Advanced Accounting Part 2

Chapter 13
Multiple Choice Problems
1. c - P50,400, billed price x 40/140 = P 14,400
2. b

Ending inventory in the combined income statement:

From Home Office: (P50,000-P6,600) x 100/140
From Outsiders

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

4. a P30,000 x (90,000 60,000)/90,000

5. a
6. d (P50,000 P40,000)/P40,000 = 25% markup on cost
7. c (P480,000 P360,000) x (P80,000/P480,000) = P20,000
8. c P700,000, since the problem stated that the home office adjusted the intracompany
Profit Deferred account and the amount of P700,000 is the amount of net income in the
adjusted financial statements of the home office, and therefore it is understood to be
combined net income.
9. b

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
Overvaluation of branch cost of goods soldP 20,000
Cost of sales of Home Office.P500,000
Cost of sales of Branch 100,000
Overvaluation of branch cost of sales( 20,000)
Combined cost of sales...P580,000

10. c the amount of net income as reported by Home office is considered the combined net
income.
11. c
True Branch Net Income
Less: branch Net Income as reported by the branch
Overvaluation of CGS
Less: Cost of goods sold from home office at BP
Inventory, December 1
Shipment from HO
COGAS
Less: Inventory, December 31
CGS from home office, at cost

P156,000
60,000
P 96,000
P 70,000
350,000
P 420,000
84,000

336,000
P 240,000

Billing Price: P336,000 / P240,000 = 140%.

12. c Allowance for overvaluation after adjustment / for December 31 inventory: P84,000 x
40/140 = P24,000.
13. b
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
14. d

15. d

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

Sales (P537,500 + P300,000).. P 837,500

Less: Cost of goods sold
Merchandise inventory, beg. [P50,000 + (P45,000 / 1.20)]P 87,500
Add: Purchases. 500,000
Cost of Goods Available for Sale... P 587,500
Less: MI, ending [P70,000 + (P60,000 / 1.20)]. 120,000
467,500
Gross profit.
P 370,000
Less: Expenses (P120,000 + P50,000...
170,000
Net Income
P 200,000
Overvaluation of Cost of Goods Sold:
Unrealized Profit in branch inventory/ before adjustment.P 7,200
Less: Allowance of ending branch inventory (P20,000 x 84% =
P16,800 x 20/120. 2,800
Overvaluation of Cost of Goods Sold. .P 4,400
Adjusted branch net income:

SalesP60,000
Less: Cost of goods sold:
Inventory, January 1, 2003.P 30,000
Add: Purchases..... 11,000
Shipments from home office..
19,200
Cost of Goods available for sale P 60,200
Less: Inventory, December 31, 2003.
20,000
40,200

Gross profit.. P19,200

Less: Expenses.. 12,000
Unadjusted branch net income...P 7,800
Add: Overvaluation of Cost of Goods Sold.
4,400
Adjusted branch net income...P 12,000

16. d
Billed
Price
*P 36,000
28,800

Cost

Allowance

Merchandise Inventory, 12/31/2005

P 30,000
P 6,000
Shipments
24,000
4,800
Cost of goods sold
P10,800
From Home at billed price: *P6,000 / 20% = P30,000 + P6,000 = P36,000.
From outsiders: P45,000 P36,000 = P9,000
17.

d
Billed Price
Merch. Inventory, 12/31/20x4
*P12,000
Shipments
9,600
Cost of Goods Sold
*P2,000 / 20% = P10,000 + P2,000 = P12,000.

Cost
P10,000
8,000

Allowance
P 2,000
1,600
P 3,600

Merchandise inventory, December 1, 20x4P 15,000

Less: Shipments from home office at billed price* 12,000
Merchandise from outsidersP 3,000
18. d
Combined Cost of Goods Sold:
Merchandise Inventory, 1/1/2003:
Home Office, cost
P 3,500
Branch: Outsiders, ...........................P 300
From Home Office (P2,500 P300)/110%................. 2,000
2,300
P
5,800
Add Purchases (P240,000 + P11,000)..
251,000
COGAS
P 256,800
Less: Merchandise Inventory, 12/31/2003
Home Office, cost.
P 3,000
Branch: Outsiders. P
150
From Home Office (P1,800 P150)/110%................
1,500
1,650
4,650
Cost of Goods Sold
P252,150
19. d
100%
60%
40%
Billed Price
Cost
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
Less: MI, 12/31/x4 (P60,000 x 80%)
48,000
Overvaluation of CGS (60,000 x
60,000
10,000*
20/120)
24. b
Sales (P148,000 + P44,000)
Less: Cost of Sales

P192,000

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
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)

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

125%
Billed Price
40,000
250,000
290,000
60,000
230,000

100%
Cost

25%
Allowance

46,000*

26. d 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
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
52,000
P 20,000

Sales ....
P140,000
Less: Cost of Sales
Inventory, 1/1/10 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, 12/31/10
(P10,400 + P520 + P5,250) .
16,170
111,130
Gross profit. .
P 28,870
Less: Expenses

28,000
Net income per branch books/unadjusted
P 870
Add: Overvaluation of CGS* ..
9,600
Net Income of Davao Branch, adjusted .
P 10,470
BP
MI. 1/1/2010
Shipments

110,000

Cost
100,000

Allowance
1,000
**10,000

Available for sale

-: MI, 12/31/10
CGS
**110,000 x 10/110
***10,400 + 5,000, in transit
****15,400 x 10/110

***15,400

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

36. b

60%

Inventory of the Branch:

Shipments from home office at billed price.........................................P 37,700
X: Ending inventory %................................................................................
60%
Ending inventory at billed price...P 22,620
Add: Freight (P1,300 x 60%)......
780
P 23,400
Or, P39,000 x 60% = P23,400
Inventory in the published balance sheet, at cost
Shipments at cost..........................................P 32,500
X: Ending inventory %....................................................................................
Ending inventory at billed price.P19,500

Add: Freight (P1,300 x 60%).........

