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DAYAG Solution Chapter 13
DAYAG Solution Chapter 13
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.
Problem II
a. Unrealized Intercompany Inventory Profit has a credit balance of P9,450 before adjustment on
December 31, calculated as follows:
Problem III
a. The branch office inventory as of December 1 considered of:
Shipments from Home Office (see below)............................................................. P 12,000
Purchases from outsiders (balance of inventory).................................................. 3,000
Total inventory........................................................................................................... P 15,000
Goods acquired from home office and included in branch inventory at billed price are calculated
as follows:
Balance of unrealized intercompany inventory profit, December 31.................... P 3,600
Additions to unrealized profit account during December, 20% of
shipments to branch (20% x P8,000)............................................................................. 1,600
Balance of unrealized profit account, December 1.................................................. P 2,000
Problem IV
(1) Dec.31 Selling Expenses............................................................................ 260
Store Supplies............................................................................ 260
Supplies used: P400 P140, or P260.
31 Selling Expenses............................................................................ 80
Accumulated Depreciation-Store Furniture........................ 80
Depreciation:1% of P8,000, or P80.
31 Selling Expenses............................................................................ 120
Accrued Expenses Payable................................................. 120
31 Sales.......................................................... .......................................20,500
Income Summary....................................................................... 20,500
SPENCER CO.
Income Statement for Branch
For Month Ended December 31, 20x4
Sales........................................................................................................................................... P 20,000
Cost of goods sold:
Merchandise inventory, December 1................................................ P 14,400
Purchases.............................................................................................. 4,100
Shipments from home office............................................................... 10,200
Merchandise available for sale.......................................................... P 28,700
Less: Merchandise Inventory, December 31..................................... 14,600
Cost of goods sold....................................................................................................... 14,100
Gross profit................................................................................................................................. P 5,90 0
Operating expenses:
Advertising expense............................................................................. P 2,800
Salaries and commissions expense..................................................... 2,350
Store supplies expense......................................................................... 280
Miscellaneous selling expense............................................................ 1,050
Rent expense........................................................................................ 1,500
Depreciation expense furniture and fixtures.................................. 36
Miscellaneous general expense......................................................... 905
Total operating expenses.......................................................................................... 8,921
Net loss...................................................................................................................................... P 3,021
SPENCER CO.
Balance Sheet for Home Office
December 31, 20x4
Assets Liabilities and Stockholders Equity_______
Cash..................................................... P10,350 Liabilities
Cash in transit..................................... 1,500 Accounts payable................ P 35,400
Accounts receivable........................ 26,200 Accrued expenses............... 260 P 35,660
Merchandise inventory..................... 24,200 Stockholders Equity
Store supplies...................................... 380 Capital Stock......................... P 65,000
Prepaid expenses............................... 350 Less deficit.............................. 4,476 60,524
Furniture and fixtures.............. P 8,500
Less: Accumulated
depreciation.............. 2, 585 5,915
Branch..................................... P29,239
Less: Unrealized intercompany
inventory profit............ 1,950 27,289 Total liabilities and ________
Total assets........................................ P 96,184 stockholders equity............................... P 96,184
SPENCER CO.
Income Statement for Home Office
For Month Ended December 31, 20x4
Sales........................................................................................................................ ................... P 44,850
Cost of goods sold:
Merchandise inventory, December 1................................................ P 31,500
Purchases.............................................................................................. 27,600
Merchandise available for sale.......................................................... P 59,100
Less: Shipments to branch................................................................... 8,500
Merchandise available for own sales................................................ P 50,600
Less: Merchandise Inventory, December 31..................................... 24,200
Cost of goods sold.......................................................................................... 26,400
Gross profit................................................................................................................................. P 18,450
Operating expenses:
Advertising expense............................................................................. P 2,850
Salaries and commissions expense..................................................... 4,250
Store supplies expense......................................................................... 560
Miscellaneous selling expense.......................................................... .. 1,850
Rent expense........................................................................................ 2,700
Depreciation expense furniture and fixtures.................................. 85
Miscellaneous general expense......................................................... 2,510
Total operating expenses............................................................................. 14,805
Net income from own operations............................................ ............................................. P 3,645
Less: Branch net loss........................................................................................................ ........ 1,271
Total income............................................................................................................................ P 2,374
SPENCER CO.
