Chapter 13

Problem I
Sales........
Sales................
.................
................
.................
..................
.................
..................
................
.................
..................
.................
..................
................
......... 42,000
Ship
Shipme ment ntss to Newa
Newark rk Bran
Branch ch.. ....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 35,0
35,000
00
Unre
Unreal aliz
ized
ed Inte
Interc rcoompan
mpany y Inv
Invento
entory ry Pro
Profit.
fit...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 7,00
7,000
0
Cost of merchandise shipped t branch: P42,000/1.20= P35,000.

Shipments to Newark Branch.........................

Branch............................................
..........................................
...............................
........ .. 625
Unreal
Unrealize
ized
d Interco
Intercompan
mpany y Inventor
Inventory y Profit...
Profit.......
........
........
........
.......
.......
........
........
........
.......
.......
........
........
.......
... 125
Sales Retur
turns.
ns......
........
.......
........
.......
..........
........
.........
.........
.......
........
........
.......
.......
............
.......
........
.......
..........
... 750
Cost of merchandise returned by branch: P750/1.20= P625.

Newark Branch Income.........................

Income.............................................
........................................
........................................
.................... 2,600
Newar
wark Bra
Branch......
........
.......
........
..........
........
.......
.......
...........
.......
.........
.......
.......
...........
........
.......
........
..........
... 2,600

Unrealized Intercompany Inventory Profit..........................................

Profit.................. ......................................
.............. 4,125
Newar
wark Bra
Branch...... ........
.......
........
..........
........
.......
.......
...........
.......
.........
.......
.......
...........
........
.......
........
..........
... 4,125
Decrease in Unrealized Intercompany Inventory Profit: Profit:
Balance prior
prior to adjustment,
adjustment, 12/31, 12/31, P7,000 – P125..........
P125............... ..... P6,875
P6,875
Balance required in account, 12/31,
P16,500
P16,500 – (P16,500/1.
(P16,500/1.20).....
20)............
...............
.................
..................
.................
.................
.............
.... 2,750
Decrease.................................................................................... P4,125

Newark Branch Income...................................................................................... 1,525

Inc
Income Summary
ary...
........
.......
......
......
.......
........
........
.........
........
.......
.........
........
......
.....
........
.......
........
.......
..........
.... 1,525

Problem II
a. Unrealized Intercompany Inventory Profit has a credit balance of P9,450 before adjustment on
December 31, calculated as follows:

Merchandise transferred by home office at billed price,

35% above cost
cost (P16,200 plus P20,250).......................
P20,250).............................................
...................... P36,450
Merchandis
Merchandise e transferre
transferred d by homehome officeoffice at cost, cost, P36,450/1.
P36,450/1.35.... 35.... 27,000
27,000
Additions to unrealized profit account resulting from transfers
by home office.......
office...............
..................
........................
.......................
.................
.................
.................
.................
............
... P9,450
P9,450

b. Unrealized Intercompany Inventory Profit.................................................. 4,550

Cash
Cash......
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... ....
......
....
....
....
....
....
....
....
.. 4,55
4,550
0

Balance of unrealized profit account at December 31

(as calculated above).......................................................................................................... P 9,450
Required balance, December 31, to reduce inventory to cost:
Ending inventory of merchandise shipped to branch by home office:
At billed price.........
price.................
.................
.................
.................
..................
................
......... ..................
..........................
.................
...........
.. P 18,900
At cost (P 18,900/1.35)
18,900/1.35)........
...............
.....................
.......................
......................
.....................
...............
................
................
....... 14,000
4,900
Required decrease in unrealized profit account as a result
of branch sales.........
sales................
................
.................
.........................
.........................
..................
..................
........................
.......................
.................
..................
.......... P4,550
P4,550
c. Branch Books:
Home Office........................................................................................... 540
Shipm
hipmen
entsts fro
fromm Home
Home off offic
ice.
e...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 540
540

Home Office Books:

Shipments to Branch.............................................................................. 400
Unrealized Intercompany Inventory Profit........................................... 140
Bran
Branch
ch..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 540
540
Cost of merchandise returned: P540/1.35, or P400.

