Professional Documents
Culture Documents
Problem I
1.
Home Office Books
Branch Current
Shipments to Branch
Unrealized Int Inv. Profit
2.
Branch Books
55,000
50,00
0
5,000
55,000
55,000
Billed price
P55,000 / 110%
Cost
50,000
Allowance for overvaluation of branch inventory/
_______
Unrealized Intercompany Inventory Profit/Deferred Profit
P 5,000
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
15,800
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
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
Billing Price
Inventory, December 1
Shipments during December
Less: Returns
Available for Sale (before adjustment)
Less: Inventory, Dec. 31 (after
adjustment)
0
42,000
_____750
P 41,250
16,500
Cost
(Billing/1.20
)
P
0
35,000
____625
P 34,375
13,750
Unrealized Profit
(Billing Price
Minus Cost)
P
0
7,000
____125
P 6,875
__2,750
P 24,750
P 20,625
*P 4,125
1,525
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
400
140
540
540
540
**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
SPENCER CO.
Balance Sheet for Branch
December 31,20x4
Assets
Liabilities____________________
Cash..................................................... P 2,650
payable................................... P 4,200
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
Accounts
Accrued
Home
Total
SPENCER CO.
Income Statement for Branch
For Month Ended December 31, 20x4
Sales...........................................................................................................................................
P 20,000
Assets
Equity_______
Cash..................................................... P10,350
Cash in transit.....................................
1,500
Accounts receivable........................
26,200
P 35,660
Merchandise inventory..................... 24,200
Store supplies......................................
380
Prepaid expenses...............................
350
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 assets........................................ P 96,184
P 96,184
Liabilities
Accounts payable................ P 35,400
Accrued expenses...............
260
Stockholders Equity
Capital Stock......................... P 65,000
Less deficit..............................
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
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
SPENCER CO.
Combined Income Statement for Home Office and Branch
SHEquity
Dec.
Merchandise Inventory
Income Summary .
14,400
14,600
14,600
31
280
31
Prepaid Expenses
Miscellaneous General Expense .
120
31
105
31
36
31
220
31
Sales
20,000
Income Summary .
31
Income Summary
Purchases
20,000
14,400
280
120
105
36
220
22,221
4,100
3,021
3,021
Income Summary .
Merchandise Inventory .
31,500
31
24,200
31
31
31,500
560
350
31
260
31
Depreciation Expense ..
Accumulated Depreciation F&F .
Depreciation: 1% of P8,500, or P85
85
31
24,200
560
Prepaid Expense
Miscellaneous General Expense
31
Dec
10,200
2,800
2,350
280
1,050
1,500
36
905
350
260
85
Cash in Transit .
Branch Current
1,500
Sales
Shipments to branch .......................
Income Summary .
44,850
8,500
1,500
53,350
31
Income Summary
42,405
Purchases
Advertising Expense .
Salaries and Commissions Expense .
Store Supplies Expense
Miscellaneous Selling Expense ..
Rent Expense .
Depreciation Expense F&F .
Miscellaneous General Expense .
31
3,021
31
1,750
27,600
2,850
4,250
560
1,850
2,700
85
2,510
3,021
1,750
31
Income Summary
Branch Income Summary.
1,271
31
Income Summary
Retained Earnings .
2,374
1,271
2,374
Problem VI
1.
Branch
Current
Unadjusted balance, 12/31/20x4
Add (Deduct): Adjustments
1 Cash in transit
2. Merchandise in transit
3. Branch expenses paid by home office
4. Cash in transit from home office
Adjusted balance, 12/31/20x4
P 44,000
H. Office
Current
P 9,000
( 10,000)
_______
P 34,000
10,000
12,000
3,000
P34,000
PAXTON CO.
Income Statement for Dayton Branch
For Year Ended December 31, 20x5
Sales..............................................................................................................................
P315,000
Income Summary............................................................................................
373,500
Income Summary......................................................................................................... 398,000
Merchandise Inventory, January 1................................................................
44,500
Shipments from Home Office.........................................................................
252,000
Operating expenses........................................................................................
101,500
Home Office...............................................................................................................
Income Summary..........................................................................................
24,500
24,500
9,750
41,150
60,500
P
RUGGLES CO.