Combined Income Statement for Home Office and Branch
For Month Ended December 31, 20x4
Sales P64,850
Cost of goods sold:
Merchandise Inventory, December 1 P43,900
Purchases 31,700
Merchandise available for sale P75,600
Less merchandise inventory, December 31 . 36,850
Cost of goods sold .. 38,750
Gross profit P26,100
Operating Expenses:
Advertising Expense P 5,650
Salaries and Commissions expense 6,600
Store supplies expense .. 840
Miscellaneous selling expense 2,900
Rent expense 4,200
Depreciation Expense F&F . 121
Miscellaneous general expense . 3,415
Total operating expense . 23,726
Net Income P 2,374
31 Sales 20,000
Income Summary . 20,000
31 Income Summary 22,221
Purchases 4,100
Shipments from Home Office 10,200
Advertising Expense . 2,800
Salaries and Commissions Expense . 2,350
Store Supplies Expense 280
Miscellaneous Selling Expense .. 1,050
Rent Expense . 1,500
Depreciation Expense F&F . 36
Miscellaneous General Expense . 905
31 Depreciation Expense .. 85
Accumulated Depreciation F&F . 85
Depreciation: 1% of P8,500, or P85
31 Sales 44,850
Shipments to branch ....................... 8,500
Income Summary . 53,350
Problem VI
1.
Branch H. Office
Current Current
Unadjusted balance, 12/31/20x4 P 44,000 P 9,000
Add (Deduct): Adjustments
1 Cash in transit ( 10,000)
2. Merchandise in transit 10,000
3. Branch expenses paid by home office 12,000
4. Cash in transit from home office _______ 3,000
Adjusted balance, 12/31/20x4 P 34,000 P34,000
Problem VII
(1)
PAXTON CO.
Income Statement for Dayton Branch
For Year Ended December 31, 20x5
Sales................................................................................................ .............................. P315,000
Cost of goods sold:
Merchandise inventory, January 1, 20x5................................... P 44,500
Shipments from home office...................................................... 252,000
Merchandise available for sale................................................. P296,500
Less: Merchandise Inventory, December 31, 20x5.................. 58,500 238,000
Gross profit................................................................................................................. P 77,000
Operating expenses................................................................................................. 101,500
Net loss....................................................................................................................... P 24,500
PAXTON CO.
Income Statement for Cincinnati Home Office
For Year Ended December 31, 20x5
Sales.............................................................................................................................. P1,060,000
Cost of goods sold:
Merchandise inventory, January 1, 20x5................................... P115,000
Shipments from home office...................................................... 820,000
Merchandise available for sale................................................. P935,000
Less: Shipments to branch.......................................................... 210,000
Merchandise available for own sales....................................... P725,000
Less: Merchandise Inventory, December 31, 20x5.................. 142,500 582,500
Gross profit........................................................................................................ .......... P477,500
Expenses..................................................................................................................... . 382,000
Net income from own operations........................................................... ................. P 95,500
Add branch net income........................................................................................... 16,650
Total income.................................................................................. ............................. P112,150
(2)
PAXTON CO.
Combined Income Statement for Home Office and Branch
For Year Ended December 31, 20x5
Sales................................................................................................ .............................. P1,375,000
Cost of goods sold:
Merchandise inventory, January 1, 20x5...................................P 150,600
Purchases...................................................................................... 820,000
Merchandise available for sale................................................. P970,600
Less: Merchandise Inventory, December 31, 20x5.................. 191,250 779,350
Gross profit.......................................................................... .......................................... P595,650
Operating expenses.................................................................................................... 483,500
Net income........................................................... ........................................................ P112,150
Problem VIII
(1)
RUGGLES CO.
