The Pampanga branch of Saruman Enterprises was billed for merchandise The Best Co.

The Best Co. bills merchandise shipments in its Cavite City branch at 125%
shipments from home office at cost plus 25% in 2015 and cost plus 20% in of cost. The branch, in turn, sells the merchandise it receives from the home
2016. Other pertinent data for 2016 shows the following: office at 25% above the billing price. On August 1, 2016, all of the branchs
Pampanga Home Office merchandise stock was destroyed by fire except for some goods marked to
branch sell for P46,800. The branch records that were recovered showed the
Sales 78,120 262,880 following:
Inventory beginning 11,036 28,520
Purchases 203,360 Inventory, January 1, 2016 (at billed price) P 257,400
Inventory transfers to Pampanga 52,080 Shipments received from home office, January to July 171,600
Inventory transfers from Home Office 62,496 Purchases, at cost, from outside sources, all resold at 20% markup 11,700
Inventory ending 14,508 35,340 Sales 234,000
Expenses 25,172 94,736 Sales allowance 6,500

1. How much is the reported net income (loss) of the branch? 6. How much is the estimated loss on the merchandise destroyed by
2. How much is the combined net income of Saruman Enterprise? the fire at cost?

During 2016 goods were shipped to a branch at 20% above cost. The JM Co. operates a branch in Davao. There are shipments in transit from
reciprocal account in the income statement of the branch amounted to home office of the branch. The home office ships merchandise to the branch
P414,000. The balance of the contra investment in branch account reports a at 125% of cost in the year 2016. Profit and loss data for the home office and
balance of P90,000 before adjustment. The beginning inventory of the branch for 2016 follows:
branch is P150,000 and including inventory purchased from outsider Home Office Branch
amounting P45,000. The branch purchased goods from outsiders during the Sales 410,000 123,000
year amounting to P136,800. The ending inventory of the branch as reported Purchase from outsiders 328,000 24,600
in the combined statement of financial position is P480,000, 25% of which Shipments to Branch:
are purchased from outside suppliers. Cost to Home Office 49,200
Billing Price to Branch 53,300
3. How much is the cost of goods sold to be reported in the branchs Expenses 65,600 16,400
income statement for the year ended December 31, 2016? Inventories, January 1, 2016
4. How much is the adjusted balance of allowance for mark-up for the Home Office: acquired from outsiders, at cost 131,200
year ended December 31, 2016? Branch: acquired from outsiders, at cost 7,500
Acquired from Home Office at billing price
which averaged 20% above cost 12,300
The Quezon City Sales Company established a branch in Dumaguete City Inventories, December 31, 2016
early last year. It shipped merchandise and billed the branch for P240,000 Home Office: acquired from outsiders, at cost 90,200
prior to its opening. For the year, it made additional shipments at billed price Branch: acquired from outsiders, at cost 9,020
of P96,000. Within the year, the branch shipped back P6,000 inventory and Acquired from Home Office, in 2016, at billed
got the credit memo for said returns. On the last working day of the year, an price (physical count) 34,440
inventory count was made. Ending inventory of P148,000 was established
consisting of purchases from third parties at P16,000, with the balance At the end of the year the home office has an investment in branch balance
coming from home office shipments at billed price. The home office billed the amounting to P361,000 before recognizing branch profit.
branch at 20% above cost. The total purchases of the branch from outside
suppliers amounted to P58,000. 7. How much is the combined cost of goods sold?
8. How much is the combined net income(loss)?
5. The total goods available for sale by the branch at cost amounted 9. How much is the combined ending inventory?
to? 10. How much is the investment in branch account after recognizing
branch profit?