Problem
Proble m III
a. The branch office inventory as of December 1 considered of:
Shipments from Home Office (see below)............................................................. P 12,000
Purchases
Purchases from outsiders
outsiders (balance
(balance of inventory)..
inventory)..........
................
................
.................
..................
...............
...... 3,000
Total inventory..
inventory..........
.................
.................
.......................
........................
...................
.................
................
.................
.................
...................
.............
... P 15,000

Goods acquired from home office and included in bra nch inventory at billed price are calculated
as follows:
Balance of unrealized intercompany inventory profit, December 31.................... 31 .................... P 3,600
Additions to unrealized profit account during December, 20% of
shipments
shipments to branch (20% x P8,000).......
P8,000)...............
.................
..................
................
................
..................
.................
.................
...........
.. 1,600
Balance of unrealize
unrealized
d profit account,
account, December 1............1.....................
.................
................
..................
.............
... P 2,000

Balance of unrealized profit account, December 1, P2,000 / 20% markup on

cost equals December 1 inventory at cost.............................................
cost.......................... ......................................
................... P 10,00 0
Add 20% markup.........
markup..................
.................
.................
................
................
...................
..................
.................
................
................
...................
.............
... 2,000
Goods in branch inventory
inventory at billed price...........................
price..............................................
......................................
................... P 12,000

b. Unrealized Intercompany Inventory Profit......................................... 2,200

Bra
Branch Inc
Income.......
.......
........
.......
..........
........
.......
......
......
.......
........
........
.......
.......
............
.......
...... 2,200
200

Calculation of reduction in Unrealized Intercompany

Inventory Profit:
Balance of unrealized profit account, December 31.........................P 3,600
Required balance, December 31, to reduce inventory to cost
At billed price.........................................
price.................... ..........................................
..........................
..... P8,400
At cost
cost (P8,40
(P8,400/1.
0/1.20).
20).....
........
........
........
........
........
........
........
........
........
........
........
........
......
.. 7,000
7,0 00
1,400
Required decrease in unrealized profit account as a result
of branch sales.........
sales................
................
.................
.................
..................
................
.................
..................
.................
............
... P 2,200

Prob
Proble
lem
m IV
(1) Dec.31 Selling Expenses...........................
Expenses...............................................
..........................................
.............................
....... 260
Stor
Storee Supp
Supplilies
es..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 260
260
Suppli
Supplies
es used
used:: P400
P400 – P140,
P140, or or P260.
P260.

31 Selling Expenses..........................
Expenses................................................
..........................................
............................
........ 80
Accumul
mulated
ted Depre preciatio tion-S
n-Store Furnitur ture..........
........
.......
..........
...... 80
Depreciation:1% of P8,000, or P80.
 31 Selling
Selling Expenses........
Expenses...............
...............
.................
..................
................
.................
..................
.................
........... 120
Accrued Expenses Payable................................................. 120

31 Prepaid
Prepaid Sellin
Selling
g Expens
Expenses.
es.....
........
........
........
........
.......
.......
........
........
........
.......
.......
........
........
........
...... . 150
Selling Expen
penses.......
.......
.........
.........
........
.......
........
........
.......
........
..........
........
.......
...........
... 150
31 Income Summary........................
Summary.............................................
........................................
............................
......... 16,000
Merc
Merchahand
ndisise
e Summar
mmary. y...
....
....
....
....
....
....
....
....
....
....
.....
.....
....
....
....
....
....
....
....
....
....
....
....
....
........
.... 16,0
16,00
00

31 Merchandise
Merchandise Summary
Summary........................
.................
.................
.......... ................
........................
...............
....... 16,950
Inco
Income
me Summ
Summar ary.y...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
......
......
....
....
....
....
....
....
....
....
....
....
....
.... 16,9
16,950
50
31 Notes Payable........................................
Payable................. ...................................
............ ..............................
.................. ............ 1,000
Home
Home Offi
Office
ce..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 1,00
1,000
0

31 Sales.................................................................................................20,500
Inco
Incomeme SummSummar ary.
y...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 20,5
20,500
00

31 Income Summary
Summary.........
.................
................
................
.................
............................
............................
..............
..... 21,900
Purc
Purchahase
ses.s...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 5,00
5,000
0
Ship
Shipme
mentntss from
from HomeHome Offi Office ce.. ....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 10,5
10,500
00
Sell
Sellin
ing
g Expe
Expens nses
es......
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
......
......
....
....
....
....
....
....
....
.. 4,56
4,560
0
Gene
Genera rall Expe
Expens nseses......
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 1,84
1,840
0

31 Home Office.......
Office................
.................
.................
................
................
..............................
.............................
................
.......... 450
Inco
Income
me Su
Summar
mmary. y...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 450