Income Statement for Branch
For Year Ended December 31, 20x4
Sales................................................................................................ ................................ P 78,500
Cost of goods sold:
Merchandise inventory, January 1, 20x4......................................... P 32,000
Shipments from home office........................................... P 4 0,000
Purchases from outsiders................................................. 20,000 60,000
Merchandise available for sale..................................................... .. P 92,000
Less: Merchandise Inventory, December 31, 20x4........................ 31,500
Cost of goods sold............................................................................. 60,500
Gross profit.................................................................................................................... P 18,000
Operating expenses.................................................................................................... 12,500
Net income................................................................................................................... P 5,500
RUGGLES CO.
Income Statement for Home Office
For Year Ended December 31, 20x4
Sales.............................................................................................................................. P 256,000
Cost of goods sold:
Merchandise inventory, January 1, 20x4................................... P 80,000
Purchases...................................................................................... 210,000
Merchandise available for sale................................................. P 290,000
Less: Shipments to branch.......................................................... 30,000
Merchandise available for own sales....................................... P 260,000
Less: Merchandise Inventory, December 31, 20x4.................. 55,000
Cost of goods sold............................................................................. 205,000
Gross profit................................................................................................................. .. P 51,000
Operating Expenses............................................................................................... ..... 60,000
Net loss from own operations..................................................................................... P 9, 000
Add branch net income..................................................................................... ....... 13,500
Total income................................................................................................................ P 4,500
(2)
RUGGLES CO.
Combined Income Statement for Home Office and Branch
For Year Ended December 31, 20x4
Sales................................................................................................ .............................. P 334,500
Cost of goods sold:
Merchandise inventory, January 1, 20x4................................... P 107,500
Purchases...................................................................................... 230,000
Merchandise available for sale.................................................. P 337,500
Less: Merchandise Inventory, December 31, 20x4................... 80,000
Cost of goods sold............................................................................. 257,500
Gross profit................................................................................................. ................... P 77,000
Operating expenses.................................................................................................... 72,500
Net income................................................................................ ................................... P 4,500
Problem IX
1.
Branch H. Office
Current Current
Unadjusted balance, 12/31/20x4 P 60,000 P 51,500
Add (Deduct): Adjustments
1 Remittance I 1,700)
2. Cash in transit 1,800
3. Shipments in transit 5,800
Adjusted balance, 12/31/20x4 P 57,300 P 57,300
3.
Combined Income Statement for Home Office and Branch
For Year Ended December 31, 20x4
Sales................................................................................................ .............................. P 295,000
Cost of goods sold:
Merchandise inventory, January 1, 20x4................................... P 33,550
Purchases...................................................................................... 190,000
Freight-in 5,750
Merchandise available for sale.................................................. P 229,300
Less: Merchandise Inventory, December 31, 20x4................... 44,770
Cost of goods sold........................................................................ 184,530
Gross profit................................................................................................................. ... P 110,470
Operating expenses........................................................................................ ............ 66,300
Net income................................................................................................................... P 44,170
Problem X
a. The cost of the merchandise destroyed was P30,000.
Total merchandise acquired from home ofiice, at billed price:
Inventory, January 1...................................................................................... P26,400
Shipments from home office, Jan. 1-17....................................................... 20,000
P46,400
Cost of goods sold, January 1-17, at billed price:
Net sales, P13,000/1.25...................................................................................... 10,400
Merchandise on hand, January 17, at billed price....................................... P36,000
Merchandise on hand, January 17, at cost, P36,000/1.20............................ P30,000
b. Branch Books:
Loss from Fire (or Home Office)..................................................... ....... 36,000
Merchandise Inventory............................................................ 36,000
Home Office Books:
No entry needs to be made on the books of the home office until the end of the fiscal period, when
the branch earnings (including the loss from fire) are recognized and when the balance of the
account Unrealized Intercompany Inventory Profit is adjusted to conform to the branch ending
inventory. If it is desired to recognized the loss from fire on the home office books immediately, the
following entry may be made:
Branch Loss from Fire (or Retained Earnings)...................................... 30,000
Unrealized Intercompany Inventory Profit........................................... 6,000
Branch......................................................................................... 36,000
Problem XI
a. Books of Branch A:
Home Office........................................................................................ 1,500
Cash......................................................................................... 1,500
b. Books of branch B:
Cash...................................................................................................... 1,500
Home Office............................................................................ 1,500
Problem XII
a. Books of Branch No. 1 :
Home Office . 1,950
Shipments from Home Office.. 1,600
Freight In 350
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 67,600
Unrecorded branch expenses ( 2,500)
True Branch Net Income P 70,100
5. a
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
Note to teachers: The Intercompany Profit Deferred amounting to P6,000 should be in the column
of Home Office
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
11. c
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
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 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)]. 120,000 467,500
Gross profit. P 370,000
Less: Expenses (P120,000 + P50,000... 170,000
Net Income P 200,000
15. d
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.. P 19,200
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 Cost Allowance
Merchandise Inventory, 12/31/2005 *P 36,000 P 30,000 P 6,000
Shipments 28,800 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 Cost Allowance
Merch. Inventory, 12/31/20x4 *P12,000 P10,000 P 2,000
Shipments 9,600 8,000 1,600
Cost of Goods Sold P 3,600
*P2,000 / 20% = P10,000 + P2,000 = P12,000.