Income Statement for Home Office
For Year Ended December 31, 20x4
Sales.............................................................................................................................. P
256,000
Cost of goods sold:
Merchandise inventory, January 1, 20x4................................... P 80,000
Purchases...................................................................................... 210,000
Merchandise available for sale................................................. P 290,000
Less: Shipments to branch..........................................................
30,000
Merchandise available for own sales....................................... P 260,000
Less: Merchandise Inventory, December 31, 20x4..................
55,000
Cost of goods sold.............................................................................
205,000
Gross profit................................................................................................................... P
51,000
Operating Expenses....................................................................................................
60,000
Net loss from own operations..................................................................................... P
( 9,000)
Add: Adjusted branch net income.............................................................................
13,500
Combine net income.................................................................................................... P
4,500
(2)
RUGGLES CO.
Combined Income Statement for Home Office and Branch
For Year Ended December 31, 20x4
Sales.............................................................................................................................. P
334,500
Cost of goods sold:
Merchandise inventory, January 1, 20x4................................... P 107,500
Purchases...................................................................................... 230,000
Merchandise available for sale.................................................. P 337,500
Less: Merchandise Inventory, December 31, 20x4...................
80,000
Cost of goods sold.............................................................................
257,500
Gross profit.................................................................................................................... P
77,000
Operating expenses....................................................................................................
72,500
Net income................................................................................................................... P
4,500
(3) Merchandise Inventory......................................................................................... 31,500
Sales.......................................................................................................................... 78,500
Income Summary............................................................................................
110,000
Income Summary......................................................................................................... 104,500
Merchandise Inventory...................................................................................
32,000
Shipments from Home Office.........................................................................
40,000
Purchases.........................................................................................................
20,000
Expenses...........................................................................................................
12,500
Income Summary.........................................................................................................
Home Office.....................................................................................................
5,500
5,500
(4) Branch......................................................................................................................
Branch Income................................................................................................
5,500
Unrealized Intercompany Inventory Profit...............................................................
Branch Income..............................................................................................
8,000
Calculation of unrealized profit adjustment:
Branch inventory, January 1, acquired from home office
at billed price.................................................................................... P 24,500
Less: Cost of inventory (P24,500/1.225)....................................................
20,000
Unrealized Intercompany Inventory Profit Jan. 1................................... P 4,500
Add: Increase in unrealized profit for shipments
5,500
8,000
4,500
Problem IX
1.
Branch
Current
Unadjusted balance, 12/31/20x4
Add (Deduct): Adjustments
1 Remittance
2. Cash in transit
3. Shipments in transit
Adjusted balance, 12/31/20x4
P 60,000
H. Office
Current
P 51,500
I 1,700)
P 57,300
1,800
5,800
P 57,300
1,500
b. Books of branch B:
Cash...................................................................................................... 1,500
Home Office............................................................................
1,500
1,950
1,600
350
1,600
400
1,750
250
1,750
1,500
200
1,950
1,600
1,600
3. a
True Branch Net Income
Branch Net Income
Add (deduct):
Overvaluation of cost of goods sold/realized profit
from sales made by branch:
Shipments from home office.
P
280,000
Less: Ending inventory, at billed
price (P50,000 P6,600)
43,400
Cost of goods sold from home
office at billed price
P
236,600
Multiplied by: Mark-up
40/140
Unrecorded branch expenses
True Branch Net Income
P 31,000
6,600
P 37,600
P
5,000
67,600
( 2,500)
P 70,100
Reported (unadjusted) branch net income (per branch books) ..P 30,000
Branch Income in so far as home office is concerned per home office books. 50,000
P156,000
60,000
P 96,000
P 70,000
350,000
P 420,000
84,000
336,000
P 240,000
12. b Allowance for overvaluation after adjustment / for December 31 inventory: P84,000 x
40/140 = P24,000.