(2) Dec.31
Dec.31 Branch No. 1..............
1.......................
..................
................
.................
..................
.......... ..................
..........................
........ 1,000
Cash
Cash..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.....
.....
....
....
....
....
.....
.....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 1,00
1,000
0

Branch
Branch No. 1 Income....
Income....... .......
........
........
........
........
.......
.......
........
.........
............
...........
........
........
........
.......
... 450
Bran
Branch
ch No. 1...
1.....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.....
.....
....
....
....
....
....
....
....
....
....
....
....
....
.... 450
450

31 Unrealized Intercompany
Intercompany Inventory
Inventory Profit....................
Profit.............................
.................
..........
.. 2,200
Bran
Branch
ch No.
No. 1 Inco
Income
me..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
......
......
....
....
....
....
....
....
....
....
....
....
....
....
.... 2,20
2,200
0

Calculations of unrealized profit adjustment on merch andise shipped by home office:

Billing to Cost Unrealized
Branch (Billing/1.1/ Profit
3) (Billing Price
Minus Cost)
Inventory, Dec.1............................................................ P 12,500 P 9,375 P 3,125
Shipments during December........... ........................... 10,500 7,875 2,625
Total in unrealized profit on December 31................. P 5,750
Inventory, Dec.31......................................................... 14,200 10,650 3,550
Reduction in unrealized profit account-
adjustment to branch profit for overstat ed of cost
of g
go
oods sosold................................................................. P2 2,,200

31 Branch No. 1 Income............................................................... 1,750

Income Su
Summary............................................................. 1,750
Problems V
(1)
SPENCER CO.
Balance Sheet for Branch
December 31,20x4
Assets Liabilities____________________  
Cash...
Cash.......
........
........
........
.......
.......
........
........
........
.......
.......
........
........
.... P 2,6
2,650
50 Accoun
Accountsts payable
payable... .......
........
........
........
........
.......
.......
........
...... P 4,2
4,200
00
Acco
Accoununtsts rece
receiv ivab
able le..
.....
......
.....
....
.....
......
.....
.....
..... 12,8
12,850
50 Accru
Accrued
ed expe
expens nses
es...
.....
.....
.....
.....
.....
.....
......
.....
....
.....
......
......
..... 105
Mercha
Merchandi ndisese invent
inventory ory..........
........
........
........
......
.. 14,
14,600
600 Home office
office....
........
........
........
.......
.......
........
........
.......
.......
........
........
...... 29,
29,239
239
Store supplies......................................
supplies.................... .................. 300
Prepaid expenses..........................
expenses............................... ..... 120
Furniture and fixtures.............. P 3,600
Less: Accumulated
depreciation.............. 57 6 3 , 02 4 ________  
Total
Total asset
assets. s...
.....
.....
.....
......
......
......
.....
.....
.....
.....
.....
.....
.....
....
.. P 33,33,54
5444 Total
Total liabil
liabilit
itie
ies.
s....
.....
.....
.....
.....
.....
.....
.....
.....
......
.....
.....
.....
.....
.....
.....
.....
.. P 33,
33,54
544
4

SPENCER CO.
Income Statement for Branch
For Month Ended December December 31, 20x4
Sales........................................................................................................................................... P 20,000
Cost of goods sold:
Merchandise inventory, December 1........................................
1.................... .................................... P 14,400
Purchases.............................................................................................. 4,100
Shipments
Shipments from home office........ office...............
................
..................
..................
.................
................
.............
..... 10,200
10,200
Merchandise available for sale......................................
sale................... .......................................
.................... P 28,700
Less: Merchandis
Merchandise e Inventory,
Inventory, December December 31..............
31......................
...............
...............
........ 14,600 14,600
Cost of goods sold... sold..........
................
.................
.................
.................
................
..................
..................
.................
.................
................
................
........ 14,100
Gross profit............. .........................................
................... .......................................
........................................
.........................................
...................................
................. P 5,90 0
Operating expenses:
Advertising expense...........................
expense................................................
.........................................
.............................
......... P 2,800
Salaries and commissions expense......................
expense.............................................
...............................
........ 2,350
Store supplies expense.......................
expense..............................................
...........................................
.................... ....... 280
Miscellaneous selling expense.................... ...................................
............... ......................... ..... 1,050
Rent expense.......................
expense..............................................
.........................................
.......................................
........................ ... 1,500
Depr
Deprec ecia iati
tion
on expe
expens nse e – furn
furnit itur
ure e and
and fixt fixtur
ureses......
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 36
Misc
Miscel ella
laneneououss gene
genera rall expe
expens nse. e...
....
.....
.....
.....
.....
.....
......
.....
.....
.....
.....
......
......
.....
.....
......
.....
.....
......
......
..... 905
905
Total
Total operati
operating ng expense
expenses.. s......
........
.......
.......
........
........
........
........
.......
.......
.........
.........
.......
.......
........
........
........
........
........
.......
.......
........
.......
... 8,921
8,921
Net loss..........
loss.....................
....................
..................
................
................
..................
.................
..................
.................
................
..................
.................
.................
.................
..........
.. P 3,021

