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The estimated cost of merchandise inventory destroyed by the fire at the Cebu branch is P21,600. The branch inventory included P12,000 from outsiders and P33,000 from the home office. The net income of the Bulacan branch as per its own records is P107,750. Under GAAP, its net income is P102,250. The overstatement of its cost of sales is P5,500. The combined net income of the home office and branch is P319,250.

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107 views

Additional Problem

The estimated cost of merchandise inventory destroyed by the fire at the Cebu branch is P21,600. The branch inventory included P12,000 from outsiders and P33,000 from the home office. The net income of the Bulacan branch as per its own records is P107,750. Under GAAP, its net income is P102,250. The overstatement of its cost of sales is P5,500. The combined net income of the home office and branch is P319,250.

Uploaded by

LabLab Chatto
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1. The home office in Manila bills its Cebu branch for shipments of goods at 25% above cost.

At
the close of business on Sept. 30, 2020, a fire gutted the branch warehouse and destroyed
70% of the merchandise stock stored therein. Thereafter, the following data were gathered:
January 1 inventory, at billed price P32,000.
Shipments from home office, January 1 through September 30 48,000
Net sales, January 1 through September 30 68,000
Undamaged merchandise recovered are marked to sell for 18,000
What is the estimated cost of merchandise inventory destroyed by the fire?

2. The following data were taken from the records of LUG Corporation of Manila and its Bulacan
branch of 2021.

Manila Office Bulacan Branch


Sales 530,000 P157,500
Inventory, January 1 57,500 21,250
Purchases 410,000
Shipments to branch 105,000
Shipments from home office 126,000
Inventory, December 31 71,250 29,250
Expenses 191,000 50,750
In 2021, Manila office billed the Bulacan branch at 120% of cost which was lower
by 5% than last year’s.
Compute the following:
a. Net income of the branch as far as the branch is concerned.
b. Net income of the branch under GAAP
c. The overstatement of the branch cost of sales
d. The combined net income of the home office and the branch

Trial balances for the home office and


the branch of the Tony co. show the
following accounts
before adjustment, on December 31,
2011. The home office policy of billing
the branch for
merchandise is 20% above cost.
Home office Branch
Unrealized intercompany inventory
profit P10, 800
Shipments to branch 24, 000
Purchase (outsiders) P7, 500
Shipments from home office 28,
800
Merchandise inventory, Dec. 1, 2011
45, 000
What part of the branch inventory as of
Dec. 1, 2011 represent purchases from
outsiders and
what part represents goods acquired
from the home office?
Outsiders Home office
a. P12, 000. P33, 000
b. 16, 500. 28, 500
c. 15, 000. 30, 000
d. 9, 000. 36, 000
3. Trial balances for the home office and the branch of the Tony co. show the following
accounts before adjustment, on December 31, 2021. The home office policy of billing the
branch for merchandise is 20% above cost.
Home office Branch
Unrealized intercompany inventory profit P10, 800
Shipments to branch 24, 000
Purchase (outsiders) P7, 500
Shipments from home office 28, 800
Merchandise inventory, Dec. 1, 2011 45, 000
What part of the branch inventory as of Dec. 1, 2021 represent purchases from outsiders
and what part represents goods acquired from the home office?

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