13. No answer available P109,000.
Net Income as reported by the Branch
Less: Rental expense charged by the home office
(P1,000 x 6 months)
Adjusted NI as reported by the Branch
Add: Overvaluation of CGS
MI, beginning
SFHO
COGAS
Less: MI, ending
CGS, at BP
X: Mark-up ratio
True/Adjusted/Real Branch Net Income
P 20,000
6,000
P 14,000
Billed Price
0
550,000
550,000
75,000
475,000
25/125
95,000
P109,000
14. d
15. d
Cost
Allowance
d
Billed Price
*P12,000
9,600
Cost
P10,000
8,000
Allowance
P 2,000
1,600
P 3,600
100%
Billed Price
P252,150
60%
Cost
40%
Allowance
Merchandise inventory, 1/1/x4
32,000
Shipments
*60,000
36,000
*24,000
Cost of goods available for sale
56,000
Less: MI, 3/31/x4 (25,000 x 40%)
10,000
Overvaluation of CGS**
46,000
*36,000 cost / 60% = 60,000 x 40% = 24,000. (Note: Markup is based on billed price)
**Realized Profit from Branch Sales
20. d
Billed
Price
Merchandise inventory, 8/1/x4
Shipments (400,000 x 25%)
Cost of goods available for sale
Less: MI, 8/31/x4 (160,000 x 25%)
Overvaluation of CGS/RPBSales
400,000
160,000
Cost
Allowance
60,000
*100,,000
160,000
40,000
120,000
21. b
(1) Sales
P 40,000
Less: Cost of goods sold:
Inventory, 1/1/2003 (P4,950 / 110%)
P 4,500
Add: Shipments
(P22,000 / 110%)
20,000
COGAS
P 24,500
Less: Inventory, 12/31/2003 (P6,050 / 110%)
5,500
19,000
Gross profit
P 21,000
Less: Expenses
_
13,100
Net income from own operations
P
7,900
(2) Combined Cost of Goods Sold:
Merchandise Inventory, 1/1/2003:
of Home Office, cost..P 17,000
of Branch, cost: P4,950 / 110%.
4,500
P 21,500
Add Purchases.
50,000
COGAS..
P 71,500
Less: Merchandise Inventory, 12/31/2003
of Home Office, cost P 14,000
of Branch, cost: P6,050 /100%..
5,500
19,500
Cost of Goods Sold.
P 52,000
22. a - P48,000 / 120% = P40,000
23. a P48,000 x 20/120 = P8,000 (note: adjusted allowance refers to the allowance related to
the ending inventory, so, the allowance related to the CGS, which is P10,00 in this case is
considered to be the adjustments in the books of Home Office to determine the adjusted
branch net income)
120%
100%
20%
Billed Price
Cost
Allowance
Merchandise inventory, 1/1/x4
0
Shipments
108,000
Cost of goods available for sale
108,000
48,000
60,000
10,000*
24. b
Sales (P148,000 + P44,000)
Less: Cost of Sales
Inventory, 1/1/20x4
Purchases
Shipments from home office
Cost of goods available for sale
Less: Inventory, 12/31/20x4
Gross profit
Less: Expenses
(P76,000 + P24,000)
Net income, unadjusted
Add: Overvaluation of CGS
Adjusted branch net income
P192,000
P
0
52,000
108,000
P 160,000
60,000
100,000
P 92,000
100,000
P( 8,000)
10,000
P 2,000
25. c
Merchandise inventory, 1/1/x4
Shipments
Cost of goods available for sale
Less: MI, 12/31/x4 (P60,000 x 80%)
Overvaluation
of
CGS(230,000x
25/125)
125%
Billed Price
40,000
250,000
290,000
60,000
230,000
100%
Cost
25%
Allowance
46,000*
26. b P326,000
Sales (P600,000 + P300,000) .. P 900,000
Less: Cost of goods sold
Merchandise inventory, beg.
[P100,000 + (P40,000/1.25)] .
P 132,000
Add: Purchases
350,000
Cost of goods available for sale P 482,000
Less: MI, ending
[P30,000 + (P60,000/1.25)]
78,000
404,000
Gross profit
P 496,000
Less: Expenses (P120,000 + P50,000).
_ 170,000
Net Income .
P 326,000
27. b
Sales (P537,500 + P300,000)
Less: Cost of goods sold
Merchandise inventory, beg.
[P50,000 + (P60,000/1.20)]..
P 87,500
Add: Purchases .
500,000
Cost of goods available for sale
P587,500
Less: MI, ending
[P70,000 + (P60,000/1.20)] .
120,000
Gross profit.. P 370,000
Less: Expenses (P120,000 + P50,000). _ 170,000
Net Income P 200,000
P 837,500
467,500
28. c
Sales (P120,000 + P60,000)
P 180,000
Less: Cost of goods sold:
Merchandise inventory, beg. [P40,000 + P6,000 +
(P24,000 / 1.2)] P 66,000
Add: Purchases (P70,000 + P11,000)
81,000
Cost of Goods Available for SaleP 147,000
Less: MI, ending [P40,000 + P3,200 + (P16,800 / 1.20)] 57,200
89,800
Gross profit
P
90,200
Less: Expenses (P28,000 + P12,000)
40,000
Net Income.
