AFAR Problem.doc

# A 150000 b 100000 c 120000 d 50000 page 19 and 54

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A. 150,000 B. 100,000 C. 120,000 D. 50,000

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Page 19 Numbers 52, 53 and 54 (Home Office, Branch and Agency Transactions) Siargao Company set up a branch in a province. The entity and its branch provided the following data for the second year of branch operation: Home Office Branch Sales revenue to outside customer 1,000,000 500,000 Beginning inventory 50,000 30,000 Purchases from outside supplier 400,000 100,000 Shipment to branch 200,000 Shipment from home office 250,000 Ending inventory 80,000 50,000 Operating expenses 150,000 40,000 The home office to branch markup based on cost is 25% this year and last year. 20% of the beginning inventory of the branch came from outside supplier. 24% of the ending inventory of the branch came from the last year’s shipment from the home office while 50% of the ending inventory of the branch came from current year’s shipment from the home office. 52. What is the net income reported by the branch in its separate income statement for the current year? A. 130,000 B. 124,000 C. 114,000 D. 95,000 53. What is the ending inventory to be reported by the entity in its combined statement of financial position? A. 128,000 B. 115,000 C. 130,000 D. 122,600 54. What is the overstatement in the cost of goods sold reported by the branch in its separate income statement for the current year? A. 54,000 B. 50,000 C. 52,000 D. 47,400
Page 20 Number 55 (Home office and branch) The home office in Quezon City 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 branch transactions for 2018 are reflected in the following information: Cash 20,000 Accounts receivable 80,000 Home Office 180,000 Shipments from Home Office 250,000 Sales 225,500 Expenses 55,500 December 31, 2018 inventory 65,000 What is the balance of the Investment in Branch account in the home office book? A. 180,000 B. 195,000 C. 165,000 D. 175,000 Numbers 56 and 57 (Home office and branch) Coffee Company decided to open a branch in Manila. Shipments of merchandise to the branch totaled P54,000 which included a 20% markup on cost. All accounting records are kept at the home office. The branch submitted the following report summarizing the operations for the year ended December 31, 2018: Sales on account 74,000 Sales on cash basis 22,000 Collections of accounts receivable 60,000 Expenses paid 38,000 Expenses unpaid 12,000 Purchase of merchandise for cash 26,000 Inventory on hand, December 31; 80% from home office 30,000 Remittance to home office 55,000 56. What is the branch inventory on December 31, 2018 at cost? A. 25,000 B. 20,000 C. 26,000 D. 10,000 57. What is the branch net income for the current year? A. 1,000 B. 4,000 C. 800 D. 500

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Page 21 Numbers 58, 59, 60 and 61 (Business Combination - Acquisition of Net Assets) Entity A acquired the net assets of Entity B by issuing 10,000 ordinary shares with par value of P10 and bonds payable with face amount of P500,000. The bonds are classified as financial liability at amortized cost. At the time of acquisition, the ordinary shares are publicly quoted at P20 per share. On the other hand, the bonds payable are trading at 110.
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