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Problem I
Sales....................................................................................................................... 42,000
Shipments to Newark Branch................................................................ 35,000
Unrealized Intercompany Inventory Profit........................................... 7,000
Cost of merchandise shipped t branch: P42,000/1.20= P35,000.
Shipments to Newark Branch........................................................................... .. 625
Unrealized Intercompany Inventory Profit........................................................ 125
Sales Returns........................................................................................... 750
Cost of merchandise returned by branch: P750/1.20= P625.
Newark Branch Income