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 P256,800
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 Cost Allowance
Price
Merchandise inventory, 8/1/x4 60,000
Shipments (400,000 x 25%) 400,000 *100,,000
Cost of goods available for sale 160,000
Less: MI, 8/31/x4 (160,000 x 25%) 160,000 40,000
Overvaluation of CGS/RPBSales 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
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 20/120) 60,000 10,000*
24. b
Sales (P148,000 + P44,000) P192,000
Less: Cost of Sales
Inventory, 1/1/20x4 P 0
Purchases 52,000
Shipments from home office 108,000
Cost of goods available for sale P 160,000
Less: Inventory, 12/31/20x4 60,000 100,000
Gross profit P 92,000
Less: Expenses (P76,000 + P24,000) 100,000
Net income, unadjusted P( 8,000)
Add: Overvaluation of CGS 10,000
Adjusted branch net income P 2,000
25. c
125% 100% 25%
Billed Price Cost Allowance
Merchandise inventory, 1/1/x4 40,000
Shipments 250,000
Cost of goods available for sale 290,000
Less: MI, 12/31/x4 (P60,000 x 80%) 60,000
Overvaluation of CGS(230,000x 25/125) 230,000 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)] P132,000
Add: Purchases 350,000
Cost of goods available for sale P482,000
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) P 837,500
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)] 120,000 467,500
Gross profit P 370,000
Less: Expenses (P120,000 + P50,000) _ 170,000
Net Income P 200,000
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 P 72,000
Less: Expenses 52,000
Net income home office P 20,000
31. a
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 Cost Allowance
MI. 1/1/2010 1,000
Shipments
110,000 100,000 **10,000
Available for sale 11,000
-: MI, 12/31/10 ***15,400 ****1,400
CGS 9,600
**110,000 x 10/110
***10,400 + 5,000, in transit
****15,400 x 10/110
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
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
36. b
Inventory in the published balance sheet, at cost
Shipments at cost..........................................P 32,500
X: Ending inventory %...................................................................... .............. 60%
Ending inventory at billed price.P19,500
Add: Freight (P1,300 x 60%)......... 780
P 20,280
37. c
Home Office Books Davao Branch Baguio Branch
Davao Branch39,000 SFHO.37,700
STB, cost. 32,500 Freight-in. 1,300
Unrealized profit 5,200 HOC.. 39,000
Cash (freight). 1,300
BC Baguio19,630 HOC.20,150 SFHO18,850
Excess freight 520 SFHO(50%) 18,850 Freight-in.. 780
BC-Davao. 20,150 Freight-in (50%) 650 HOC... 19,630
Cash...... 650
Quiz XIII
1. P63,000
Merchandise inventory, December 31 at cost
From outsiders (see no.2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 18,000
From home office (see no.2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000
P63,000
2. P18,000
Branch inventory, 12/31 per books . . . . . . . . . . . . . . . . . P 72,000
Less Branch inventory from HO at billed price:
Overvaluation of branch inventory . . . . . . . . . . . P 9,000
Cost of branch inventory (P9,000 20%) . . . . . . . 45,000 54,000
Branch inventory from outsiders . . . . . . . . . . . . . . . . . . . P 18,000
3. P93,600
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 351,000
Cost of sales:
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,000
Shipments from HO at cost (P216,000 120%) . . . 180,000
Cost of goods available per sale . . . . . . . . . . . . . 234,000
Less inventory, 12/31 (see no.1) . . . . . . . . . . . . . . . 63,000 171,000
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,400
Branch net income as far as the HO is concerned . . . P 93,600
4. P14,040
Allowance for overvaluation of branch inventory . . . P119,880
Less Overvaluation of shipments from HO:
Billed price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468,000
Cost (P468,000 130%) . . . . . . . . . . . . . . . . . . . . . 360,000 108,000
Overvaluation of beginning inventory from HO: . . . . P 11,880
Add Beginning inventory from HO, at cost (11,880
30%) . 39,600
Beginning inventory from HO, at billed price . . . . . . . P 51,480
5. P47,340
Sales P648,000
Cost of sales:
Merchandise inventory January 1-. . . . . . . . . . . .