P 50,200
29. d
Sales (P100,000 P33,000 + P50,000)
P 117,000
Less: Cost of goods sold:
Inventory, beg. [P15,000 + (P5,500/110%) or (P5,500 P500)] P20,000
Add: Purchases (P50,000 + P7,000) 57,000
COGAS.. P77,000
Less: Inventory, end [P11,000 + P1,050 +
(P6,000- P1,050)/110%] 16,550
60,450
Gross profit
P
56,550
Less: Expenses (P20,000 + P6,000 + P5,000)
31,000
Combined Net income.
P 25,550
30. c
52,000
Sales ...
P155,000
Less: Cost of Sales
Inventory, 1/1/10.. P 23,000
Purchases ..
190,000
Cost of goods available for sale .. P213,000
Less: Shipment/Sales to Branch,
at cost (P110,000/110%)
100,000
Cost of goods available for HO
Sale.. P113,000
Less: Inventory, 12/31/10 .....
30,000
83,000
Gross profit ...
Less: Expenses
.
Net income home office .
31. a
P 72,000
P 20,000
Sales ....
P140,000
Less: Cost of Sales
Inventory, 1/1/x4 P 11,550
Purchases .
105,000
Freight-in
5,500
Shipment in transit (P5,000+P250) .
5,250
Cost of goods available for sale . P127,300
Less: Inventory, 12/31/x4
(P10,400 + P520 + P5,250) .
16,170
111,130
Gross profit. .
P 28,870
Less: Expenses
28,000
110,000
***15,400
Cost
100,000
870
9,600
P 10,470
Allowance
1,000
**10,000
11,000
****1,400
9,600
32. a
Inventory, 1/1 at billed price..
P165,000
Add: Shipments at billed price..
110,000
Cost of goods available for sale at billed price
P275,000
Less: CGS at BP:
Sales P169,000
Less: Sales returns and allowances ..
3,750
Sales price of merchandise
acquired from outsiders
(P7,500 / 120%)
9,000
Net Sales of merchandise acquired from
home office.. P156,250
x: Intercompany cost ratio
... 100/125
125,000
Inventory, 8/1/2008 at billed price
P150,000
x: Cost ratio
..
100/125
Merchandise inventory at cost destroyed by fire
P120,000
33. d
Freight actually paid by:
Home OfficeP 500
Branch P
700
TotalP 1,200
Less: Freight that should be recorded..
800
Excess freightP 400
34.
d in arriving at the cost of merchandise inventory at the end of the period, freight
charges are properly recognized as a part of the cost. But a branch should not be charged
with excessive freight charges when, because of indirect routing, excessive costs are
incurred. Under such circumstances, the branch acquiring the goods should be charged for
no more than the normal freight from the usual shipping point. The office directing the
inter-branch transfers are responsible for the excessive cost should absorb the excess as
an expense because it represents management mistakes (or inefficiencies.)
35. c
60%
36. b
60%
Davao Branch
SFHO.37,700
Freight-in. 1,300
HOC..
39,000
HOC.20,150
SFHO(50%)
18,850
Freight-in (50%)
650
Cash......
650
Baguio Branch
SFHO18,850
Freight-in..
780
HOC...
19,630
Quiz XIII
1. P63,000
Merchandise inventory, December 31 at cost
From outsiders (see no.2) . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
From home office (see no.2) . . . . . . . . . . . . . . . . . . . . . . . .
....
P 18,000
45,000
P63,000
2. P18,000
Branch inventory, 12/31 per books . . . . . . . . . . . . .
....
Less Branch inventory from HO at billed price:
P 72,000
Overvaluation of branch
inventory . . . . . . . . . . .
Cost of branch inventory (P9,000
20%) . . . . . . .
Branch inventory from outsiders . . . . . . . . . . . . . . .
....
3. P93,600
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
Cost of sales:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
Shipments from HO at cost (P216,000
120%) . . .
Cost of goods available per sale . . . . . . . . . . .
..
Less inventory, 12/31 (see
no.1) . . . . . . . . . . . . . . .
Gross
Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......
Branch net income as far as the HO is concerned . .
.
4. P14,040
Allowance for overvaluation of branch inventory . .
.