SPENCER CO.
Balance Sheet for Home Office
December
December 31, 20x4
Assets Liabilities and Stockholder’s Equity_______  
Cash..................................................... P10,350 Liabilities
Cash in transit.......
transit..............
.................
..................
.............
..... 1,500 Accounts
Accounts payable.........
payable................ ....... P 35,400
35,400
Accou
ccoun nts receivable..... .......
.........
.......
........
... 26,200 Accruerued expenses.... ........
.......
..... 260 P 35,66
5,660
0
Merchandise inventory..................... 24,200 Stockholders’ Equity
Stor
Store
e supp
supplielies.
s...
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.. 380
380 Capit
Capitalal Stoc
Stock. k....
......
.....
.....
.....
.....
.....
.....
.....
.... P 65,0
65,000
00
Prepa
repaidid expe
expens nseses......
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 350
350 Less
ess defic
eficit
it......
......
....
....
....
....
....
....
....
....
....
....
....
.... 4,4
4,476 60,5
60,524
24
Furniture and fixtures.............. P 8,500
 Less: Accumulated
depr
deprececia iati
tion
on.. ....
....
....
....
....
....
.. 2, 585585 5,91
5,9155
Branch..................................... P29,239
Less: Unrealized intercompany
inv
invento
entory ry prof
profit it..
....
....
....
....
....
.. 1,95
1,950 0 27,28
7,2899 Tota
Totall liliab
abililiitie
ties and
and ____
______
___
__ 
Total
Total asset
assets.
s...
.....
.....
.....
......
......
......
.....
.....
.....
.....
.....
.....
.....
.....
... P 96,1
96,184
84 stoc
stockh
khol olde
der’ r’ss equi
equity
ty...
.....
.....
.....
.....
.....
.....
......
.....
.....
.....
.....
... P 96,
96,18
184
4

SPENCER CO.
Income Statement for Home Office
For Month Ended December December 31, 20x4
Sales...........................................
Sales........................ .........................................
.......................................
........................................
......................................
............... ...................
................ ... P 44,850
Cost of goods sold:
Merchandise inventory, December 1........................................
1.................... ............................
........ P 31,500
Purchases..
Purchases.......... ................
..................
.................
...............
.................
..................
.................
.................
.................
................
........ 27,600
27,600
Merchandise available for sale..........................
sale................... .......................
................................
................ P 59,100
Less:
Less: Shipmen
Shipments ts to branch...
branch....... ........
........
.......
.......
........
........
........
.......
.......
........
........
........
.......
.......
........
.......
... 8,500
8,5 00
Merchandise available for own sales................................................
sales..................................... ........... P 50,600
Less: Merchandise
Merchandise Inventory, Inventory, DecemberDecember 31..............
31......................
.................
...............
...... 24,200
24,200
Cost of goods goods sold.........
sold..................
.................
.................
..................
................
.................
..................
.................
..................
............
... 26,400
Gross profit................................................................................................................................. P 18,450
Operating expenses:
Advertising expense...........................
expense................................................
.........................................
.............................
......... P 2,850
Salaries and commissions expense.................................
expense............. ........................................
.................... 4,250
Store supplies expense.......................
expense..............................................
...........................................
.................... ....... 560
Miscellaneous selling expense.......................
expense..........................................
...................................
................ .. 1,850
Rent expense.......................
expense..............................................
.........................................
.......................................
........................
... 2,700
Depreciation
Depreciation expense expense – furniturefurniture and fixtures.....
fixtures.............
................
.................
.............
.... 85
Miscel
Mis cellan
laneoueouss general
general expense expense..... .........
.......
.......
........
........
........
.......
.......
........
........
........
.......
.......
.......
... 2,510
2,5 10
Total operating
operating expenses....
expenses........... ................
.................
.................
..................
.................
.................
.................
..............
...... 14,805
Net income from own operations....................
operations...........................................
......................... ...................................
................ .............................
.......... P 3,645
Less: Branch net loss........
loss.................
.................
.................
.................
................
..................
..................
.................
.................
................
..................
............ ........ 1,271
Total income..........
income...................
.................
................
..........................
.........................
.................
..................
.................
..................
................
.................
..................
...........
... P 2,374

