. P140,000 Cost of goods sold: Merchandise inventory, September 1................................................ P 35,200 Purchases.............................................................................................. 24,000 Shipments from home office............................................................... 55,000 Merchandise available for sale.......................................................... P 114,200 Less: Merchandise Inventory, September 30..................................... 30,000 Cost of goods sold....................................................................................................... 84,200 Gross profit.................................................................................................................... ........P 55,800 Operating expenses: Selling expenses……………………………………..................................P 8,000 General expenses…………………......................................................... 12,000 Total operating expenses.......................................................................................... 20,000 Unadjusted branch net income...................................................................................... P 35,800 3. Results of Branch Operations:

a. Branch Net Income/Loss from its own operations: Branch Current………………........................................................................... 15,800

Branch Income Summary................................................................... 15,800 b. Adjustment: Overvaluation of CGS/Allowance for Overvaluation of Branch Inventory/ Unrealized Intercompany Inventory Profit: Unrealized Intercompany Inventory Profit.................................................... 4,600 Branch Income Summary.................................................................. 4,600

*P 17,600 __55,000 P 72,600 **22,000

Cost (Billing/1.10 ) P 16,000 __50,000 P 66,000 __20,000

P 50,600

P 46,000

Billing Price Inventory, 9/1 Shipments during December Available for Sale (before adjustment) Less: Inventory, 9/30 (after adjustment) Reduction in unrealized profit account- adjustment to branch profit for overstated of cost of goods sold (adjustment)

Unrealized Profit (Billing Price Minus Cost) P 1,600 __ 5,000 P 6,600 __2,000

***P 4,600

* P35,200 x 50% = P17,600 ** P30,000 – P8,000 ***or, P50,600 x 10/110 = P4,125; Decrease in Unrealized Intercompany Inventory Profit: Therefore, the True/Real/Adjusted Branch Net Income or Branch Net Income in so far as HO is concerned amounted to: Unadjusted branch net income...............................................................................P15,800 Add: Allowance for Overvaluation of CGS……………………………………………. 4,600 Adjusted Branch Net Income……………………………………………………………..P20,400 Problem II Books of Home Office

Correcting entries: A. Sales............................................................................................................... 42,000 Shipments to Branch................................................................ ………… 35,000 Unrealized Intercompany Inventory Profit........................................... 7,000 Cost of merchandise shipped t branch: P42,000/1.20= P35,000. Entry Made Correct/Should be Entry

Branch Current…………… 42,000

Branch Current………..

42,000 Branch

Sales…………………… 35,000

42,000

Shipments to Unrealized Int.

Inv Pr.

7,000

B. Shipments to Branch...................................................................................... 625 Unrealized Intercompany Inventory Profit................................................... 125 Sales Returns........................................................................................... 750 Cost of merchandise returned by branch: P750/1.20= P625. Entry Made Correct/Should be Entry Sales Returns……………… 750 Shipments to Branch………. 625 Branch Current……… 750 Unrealized Int. Inv Profit…… 125 Branch Current…………. 750 Results of Branch Operations: A. Branch Net Income/Loss from its own operations: Branch Income Summary............................................................................... 2,600 Branch Current…................................................................................ 2,600 B. Adjustment: Overvaluation of CGS/Allowance for Overvaluation of Branch Inventory/ Unrealized Intercompany Inventory Profit: Unrealized Intercompany Inventory Profit.................................................... 4,125 Branch Income Summary.................................................................. 4,125

0 42,000 _____750 P 41,250 16,500

Cost (Billing/1.20 ) P 0 35,000 ____625 P 34,375 13,750

P 24,750

P 20,625

Billing Price Inventory, December 1 Shipments during December Less: Returns Available for Sale (before adjustment) Less: Inventory, Dec. 31 (after adjustment) Reduction in unrealized profit account- adjustment to branch profit for overstated of cost of goods sold (adjustment)

P

Unrealized Profit (Billing Price Minus Cost) P

0 7,000 ____125 P 6,875 __2,750

*P 4,125

*or, P24,750 x 20/120 = P4,125; Decrease in Unrealized Intercompany Inventory Profit: Balance prior to adjustment, 12/31, P7,000 – P125................... P6,875 Balance required in account, 12/31,P16,500 – (P16,500/1.20).. 2,750 Decrease in Allowance................................................................. P4,125 Branch Income Summary (P4,125 – P2,600)....................................................1,525 Income Summary....................................................................................

