Quiz 1- Home Office and Branch Accounting

Transactions between a home office and its branch are accounted for in reciprocal accounts. The reciprocal account maintained in the branch books is called

• Investment in branch

• Home office

• Advances from home office

• Any of these

For external reporting, the individual financial statements of the home office and the branch are combined

• by using complex consolidation procedures

• by recognizing the home office's own assets, liabilities, income and expenses plus its share in the branch's assets, liabilities , income and expenses

• by adding together similar items of assets, liabilities, income and expenses

• by adding together similar items of assets, liabilities, income and expenses and eliminating reciprocal accounts.

The depreciation expense on equipment being used by the branch but carried in the books of the home office is recorded in the branch's books as

• Debit to Investment in Branch and Credit to Accumulated Depreciation

• Debit to Depreciation Expense and credit to Investment in Branch

• Debit to Depreciation Expense and credit to Home Office account

• Not recorded

The freight on shipments to branch paid by the home office is recorded by the home office as

• Debit to freight-in

• Credit to freight-in

• Credit to Investment Account

• Credit to Cash

The freight on shipments to branch paid by the branch is recorded by the home office as

• Debit to freight-in

• Credit to freight-in

• Credit to investment account

• Not recorded

A cash remittance from the branch to the home office is recorded by the home office as

• Debit to Investment account

• Credit to cash

• Debit to Home Office

• Credit to Investment Account

ABC Co. ships and bills merchandise to its provincial branch at cost. The branch carries its own accounts receivable and makes its own collections. The branch also pays its expenses. The transactions for 2021 are reflected in the branch trial balance that follows:

Cash (Debit) 11,900

Home Office Current (Credit) 90,000

Shipments from HO (Debit) 120,000

Accounts Receivable (Debit) 62,500

Expenses (Debit) 8,100

Sales (Credit) 112,500

Dec. 31 Inventory- 30,000

Question 1: How much is the net profit of the branch?

• 22,500

• 14,400

• 21,300

• 14,000

Cebu Branch submitted the following data to its home office in Manila for 2013, its first year of operation:

Sales 2,300,000

Shipments from HO 1,850,000

Operating expenses 235,000

Home Office 480,000

Shipments to the branch are billed at cost. The December 31 inventory of the branch was P 255,500.

What is the balance of the Investment in Branch account on December 15, 2013 on the home office books?

• 950,500

• 470,500

• 950,000

• 480,000

TRUE OR FALSE.

The entry on the home office books when the agency disburses cash from the revolving fund includes Debit to Expenses and credit to Cash.

• TRUE

• FALSE

Which is the correct journal entry in the Branch's books when the home office acquires furniture for P 50,000 to be carried in the branch's books?

• Debit- Investment in Branch 50,000

  Credit - Cash 50,000

• Debit-Furniture 50,000

  Credit-Cash 50,000

• Debit-Furniture 50,000

  Credit- Home Office 50,000

• No entry