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Big Picture in Focus: Ulob. Account For Branch and Home Office Transactions and Prepare Financial Statements Let'S Analyze

The document summarizes discrepancies between the reciprocal accounts of a home office and its branch office. It provides instructions to: 1) Determine the balance of the home office account on the branch books before adjustment. 2) Calculate the correct interoffice balance amount. 3) Reconcile the balances by preparing adjusting journal entries to correct errors on the branch books for various transactions including office furniture, merchandise allowances, interest charges, labor charges, and freight charges.

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Jean Rose Tabagay Bustamante
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1K views3 pages

Big Picture in Focus: Ulob. Account For Branch and Home Office Transactions and Prepare Financial Statements Let'S Analyze

The document summarizes discrepancies between the reciprocal accounts of a home office and its branch office. It provides instructions to: 1) Determine the balance of the home office account on the branch books before adjustment. 2) Calculate the correct interoffice balance amount. 3) Reconcile the balances by preparing adjusting journal entries to correct errors on the branch books for various transactions including office furniture, merchandise allowances, interest charges, labor charges, and freight charges.

Uploaded by

Jean Rose Tabagay Bustamante
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Name: JEAN ROSE T.

BUSTAMANTE BSMA-3

Big Picture in Focus: ULOb. Account for branch and home office transactions and
prepare financial statements

Let’s Analyze

Activity 1. Reconciliation of Reciprocal Accounts

Comparison between the interoffice account of the Wash Wholesale Company with its
suburban branch and the corresponding account carried on the latter's books shows the
following discrepancies at the close of business on September 30,2020:

a. A debit of P870 (Office Furniture) on the home office books is recorded by branch as
P780.
b. A credit for P300 (Merchandise Allowances) by the home office is recorded the
branch as P350.
c. The home office charges the branch P325 for interest on open account, the branch
fails to take up in full; instead, the branch sends to the home office an incorrect
adjusting memo, reducing the charge by P75, and sets up a liability for the net amount.
d. A labor charge by the home office, P433, is recorded twice by the branch.
e. A charge of P785 for freight on merchandise is made by the home office, but amount
is recorded by the branch as P78.50.
f. The branch incorrectly sends the home office a debit note for P293, representing its
proportion of a bill for truck repairs; the home office does not record it.
g. The home office receives P475 from the sale of a truck, which it erroneously credits
to the branch; the branch does not charge the home office therewith.
h. The branch accidentally receives a copy of the home office entry dated October 10,
2020, correcting item (g), and records a credit in favor of the home office as of
September 30, 2020. The balance of the branch account on the home office books
shows P 131,690 receivable from the branch at September 30, 2020. The interoffice
accounts were in balance at the beginning of the year.

Required:

1. Determine the balance of the home office account on the branch books before
adjustment.

Unadjusted Balance of Home Office Account


(Branch Books) 131,888.50
Add/Less: Errors at the close of Business
a. acquisition of office furniture (90. 00)
b. Merchandise Allowance (50. 00)
c. Interest Charges (Full Amount) 325. 00
d. Larbor Charges (Recorded Twice) (433. 00)
e. Freight Charges 706.50
f. Bill for Truck Repairs 293. 00
g. Proceeds from the sale of truck (475. 00)
Post-dated copy of Home Office accidentally
h. received (475. 00)
Adjusted Balance of Branch Current (Home Office
Books) 131,690. 00

2. Determine the correct amount of the interoffice balance.

Correct amount of interoffice balance 131,690


The amount is already given in the problem

3. Reconcile the amount of P 131,690 on the home office books with the adjusted
balance of the reciprocal accounts.

Home
Branch Office
Current Account

Unadjusted Balance P131,690 P131,888.50


Add/Less: Errors made

a. Error made by the branch in recording the Office


Furniture 0 90.00
b. Error made by the branch in recording
allowances for merchandise 0 50.00
c. Incorrect entry in recording the interest charges 0 325.00
d. Labor charges are recorded twice by the branch 0 433.00
e. Error in recording freight charges is made by the
branch 0 706.50
f. Incorrect debit note sent made by the branch
regarding the bill for truck repairs 0 293.00
j. Error made by the home office in the sale of truck
which was erroneously credited to the branch 0 475.00
h. The branch accidentally received a correcting
entry of home office and records credit in favor of
the HO 0 475.00
Adjusted Balances P131,690 P131,690
4. Prepare the journal entry or entries necessary to adjust the branch books.

Adjusting Entries:

a. Home Office 90
Cash 90

b. Home Office 50
Shipments from HO 50

c. Interest Expense 75
Interest Payabl 250
Home Office 325

d. Home Office 433


Salaries Expense 433

e. Freight-in 706.5
Home Office 706.5

f. Repairs and Maintenance 293


Home Office 293

g. Home Office 475


Truck 475

h. Home Office 475


Truck 475

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