From outsiders (see no.4) . . . . . . . . . . . . . . . . . P14,040
From HO, at cost (see no.4) . . . . . . . . . . . . . . . 39,600 P 53,640
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,520
Shipments from HO, at cost
(equal Shipments to Branch) . . . . . . . . . . . . . . . . . . 360,000
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587,160
Less Merchandise inventory, December 31 -
From outsiders (P58,500 P46,800) . . . . . . . . . . 11,700
From HO, at cost (P46,800 130%) . . . . . . . . . 36,000 47,700 539,460
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,540
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,200
Branch net income in so far as the HO is
concerned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 47,340
6. P45,000
Balance of Allowance for overvaluation of branch inventory
account before adjustment . . . . . . . . . P 69,000
Less Overvaluation of shipments from HO:
Billed price (P240,000 x 125%). . . . . . . . . . . . . . . . . P 250,000
Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 60,000
Overvaluation of beginning inventory. . . . . . . . . . . . . 9,000
Add Beginning inventory at cost (P11,640 25%) . . . . 36,000
Branch beginning inventory at billed price . . . . . . . . . P 45,000
7. P63,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 480,000
Cost of sales: (see no.6) . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning inventory. . . . . . . . . . . . . . . . . . . . . . . . . P 45,000
Shipments from HO (P240,000 x 125%). . . . . . . . . . 300,000
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,000
Less ending inventory. . . . . . . . . . . . . . . . . . . . . . . . 48,000 297,000
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,000
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000
Branch net income, per books . . . . . . . . . . . . . . . . . . . P 63,000
8. P122,400
Branch net income, per books (see no. 7) . . . . . . . . . P 63,000
Add realized profit -
Allowance for overvaluation of branch inventory P 69,000
Less Overvaluation of branch ending inventory:
Billed price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 48,000
Cost (P48,000 125%). . . . . . . . . . . . . . . . . . . . 38,400 9,600 59,400
True branch net income. . . . . . . . . . . . . . . . . . . . . . . . P 122,400
9. 20%
Inventories, January 1, 20x5 at billed price. . . . . . . . . . . . . . . . . . . . . . P 90,000
Shipments from HO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522,000
Less Allowance for overvaluation of branch inventory. . . . . . . . . . . . 87,000
Cost of merchandise from home office . . . . . . . . . . . . . . . . . . . . . . . . P435,000
10. P360,000
Shipments from HO, at billed price . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 432,000
Divide by the billing percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120%
Balance of shipments to Branch account. . . . . . . . . . . . . . . . . . . . . . P 360,000
11. P129,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 720,000
Cost of sales:
Inventories, January 1 at cost (P90,000 120%) . . . . . . . . . . P 75,000
Shipments from HO, at cost (see no. 10) . . . . . . . . . . . . . . . . 360,000
CGAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435,000
Inventories, December 31 at cost (P100,800 120%) . . . . . . 84,000 351,000
Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369,000
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,000
Adjusted branch profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 129,000
12. P4,800
Inventory , January 1 per books . . . . . . . . . . . . . . . . . . . . . . . . . . . P 24,000
Less Inventory, January 1 from HO at billed price
Allowance for overvaluation of branch inventory . . . . . . . . P 28,900
Overvaluation of shipments from HO (P96,000 P72,000) . . 24,000
Overvaluation of beginning inventory from HO . . . . . . . . . . 4,800
Add Inventory for HO, at cost (P4,800 33.33%) . . . . . . . . . . 14,500 19,200
Inventory, January 1 from outsiders. . . . . . . . . . . . . . . . . . . . . . . . . P 4,800
13. P66,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 240,000
Cost of sales:
Inventory, January 1(cost)
From outsiders (see no.12) . . . . . . . . . . . . . . . . . . . . . P 4,800
From HO, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,500 P 19,200