1,525

Therefore, the Real/True/Adjusted Branch Net Income/Branch Net Income in so far as HO is concerned, amounted to P1,525, computed as follows: Branch net loss as reported/unadjusted……………………………………………………(P2,600) Add: Overvaluation of branch inventory/Realized profit from branch sales……….. 4,125 Real/True/Adjusted Branch Net Income or Branch NI in so far as HO is concerned P1,525 Problem III

a. Unrealized Intercompany Inventory Profit has a credit balance of P9,450 before adjustment on December 31, calculated as follows:

P 16,200 __20,250 P 36,450 __18,900

Cost (Billing/1.35 ) P 12,000 _ 15,000 P 35,625 _14,000

P 17,550

P 21,625

Billing Price Inventory, December 1 Shipments during December Available for Sale (before adjustment) Less: Inventory, Dec. 31 (after adjustment) Reduction in unrealized profit account- adjustment to branch profit for overstated of cost of goods sold (adjustment)

Unrealized Profit (Billing Price Minus Cost) P 4,200 __ 5,250 P 9,450 __4,900

*P 4,550

* or, P17,550 x 35/135 = P4,550 b. Adjustment: Overvaluation of CGS/Allowance for Overvaluation of Branch Inventory/ Unrealized Intercompany Inventory Profit (refer to “a” for computation): Unrealized Intercompany Inventory Profit.................................................... 4,550 Branch Income Summary.................................................................. 4,550 c. Home Office Books Shipments to Branch Unrealized Int Inv. Pr

400 140

Branch Books Home Office Current Shipments to Branch

540 540

Branch Current

540

Cost of merchandise returned: P540/1.35, or P400. Problem IV

1. The branch office inventory as of December 1 considered of: Shipments from Home Office (see below)............................................................. P 12,000** Purchases from outsiders (balance of inventory).................................................. 3,000 Total inventory........................................................................................................... P 15,000 Goods acquired from home office and included in branch inventory at billed price are calculated as follows:

**P 12,000 __9,600 P 21,600 __8,400

Cost (Billing/1.20 ) *P 10,000 _ 8,000 P 18,000 __7,000

P 13,200

P 11,000

Billing Price Inventory, December 1 Shipments during December Available for Sale (before adjustment) Less: Inventory, Dec. 31 (after adjustment) Reduction in unrealized profit account- adjustment to branch profit for overstated of cost of goods sold (adjustment)

Unrealized Profit (Billing Price Minus Cost) P 2,000 __ 1,600 P 3,600 __1,400

***P 2,200

*P2,000/20% = P10,000; ***P13,200 x 20/120 = P2,200 2. Adjustment: Overvaluation of CGS/Allowance for Overvaluation of Branch Inventory/ Unrealized Intercompany Inventory Profit (refer to “a” for computation): Unrealized Intercompany Inventory Profit......................................... 2,200 Branch Income Summary.......................................................... 2,200 Problems V

(1) Individual Statements SPENCER CO. Balance Sheet for Branch December 31,20x4 Assets Liabilities____________________ Cash..................................................... P 2,650 payable................................... P 4,200

Accounts

Accounts receivable........................ 12,850 expenses................................... 105 Merchandise inventory..................... 14,600 office............................................... 29,239 Store supplies...................................... 300 Prepaid expenses............................... 120 Furniture and fixtures.............. P 3,600 Less: Accumulated depreciation.............. 576 3,024 ________ Total assets....................................... P 33,544 liabilities............................................ P 33,544

Accrued Home

Total

SPENCER CO. Income Statement for Branch For Month Ended December 31, 20x4 Sales.................................................................................................................... ....................... P 20,000 Cost of goods sold: Merchandise inventory, December 1................................................ P 14,400 Purchases.............................................................................................. 4,100 Shipments from home office............................................................... 10,200 Merchandise available for sale.......................................................... P 28,700 Less: Merchandise Inventory, December 31..................................... 14,600 Cost of goods sold....................................................................................................... 14,100 Gross profit.................................................................................................................... ............. P 5,900 Operating expenses: Advertising expense............................................................................. P 2,800 Salaries and commissions expense..................................................... 2,350 Store supplies expense......................................................................... 280 Miscellaneous selling expense............................................................ 1,050 Rent expense........................................................................................ 1,500

Depreciation expense – furniture and fixtures.................................. 36 Miscellaneous general expense......................................................... 905 Total operating expenses.......................................................................................... 8,921 Net loss...................................................................................................................... ................ P 3,021 SPENCER CO. Balance Sheet for Home Office December 31, 20x4 Assets Liabilities and Stockholder’s Equity_______ Cash..................................................... P10,350 Liabilities Cash in transit..................................... 1,500 Accounts payable................ P 35,400 Accounts receivable........................ 26,200 Accrued expenses............... 260 P 35,660 Merchandise inventory..................... 24,200 Stockholders’ Equity Store supplies...................................... 380 Capital Stock......................... P 65,000 Prepaid expenses............................... 350 Less deficit.............................. 4,476 60,524 Furniture and fixtures.............. P 8,500 Less: Accumulated depreciation.............. 2, 585 5,915 Branch..................................... P29,239 Less: Unrealized intercompany inventory profit............ 1,950 27,289 Total liabilities and ________ Total assets........................................ P 96,184 stockholder’s equity............................... P 96,184

SPENCER CO. Income Statement for Home Office For Month Ended December 31, 20x4 Sales.................................................................................................................... ....................... P 44,850 Cost of goods sold:

Merchandise inventory, December 1................................................ P 31,500 Purchases.............................................................................................. 27,600 Merchandise available for sale.......................................................... P 59,100 Less: Shipments to branch................................................................... 8,500 Merchandise available for own sales................................................ P 50,600 Less: Merchandise Inventory, December 31..................................... 24,200 Cost of goods sold.......................................................................................... 26,400 Gross profit.................................................................................................................... ............. P 18,450 Operating expenses: Advertising expense............................................................................. P 2,850 Salaries and commissions expense..................................................... 4,250 Store supplies expense......................................................................... 560 Miscellaneous selling expense............................................................ 1,850 Rent expense........................................................................................ 2,700 Depreciation expense – furniture and fixtures.................................. 85 Miscellaneous general expense......................................................... 2,510 Total operating expenses............................................................................. 14,805 Net income from own operations......................................................................................... P 3,645 Less: Branch net loss................................................................................................................ 1,271 Total income................................................................................................................. ........... P 2,374 2. Refer to Word Document Worksheet 3, Combined Statements

SPENCER CO. Combined Balance Sheet for Home Office and Branch December 31, 20x4 Assets

Liabilities and Stockholders’ Equity

Cash ………………………………. P 14,500 Accounts Receivable ………… 39,050 Merchandise Inv ………………. 36,850 39,965 Store Supplies ………………….. 680 Prepaid Expenses …………….. Furniture & Fixtures ……… P12,100 60,524 Less accumulated Depreciation …... 3,161 8,939 Total assets ……………………… P100,489

P100,489

Liabilities Accounts Payable ……….. Accrued Expenses ……….

P39,600 365 P

Stockholders’ Equity 470 Capital Stock ……………… P65,000 Less deficit …………………. 4,476

Total

liabilities

and

SHEquity

SPENCER CO. Combined Income Statement for Home Office and Branch For Month Ended December 31, 20x4 Sales ………………………………………………………………………………………………………… P64,850 Cost of goods sold: Merchandise Inventory, December 1 …………………………………… P43,900 Purchases ……………………………………………………………………… 31,700 Merchandise available for sale …………………………………………… P75,600 Less merchandise inventory, December 31 ……………………………. 36,850 Cost of goods sold ………………………………………………………….. 38,750 Gross profit ……………………………………………………………………………… P26,100 Operating Expenses: Advertising Expense ………………………………………………………… P 5,650 Salaries and Commissions expense ……………………………………… 6,600 Store supplies expense …………………………………………………….. 840 Miscellaneous selling expense …………………………………………… 2,900 Rent expense ………………………………………………………………… 4,200 Depreciation Expense – F&F ………………………………………………. 121 Miscellaneous general expense …………………………………………. 3,415 Total operating expense ………………………………………………………………………. 23,726 Net Income ………………………………………………………………………………………………… P 2,374 4. Adjusting and Closing Entries (a) Branch Books Dec 31 Income Summary …………………………………………….. Merchandise Inventory …………………………….. 31

Merchandise Inventory ………………………………………

14,400 14,400 14,600

Income Summary ……………………………………. 31

Dec.

31

31

31

31

14,600

Store Supplies Expense ………………………………………. Store Supplies ………………………………………… Store supplies used: P580 – P300, or P280

280

Prepaid Expenses ………………………………………………… Miscellaneous General Expense …………………….

120

Miscellaneous General Expense ……………………………… Accrued Expenses ……………………………………..

105

Depreciation Expense – F&F ………………………………….. Accumulated Depreciation ………………………… Depreciation: 1% of P3,600

36

Miscellaneous General Expense …………………………….. Home Office Current…………………………………

220

280

120

105

36

220

31

Sales ……………………………………………………………… 20,000 Income Summary …………………………………….

31

Income Summary ……………………………………………… 22,221 Purchases ……………………………………………… Shipments from Home Office ……………………… Advertising Expense …………………………………. Salaries and Commissions Expense ………………. Store Supplies Expense ……………………………… Miscellaneous Selling Expense …………………….. Rent Expense …………………………………………. Depreciation Expense – F&F ………………………. Miscellaneous General Expense ………………….

20,000

31

(b) Dec

Home Office Current………….………………………………. Income Summary ……………………………………..

4,100 10,200 2,800 2,350 280 1,050 1,500 36 905

3,021 3,021

Home Office Books 31

31

31

31

31

Income Summary ………………………………………………. Merchandise Inventory ……………………………….

31,500

Merchandise Inventory ………………………………………... Income Summary ………………………………………

24,200

Store Supplies Expense …………………………………………. Store Supplies …………………………………………… Store supplies used: P940 – P380, or : 560

31,500

24,200 560 560

Prepaid Expense ………………………………………………… Miscellaneous General Expense ……………………

350

Miscellaneous General Expense …………………………….. Accrued Expenses …………………………………….

260

350

260

31

31 31

Dec

31

31 31