780
P 20,280
37. c
Home Office Books
Davao Branch39,000
STB, cost.
32,500
Unrealized profit
5,200
Cash (freight).
1,300
BC Baguio19,630
Excess freight
520
BC-Davao.
20,150

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

38. c (P300,000 x = P75,000, ending inventory x (P300,000 P250,000)/P300,000 =

P12,500
39. d
40. d
41. b refer to No. 21
42. b refer to No. 21
43. c refer to No. 21
44. c
45. d

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:
Overvaluation of branch
inventory . . . . . . . . . . .
Cost of branch inventory (P9,000
20%) . . . . . . .
Branch inventory from outsiders . . . . . . . . . . . . . . .
....
3. P93,600
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....

P 72,000
P 9,000
45,000

54,000
P 18,000

P 351,000

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 . . . . .
..

54,000
180,000
234,000
63,000

180,000
86,400
P 93,600

P119,880
468,000
360,000

Merchandise inventory, January

1................
Less Beginning inventory from HO, at billed price
(see
above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Beginning inventory from
outsiders . . . . . . . . . . . . . . .
5. P47,340
Sales
Cost of sales:
Merchandise inventory January
1-. . . . . . . . . . . .
From outsiders (see
no.4) . . . . . . . . . . . . . . . . .
From HO, at cost (see no.4) . . . . . . . . . . . .
...
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....

171,000

108,000
P 11,880
39,600
P 51,480
P 65,520
51,480
P 14,040

P648,000

P14,040
39,600

P 53,640
173,520

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
...

360,000
587,160
11,700
36,000

539,460
108,540
61,200
P 47,340

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) . . . . . . . . .
Add realized profit Allowance for overvaluation of branch
inventory
Less Overvaluation of branch ending inventory:
Billed price. . . . . . . . . . . . . . . . . . . . . . . . .
.....
Cost (P48,000 125%). . . . . . . . . . . . . . .
.....
True branch net income. . . . . . . . . . . . . . . . . . . . .
...

47,700

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......
Adjusted branch profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
12. P4,800
Inventory , January 1 per books . . . . . . . . . . . . . . . . . . . . . . .
....
Less Inventory, January 1 from HO at billed price

84,000

351,000
369,000
240,00
0
P
129,000
P 24,000

Allowance for overvaluation of branch inventory . . . . . .

P 28,900

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. . . . . . . . . . . . . . . . . . . . . . . . .

24,000

..

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 . . . . . . . . . . . . . . . . . .
....

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
outsiders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
From HO, at cost (P24,000 133%). . . . . . . . .
.....
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.....
True branch net
income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,200
18,000

14. 25%
Shipments from home office (billed
price) . . . . . . . . . . . . . . . . . . . . . . . . .
Divide by shipments to branch (cost) . . . . . . . . . . . . . . . . . . . . . . . .
.....
Billing
percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
Less percentage at
cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of mark-up on
cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15. P24,000

25,200

102,000
138,000
72,000
P66,000

P
450,000
360,000
125%
100
25%

Balance of allowance for overvaluation of branch inventory account

P 94,800

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

90,000

16. P89,040
Balance of allowance for overvaluation of branch
inventory
Less Overvaluation of branch ending inventory:
Billed price (P49,680
P20,880) . . . . . . . . . . . . . . . . . . . . .
Cost (P28,800
125%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
......

19. P9,990
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,200
P 24,000

P
94,800
P
28,800
23,040

5,760
P89,040

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) . . . . . . . . . . . . . . .
.....
Cost (P100,800
120%) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Realized branch profit to be
adjusted . . . . . . . . . . . . . . . . . . .

4,800

P 43,200
19,200
24,000
120,000
P
144,000
P
180,000
144,000
P 36,000

P
43,200
P100,80
0
84,000

16,800
P
26,400
P

......
Cost of sales:
Inventory, January 1 at cost (P27,000
125%) . . . . . . . .
Shipments from HO, at cost . . . . . . . . . . . . . . . . . . .
....

189,000
P 21,360
126,000
147,360

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 . . . . . . . . . . . . . . . . . . . . . . . . . . .
...

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

21. Branch Inventory, 12/31/20x4: P30,000 x 60%...................................P 18,000

22. Branch Inventory, at cost: (P25,000 + P1,000) x 60%.........................P 15,600
23. P30,000
Merchandise inventory, January 1
P 26,400
Shipments from home office
__20,000

Cost of goods available for sale

Less: Cost of goods sold, at BP:
Sales
Less: Sales returns
Net sales
Divided by: SP based on cost
Merchandise inventory, ending at BP
Divided by: Billed price
Merchandise inventory, ending at cost
lost due to fire)

P 46,400
P 15,000
___2,000
P 13,000
____125%

__10,400
P 36,000
____120%
P 30,000

Theories
1
.
2
.
3
.
4
.
5
.

True

6.

False

11.

False

16.

True

21.

False

7.

False

12.

True

17.

True

22.

True

8.

False

13.

False

18.

True

23.

True

9.

True

14.

True

19.

False

24.

10.

True

15.

False

20.

25.

26.

False