2. WORKSHE
WORKSHEET
ET – ref
refer
er to a sepa
separat
rate
e sheet
sheet
SPENCER CO.
Combined Balance Sheet for Home Office and Branch
December
December 31, 20x4

Assets Liabilities and Stockholders’ Equity

Cash ………………………………. P 14,500 Liabilities

Accounts Receivable ………… 39,050 Accounts Payable ……….. P39,600
Merchandise Inv ………………. 36,850 Accrued Expenses ………. 365 P 39,965
Store Supplies ………………….. 680 Stockholders’ Equity
Prepaid Expenses …………….. 470 Capital Stock ……………… P65,000
Furniture & Fixtures ……… P12,100 Less deficit …………………. 4,476 60,524
Less accumulated
Depreciation …... 3,161 8,939 Total liabilities and
Total assets ……………………… P100,489 stockholders’ equity …………… P1
P100,489

SPENCER CO.
 Combined Income Statement for Home Office and Branch
For Month
Month Ended December
December 31,
31, 20x4

Sales ………………………………………………
……………………………………………………………………………………… ………………………………………………………… ………………… P64,850
Cost of goods sold:
Merchandise
Merchandise Inventory,
Inventory, December
December 1 …………………………
…………………………………… ………… P43,900
P43,900
Purchases
Purchases ………………
………………………… ……………………… ………………………
………………………
……………………
……… 31,700
31,700
Merchandise available for for sale ……………………………………………
…………………………………………… P75,600
Less merchandis
merchandise e inventory
inventory,, December
December 31 …………………
…………………………….
…………. 36,850
36,850
Cost of goods sold ………………………………………………………….. 38,750
Gross pr
profit …
…… …………………………………………………………………………… P26,100
Operating Expenses:
Advertisin
Advertising g Expense
Expense ……………………………………… ………………………
………………………
……………………
……… P 5,650
Salari
Salaries
es and Commis
Commissio sions
ns expens
expensee …………
……………………………
………………
………………
……… 6,600
6,600
Stor
Store
e supp
supplilies
es expe
expens nse
e ……
………… ………… …………
…………
…………
…………
…………
…………
…………
……..
.. 840
840
Misc
Miscel
ella
lane
neou
ouss selli
selling
ng expe
expens nse
e ……………
………………… …………
…………
…………
…………
…………
…… 2,90
2,900
0
Rent
Rent expe
expens nsee …………
……………… ………… ……………………
…………
……………………
…………
…………
…………
………
… 4,20
4,200
0
Depr
Deprec
ecia iati
tion
on Exp
Expeensense – F&F ………
………… ………
………………
………………
………
………
…………
……….
…. 121
121
Miscel
Miscellan
laneou
eouss genera
generall expense
expense ………
………………
………………
………………
………………
………….
…. 3,415
3,415
Total operating
operating expense …………… …………………………………………………
……………………
………………………
………………………. …………. 23,726
23,726
Net Income ……………………………………………
…………………………………………………………………………………… …………………………………………………… …………… P 2,374

(a) Branch Books

Dec 31 Income Summary …………………………………………….. 14,400

Merchandise Inventory …………………………….. 14,400

31 Merchandise Inventory ……………………………………… 14,600

Income Summary ……………………………………. 14,600

31 Store Supplies Expense ………………………………………. 280

Store Supplies ………………………………………… 28 0
Store
Store suppli
supplies
es used:
used: P580
P580 – P300,
P300, or P280
P280

Dec. 31 Prepaid Expenses ………………………………………………… 120

Miscellaneous General Expense ……
… …………………. 1 20

31 Miscellaneous General Expense ……………………………… 105

Accrued Expenses …………………………………….. 10 5

31 Depreciation Expense – F&F ………………………………….. 36

Accumulated Depreciation ………………………… 36
Depreciation: 1% of P3,600

31 Miscellaneous Ge
General E
Exxpense ……
…………………………….. 220
Home Office …………………………………………… 220

31 Sales ……………………………………………………………… 20,000

Income Summary ……………………………………. 20,000
 31 Income Su
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 …………………. 90 5

