ABASE HUMILIATE Co. is currently preparing its combined financial statements for the year ended December 31, 20x1. As of this date, the “Investment in branch” account has a balance of ₱380,000 while the “Home office” account has a balance of ₱528,000. The following information has been gathered: (a) The home office allocated unpaid utilities expenses amounting to ₱40,000 to the branch which the branch did not record in full. Instead, the branch sent a wrong adjusting memo to the home office reducing the charge by ₱10,000 and setting up a liability for the remaining amount. (b) The home office erroneously credited the branch for a return of shipment of merchandise worth ₱100,000. The branch did not make any return of merchandise. (c) The branch mistakenly received a copy of the home office correcting entry for item (b) above dated January 3, 20x2 and entered a credit in favor of the home office on December 31, 20x1. (d) The branch mistakenly sent the home office a debit memo amounting to ₱12,000 for an apparent remittance of collections which did not happen. The home office did not record the debit memo. How much is the net adjustment to the “Investment in branch” account? increase (decrease) a. 100,000 b. 48,000 c. (48,000) d. (52,000)
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
ABASE HUMILIATE Co. is currently preparing its combined financial statements for the year ended December 31, 20x1. As of this date, the “Investment in branch” account has a balance of ₱380,000 while the “Home office” account has a balance of ₱528,000. The following information has been gathered:
(a) The home office allocated unpaid utilities expenses amounting to ₱40,000 to the branch which the branch did not record in full. Instead, the branch sent a wrong adjusting memo to the home office reducing the charge by ₱10,000 and setting up a liability for the remaining amount.
(b) The home office erroneously credited the branch for a return of shipment of merchandise worth ₱100,000. The branch did not make any return of merchandise.
(c) The branch mistakenly received a copy of the home office correcting entry for item (b) above dated January 3, 20x2 and entered a credit in favor of the home office on December 31, 20x1.
(d) The branch mistakenly sent the home office a debit memo amounting to ₱12,000 for an apparent remittance of collections which did not happen. The home office did not record the debit memo.
How much is the net adjustment to the “Investment in branch” account? increase (decrease)
a. 100,000
b. 48,000
c. (48,000)
d. (52,000)
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