175 Excess Freight on Inter branch Transfer of Merchandise 200 Branch No 1 195

# 175 excess freight on inter branch transfer of

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1,75 0 Excess Freight on Inter branch Transfer of Merchandise……….. 200 Branch No. 1………………………………………………… 1,95 0

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……… Shipments to Branch No. 1…………………………………………….. 1,60 0 Shipments to Branch No. 5………………………………………… 1,60 0 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 P 31,000 From Outsiders 6,600 P 37,600 3. a True Branch Net Income Branch Net Income P 5,000 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 67,60 0 Unrecorded branch expenses ( 2,50 0) True Branch Net Income 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 sold…………………………………………P 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 )

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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. a True Branch Net Income P156,000 Less: branch Net Income as reported by the branch 60,000 Overvaluation of CGS P 96,000 Less: Cost of goods sold from home office at BP Inventory, December 1 P 70,000 Shipment from HO 350,000 COGAS P 420,000 Less: Inventory, December 31 84,000 336,000 CGS from home office, at cost P 240,000 Billing Price: P336,000 / P240,000 = 140%. 12. b – 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 P 20,000 Less: Rental expense charged by the home office (P1,000 x 6 months) 6,000 Adjusted NI as reported by the Branch P 14,000 Add: Overvaluation of CGS Billed Price MI, beginning 0 SFHO 550,000
COGAS 550,000 Less: MI, ending 75,000 CGS, at BP 475,000 X: Mark-up ratio 25/125 95,000 True/Adjusted/Real Branch Net Income P109,000 14. d 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)]……………….

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