31 Home Office ……………………………………………………. 3,021

Income Summary …………………………………….. 3,021

(b) Home Office Books

Dec 31 Income Summary ………………………………………………. 31,500

Merchandise Inventory ………………………………. 31,500

31 Merchandise Inv
Inventory ………
……………………………………….
….... 24,200
Income Summary ……………………………………… 24,200

31 Store Su
Supplies Expense …………………………………………. 5 60
Store Supplies …………………………………………… 560
Store supplies
supplies used:
used: P940
P940 – P380, or : 560
560

31 Prepaid Expense ………………………………………………… 350

Miscellaneous General Expense …………………… 350

31 Miscellaneous General Expense …………………………….. 260

Accrued Expenses ……………………………………. 2 60

31 Depreciation Expense ………………………………………….. 85

Accumulated Depreciation – F&F&F …………………. 85
Depreciation: 1% of P8,500, or P85

31 Cash in Transit …………………………………………………. 1,500

Branch ………………………………………………… 1,500

31 Sales ……
… ………………………………………………………… 44,850
Shipm
hipmen
ents
ts to bran
branch
ch ……
…………
………
………
………
…….
…...
....
....
....
....
....
....
....
....
....
....
.. 8,500
,500
Income Summary …………………………………. 53,350

Dec 31 Income Summary ……………………………………………… 42,405

Purchases ……………………………………………… 27,600
Advertising Expense …………………………………. 2,850
Salaries and Commissions Expense ………………. 4,250
Store Supplies Expense ……………………………… 560
Miscellaneous Selling Expense …………………….. 1,850
Rent Expense …………………………………………. 2,700
Depreciation Expense – F&F ………………………. 85
Miscellaneous General Expense …………………. 2,510
 31 Branch Income ……
……………………………………………….. 3,021
Branch ………………………………………………… 3,021

31 Unrealized Intercompany Inventory Profit ………………. 1,750

Branch Income ……………………………………… 1,750
Calculation of unrealized profit adjustment:
Balance of unrealized profit account,
Dece
Decemb
mberer 31 ……
……………………………… ……….…... P3,7
P3,700
00
Inventory merchandise received from
Home office at billed price on
December 31, P11,700
Inventory at cost: P11,700/ 1.20, or P9,750
Balance of unrealized profit account on
December
ber 31, P11,
P11,7700 – P9,750 .... 1,950
Required decreased in unrealized profit
Adjustment to branch income for 
Overstatement of cost of goods
Sold
Sold ……
………………………………………… ………… ……………….. .. P1,7
P1,750
50

31 Income Summary …………………………………………… 1,271

Branch Income ……………………………………. 1,271

31 Income Summary ………………………… ………………… 2,374

Retained Earnings …………………………………. 2,374

Problem VI
1.
Branch H. Office
Current Current
Unadjusted balance, 12/31/20x4 P 4 4,00 0 P 9,000
Add (Deduct): Adjustments
1 Cash in transit ( 10,000)
2. Merchandise in transit 1 0 ,0 0 0
3. Branch expenses paid by home office 12,000
4. Cash in transit from home office _______ 3,000
Adjusted balance, 12/31/20x4 P 3 4 ,0 0 0 P34,000

2. Combined Income Statement

Sales [(P350,000
[(P350,000 – P105,000)
P105,000) + P150,000)……
P150,000)………........ …...............
................
......................
.......................
.................
......... P395,000
Less:
Less: Cost
Cost of good
goodss sold sold [(P220
[(P220,00 ,000 0 – P84,00
P84,000) 0) +
(P93
(P93,0 ,000
00 + P3,6
P3,600 00 – P21,
P21,00 000 0 – P1,2
P1,200 00)])]……
………… ………… ………… ………… ………… ………… …….. 210, 210,40
400
0
Gross profit.........
profit..................
..................
................
................
..................
.................
.................
.................
.................
..................
................
.................
.............
... P184,600
P184,600
Operating
Operating expenses
expenses (P70,000
(P70,000 + P41,000 P41,000 + P12,000 P12,000).........
)..................
................
................
..................
..............
..... 123,000
123,000
Net income.........
income.................
.................
................
................
..................
.................
..................
.................
................
..................
.................
.................
.............
.... P 61,600
61,600