Less Overvaluation of shipments from HO:
Billed
price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost (P468,000 130%) . . . . . . . . . . . . . . . .
.....
Overvaluation of beginning inventory from HO: . . .
.
Add Beginning inventory from HO, at cost (11,880
30%) .
Beginning inventory from HO, at billed price . . . . .
..
Merchandise inventory, January
1................
Less Beginning inventory from HO, at billed price
(see
above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Beginning inventory from
outsiders . . . . . . . . . . . . . . .
5. P47,340
P 9,000
45,000
54,000
P 18,000
P 351,000
54,000
180,000
234,000
63,000
171,000
180,000
86,400
P 93,600
P119,880
468,000
360,000
108,000
P 11,880
39,600
P 51,480
P 65,520
51,480
P 14,040
Sales
Cost of sales:
Merchandise inventory January
1-. . . . . . . . . . . .
From outsiders (see
no.4) . . . . . . . . . . . . . . . . .
From HO, at cost (see no.4) . . . . . . . . . . . .
...
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
Shipments from HO, at cost
(equal Shipments to Branch) . . . . . . . . . . . . . . .
...
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
Less Merchandise inventory, December 31 From outsiders (P58,500 P46,800) . . . . . .
....
From HO, at cost (P46,800
130%) . . . . . . . . .
Gross
profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
Branch net income in so far as the HO is
concerned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
...
P648,000
P14,040
39,600
173,520
360,000
587,160
11,700
36,000
6. P45,000
Balance of Allowance for overvaluation of branch
inventory account before adjustment . . . . . . . . .
Less Overvaluation of shipments from HO:
Billed price (P240,000 x 125%). . . . . . . . . . . . . . . . .
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overvaluation of beginning inventory. . . . . . . . . . . . .
Add Beginning inventory at cost (P11,640 25%) . . . .
Branch beginning inventory at billed price . . . . . . . . .
7. P63,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales: (see no.6) . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning inventory. . . . . . . . . . . . . . . . . . . . . . . . .
Shipments from HO (P240,000 x 125%). . . . . . . . . .
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less ending inventory. . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Branch net income, per books . . . . . . . . . . . . . . . . . . .
8. P122,400
Branch net income, per books (see no.
7) . . . . . . . . .
P 53,640
47,700
539,460
108,540
61,200
P 47,340
P 69,000
P 250,000
200,000
60,000
9,000
36,000
P 45,000
P 480,000
P 45,000
300,000
345,000
48,000
297,000
183,000
120,000
P 63,000
P 63,000
P 69,000
P 48,000
38,400
9,600
59,40
0
P
122,400
9. 20%
Inventories, January 1, 20x5 at billed
price. . . . . . . . . . . . . . . . . . . . . .
Shipments from
HO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.......
Less Allowance for overvaluation of branch
inventory. . . . . . . . . . . .
Cost of merchandise from home
office . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for overvaluation of branch
inventory . . . . . . . . . . . . . . .
Divide by Cost of merchandise from HO (see
above) . . . . . . . . . . . .
Percentage of profit on cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
10. P360,000
Shipments from HO, at billed price . . . . . . . . . . . . . . . . . . . . . . .
.....
Divide by the billing
percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance of shipments to Branch account. . . . . . . . . . . . . . . . . . .
...
11. P129,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.......
Cost of sales:
Inventories, January 1 at cost (P90,000 120%) . . . . .
.....
Shipments from HO, at cost (see no.
10) . . . . . . . . . . . . . . . .
P 90,000
432,000
522,000
87,000
P435,000
P 87,000
P 435,000
20%
P 432,000
120%
P 360,000
P
720,000
P 75,000
360,000
435,000
CGAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Inventories, December 31 at cost (P100,800 120%) .
.....
Gross
profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84,000
351,000
369,000
.
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......
Adjusted branch profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
12. P4,800
Inventory , January 1 per books . . . . . . . . . . . . . . . . . . . . . . .
....
Less Inventory, January 1 from HO at billed price
Allowance for overvaluation of branch inventory . . . . . .
..
Overvaluation of shipments from HO (P96,000
P72,000) . .
Overvaluation of beginning inventory from HO . . . . . . .
...
Add Inventory for HO, at cost (P4,800
33.33%) . . . . . . . . . .
Inventory, January 1 from
outsiders. . . . . . . . . . . . . . . . . . . . . . . . .