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000
Shipments from HO, at cost . . . . . . . . . . . . . . . . . . . . . . 72,000
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,200
Less Inventory, December 31 (cost) -
From outsiders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,200
From HO, at cost (P24,000 133%). . . . . . . . . . . . . . 18,000 25,200 102,000
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,000
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,000
True branch net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . P66,000
14. 25%
Shipments from home office (billed price) . . . . . . . . . . . . . . . . . . . . . . . . . P 450,000
Divide by shipments to branch (cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,000
Billing percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125%
Less percentage at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Rate of mark-up on cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%
15. P24,000
Balance of allowance for overvaluation of branch inventory account P 94,800
Less Overvaluation of shipments from HO (P450,00 P360,000) . . . . . . . 90,000
Overvaluation of beginning inventory from HO . . . . . . . . . . . . . . . . . . . . . 4,800
Add Cost of beginning inventory from HO (P4,800 25%) . . . . . . . . . . . . 19,200
Branch beginning inventory from HO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 24,000
16. P89,040
Balance of allowance for overvaluation of branch inventory P 94,800
Less Overvaluation of branch ending inventory:
Billed price (P49,680 P20,880) . . . . . . . . . . . . . . . . . . . . . P 28,800
Cost (P28,800 125%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,040 5,760
Realized profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P89,040
17. P36,000
Balance of Allowance for overvaluation of branch inventory . . . . . . . P 43,200
Less Overvaluation of shipments from HO (P115,200 P96,000) . . . . . . . 19,200
Overvaluation of beginning inventory from HO . . . . . . . . . . . . . . . . . . . . 24,000
Add Cost of beginning inventory from HO (P24,000 20%) . . . . . . . . . . . 120,000
Beginning inventory from HO, at billed price. . . . . . . . . . . . . . . . . . . . . . . P 144,000
Merchandise inventory, January 1 per books . . . . . . . . . . . . . . . . . . . . . . P 180,000
Less beginning inventory from HO (see above) . . . . . . . . . . . . . . . . . . . . . 144,000
Branch beginning inventory from outsiders . . . . . . . . . . . . . . . . . . . . . . . . P 36,000
18. P26,400
Balance of allowance for overvaluation of branch inventory P 43,200
Less Overvaluation of branch ending inventory from HO:
Billed price (P120,000 P19,200) . . . . . . . . . . . . . . . . . . . . P100,800
Cost (P100,800 120%) . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,000 16,800
Realized branch profit to be adjusted . . . . . . . . . . . . . . . . . . . P 26,400
19. P9,990
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 189,000
Cost of sales:
Inventory, January 1 at cost (P27,000 125%) . . . . . . . . P 21,360
Shipments from HO, at cost . . . . . . . . . . . . . . . . . . . . . . . 126,000
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,360
Inventory, December 31 at cost P35,100 120%) . . . . . 29,250 118,110
Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,890
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,900
True branch income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 9,990
20. P67,290
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 636,000
Cost of sales:
Inventory, January 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 69,000
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,000
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,000
Less Shipment to branch . . . . . . . . . . . . . . . . . . . . . . . . . . 126,000
Cost of goods available for own sale . . . . . . . . . . . . . . . 435,000
Less Inventory, December 31. . . . . . . . . . . . . . . . . . . . . . 85,500 349,500
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286,500
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229,200
Net income of home office . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,300
Add Branch net income (see no. 19) . . . . . . . . . . . . . . . . . . . 9,990
Combined net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 67,290
Theories