Problem VII
(1)
PAXTON CO.
Income Statement for Dayton Branch
For Year Ended
Ended December
December 31, 20x5
Sales.............................................................................................................................. P315,000
Cost of goods sold:
Merchandise inventory, January 1, 20x5...................................
20x5.................. ................. P 44,500
Shipments
Shipments from from home office... office..........
.....................
.......................
..................
.................
............
.... 252,000
252,000
Merchandise available for sale................................................. P296,500
Less
Less:: Merc
Mercha hand ndisisee Inve
Invent ntor
ory,y, Dece
Decemb mber er 31,
31, 20x5.
20x5... .....
.....
.....
.....
.....
.....
.. 58,5
58,500 00 238,238,00
0000
Gross profit................. .....................................
................. .......................................
..........................................
.......................................
.................. P 77,000
Operating
Operating expense
expenses..... s..............
.................
.................
................
................
...................
..................
.................
................
................
................
....... 101,500
101,500
Net loss..........
loss.....................
....................
..................
................
................
..................
.................
..................
.................
................
..................
.................
............
.... P 24,500
24,500

PAXTON CO.
Income Statement for Cincinnati Home Office
For Year Ended Ended December December 31, 20x5
Sales........
Sales................
.................
................
.................
..........................
.........................
.................
.................
.................
.................
..................
................
................
......... P1,060,000
P1,060,000
Cost of goods sold:
Merchandise inventory, January 1, 20x5...................................
20x5.................. ................. P115,000
Shipments
Shipments from from home office... office..........
...............
.................
..........................
.........................
..........
.. 820,000
820,000
Merchandise available for sale................................................. P935,000
Less: Shipmen
Shipments ts to branch.......
branch............... ................
.................
.................
.................
................
.........
.. 210,000
210,000
Merchandise available for own sales....................................... P725,000
Less
Less:: Mer
Merch chanandi dise
se Inve
Invent ntor
ory,y, Dece
Decemb mber er 31,
31, 20x5
20x5.. ....
....
....
....
....
....
....
....
.. 142, 142,50 500 0 582,
582,50
5000
Gross profit.....................................
profit................. .......................................
......................................
..........................................
................................... .......... P477,500
Expens
Expenses.
es....
.......
........
........
.......
.......
........
........
.......
.......
........
........
........
........
.......
.......
........
........
.........
........
.......
........
........
........
.......
.......
........
........
........
........
...... . 382,00
382,0000
Net income
income from own operati operations ons....
........
........
........
........
.......
.......
........
........
........
.......
.......
........
........
........
...... ........
............
.........
..... P 95,
95,500
500
Add
Add branch
branch net income income... .......
........
........
........
.......
.......
........
........
........
.......
........
.........
........
........
........
........
.......
.......
........
.......
.......
........
.......
... 16,650
16,650
Total income......
income...............
..................
................
................
.................
.................
...................
.................
...............................
................................
.............
..... P112,150
P112,150

(2)
PAXTON CO.
Combined Income Statement for Home Office and Branch
For Year Ended Ended December
December 31, 20x5
Sales...........................................
Sales........................ .........................................
.......................................
...............................
.............. ..............................
............. ................. P1,375,000
Cost of goods sold:
Merchandise inventory, January 1, 20x5...................................P
20x5.................. .................P 150,600
Purchases...................................................................................... 820,000
Merchandise available for sale.....................................
sale................... ..............................
............ P970,600
Less
Less:: Merc
Mercha hand ndisise
e Inve
Invent ntor
ory,y, Dec
Decem embe berr 31,
31, 20x5
20x5.. ....
....
....
....
....
....
....
....
.. 191,191,25 250 0 779,
779,35
350
0
Gross profit.....................................
profit................. .......................................
.....................................
.................. ......................................
....................... ...................
.... P595,650
Operating
Operating expenses....
expenses..............................
................
................
.................
...................
..................
................
................
.................
...................
............ 483,500
483,500
Net income........
income................
................
................
................
.................
.................
..........
.. .................
.........................
.................
.................
.................
..............
..... P112,150
P112,150

(3) Merchandise Inventory, December 31...........................................

31................... .........................................
.....................
.... 58,500
Sales.......................................................................................................................... 315,000
Inco
Income me SummSummar ary.y...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 373,
373,50
500
0

Income Summary......................................................................................................... 398,000

Merc
Mercha
hand
ndisise
e Inve
Invent
ntor
ory y, Janu
Januar ary y 1...
1.....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 44,5
44,500
00
Ship
Shipme
ment
ntss from
from Home
Home Offi Officece.. ....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
......
......
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 252,
252,00
000
0
Oper
Operat
atin
ing
g expe
expensnses
es......
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 101,
101,50
500
0

Home Office........
Office................
.................
................
................
.................
............................
............................
.................
................
................
..................
......... 24,500
 Inco
Income
me Summa
ummary
ry..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 24,5
24,500
00

(4) Branch Income.......