13. P66,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
Cost of sales:
Inventory, January 1(cost)
From outsiders (see no.12) . . . . . . . . . . . . . . . .
.....
From HO, at cost . . . . . . . . . . . . . . . . . . . . . . . .
.....
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
Shipments from HO, at cost . . . . . . . . . . . . . . . . . .
....
240,00
0
P
129,000
P 24,000
P 28,900
24,000
4,800
14,500
19,200
P 4,800
P
240,000
P
4,800
14,500
P
19,200
36,000
72,000
127,200
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
..
Less Inventory, December 31 (cost) From
7,200
outsiders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
From HO, at cost (P24,000 133%). . . . . . . . . 18,000
25,200
102,000
.....
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138,000
......
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72,000
.....
True branch net
P66,000
income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14. 25%
Shipments from home office (billed
P
price) . . . . . . . . . . . . . . . . . . . . . . . . .
450,000
Divide by shipments to branch (cost) . . . . . . . . . . . . . . . . . . . . . . . .
360,000
.....
Billing
percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Less percentage at
cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of mark-up on
cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15. P24,000
Balance of allowance for overvaluation of branch inventory account
Less Overvaluation of shipments from HO (P450,00 P360,000) . . .
....
Overvaluation of beginning inventory from HO . . . . . . . . . . . . . . . . .
....
Add Cost of beginning inventory from HO (P4,800 25%) . . . . . . . .
....
Branch beginning inventory from
HO . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16. P89,040
Balance of allowance for overvaluation of branch
inventory
Less Overvaluation of branch ending inventory:
Billed price (P49,680
P
P20,880) . . . . . . . . . . . . . . . . . . . . .
28,800
Cost (P28,800
23,040
125%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......
17. P36,000
Balance of Allowance for overvaluation of branch inventory . . . . .
..
Less Overvaluation of shipments from HO (P115,200 P96,000) . . .
. ...
Overvaluation of beginning inventory from
HO . . . . . . . . . . . . . . . . . . . .
Add Cost of beginning inventory from HO (P24,000 20%) . . . . . . .
....
Beginning inventory from HO, at billed price. . . . . . . . . . . . . . . . . . .
....
Merchandise inventory, January 1 per
books . . . . . . . . . . . . . . . . . . . . . .
Less beginning inventory from HO (see
above) . . . . . . . . . . . . . . . . . . . . .
Branch beginning inventory from
outsiders . . . . . . . . . . . . . . . . . . . . . . . .
18. P26,400
Balance of allowance for overvaluation of branch
inventory
Less Overvaluation of branch ending inventory from HO:
Billed price (P120,000 P19,200) . . . . . . . . . . . . . . . P100,80
.....
0
Cost (P100,800
84,000
125%
100
25%
P 94,800
90,000
4,800
19,200
P 24,000
P
94,800
5,760
P89,040
P 43,200
19,200
24,000
120,000
P
144,000
P
180,000
144,000
P 36,000
P
43,200
16,800
120%) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized branch profit to be
adjusted . . . . . . . . . . . . . . . . . . .
19. P9,990
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......
Cost of sales:
Inventory, January 1 at cost (P27,000
125%) . . . . . . . .
Shipments from HO, at cost . . . . . . . . . . . . . . . . . . .
....
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
...
Inventory, December 31 at cost P35,100 120%) .
....
Gross
profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......
True branch
income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20. P67,290
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......
Cost of sales:
Inventory, January 1. . . . . . . . . . . . . . . . . . . . . . . . .
.....
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
..
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......
Less Shipment to branch . . . . . . . . . . . . . . . . . . . . .
.....
Cost of goods available for own sale . . . . . . . . . . . .
...
Less Inventory, December 31. . . . . . . . . . . . . . . . . .
....
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......
Net income of home
office . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add Branch net income (see no.
19) . . . . . . . . . . . . . . . . . . .
Combined net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
...
P
26,400
P
189,000
P 21,360
126,000
147,360
29,250
118,110
70,890
60,900
P 9,990
P
636,000
P 69,000
492,000
561,000
126,000
435,000
85,500
349,500
286,500
229,200
57,300
9,990
P 67,290
6.
False
11.
False
16.
True
21.
7.
False
12.
True
17.
True
22.
8.
False
13.
False
18.
True
23.
9.
True
14.
True
19.
False
24.
10.
True
15.
False
20.
25.
26.