Income................
.................
.................
................
......... .................
.........................
.................
.................
................
..................
.......... 24,500
24,500
Bran
Branch
ch..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 24,5
24,500
00

Unrealized
Unrealized Intercompany
Intercompany Inventory
Inventory Profit.............
Profit......................
................
................
.................
.................
.................
........ 41,150
Bran
Branchch Inc
Income.
ome... ....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 41,1
41,150
50
Calculation of unrealized profit adjustment:
Branch inventory, January 1, acquired from home office
at billed price...........................
price..............................................
......................................
.......................................
...................... P 44,500
Less: Cost of inventory
inventory (P44,500/1.
(P44,500/1.25).....25).............
...............
.................
..................
.................
............
..........
....... 35,600
Unrealized Intercompany Inventory Profit Jan. 1......................................
1................... ..................... P 8,900
Add: Increase in unrealized profit for shipments
made during year, billed price of goods,
P252,000,
P252,000, cost of goods,
goods, P210,000.....
P210,000...............................
..................
.................
................
............
..... 42,000
P 50,900

Deduct balance to remain in unrealized profit account:

Branch inventory, December 31,
acquired from home office.......................................
office....................... ................ P 58, 500
Less: Cost of inventory to home office,
P58,
P58,50
500/
0/1.
1.20
20..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 48,7
48,750
50 9,75
9,750
0
Reduction
Reduction in unrealized
unrealized profit
profit account-
account- adjustmentadjustment to
branch income for overstatement of cost of
goods sold..........................
......................
........................ 41,150

Branch Income.........................
Income...............................................
......................................
........................................
..........................................
......................
.... 1 6,650
Inco
Income
me Summa
ummary ry..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 16,6
16,650
50

Merchandise Inventory, December 31..........................................

31.................... ..........................................
............................
........ 142,500
Sales............................................................................................................................... 1,060,000
Shipments to Branch.........................
Branch............................................
......................................
.......................................
.....................................
................. 21 0,000
Inco
Income me SummSummar ary.y...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 1,41
1,412,
2,50
500
0

Income Summary..........................
Summary.............................................
.......................................
..........................................
......................................
.................. .. 1,31 7,000
Merc
Mercha
hand
ndisise
e Inve
Invent ntor
oryy, Janu
Januar aryy 1...
1.....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 115,
115,00
0000
Purc
Purcha
hase
ses.
s...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 820,
820,00
000
0
Expe
Expens
nses
es..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 382,
382,00
000
0

Income Summary.....
Summary..............
.................
...............
................
..................
..................
.................
................
.................
..................
................
..........
... ...... 112,150
112,150
Reta
Retain
ined
ed Earn
Earninings
gs..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 112,
112,15
150
0

Problem VIII
(1)
RUGGLES CO.
Income Statement for Branch
For Year Ended Ended December
December 31, 20x4
Sales.........................................
Sales...................... ..........................................
.......................................
................................
................ ................................
............... ................. P 78,500
Cost of goods sold:
Merchandise inventory, January 1, 20x4......................................
20x4.................. .......................... P 32,000
Shipments from home office......................................
office.................... .......................
..... P 4 0,000
 Purc
Purchas
hases es from
from outs outsid ider
ers.
s...
.....
.....
.....
......
.....
.....
.....
.....
.....
.....
......
.....
....
.....
.....
.....
......
.....
.. 20,00
20, 000 0 60, 60,00
000 0
Merchandise available for sale......................................
sale................... ..................................
............... .. P 92,000
Less:
Less: Mercha
Merchandi ndise se Invent
Inventory ory,, Decemb
December er 31, 20x 20x4...4.......
........
........
.......
.......
......
.. 31,500
31,500
Cost
Cost of goods goods sold..sold.............
.......
........
........
........
.......
.......
........
........
........
.......
.......
.........
.........
........
........
.......
.......
......
.. 60,500
60,500
Gross profit................................
profit................. ............... .....................................
...................... .......................................
...........................................
.......................
.... P 18,000
Operati
Operating
ng expens
expenses. es....
.......
........
........
.......
.......
........
........
........
.......
.......
........
........
.........
........
.......
........
........
........
........
.......
.......
........
........
.........
.......
.. 12,500
12,500
Net income........
income...................
...................
................
.................
.................
................
..................
..................
.................
................
................
...................
............
.. P 5,500

RUGGLES CO.
Income Statement for Home Office
For Year Ended Ended December December 31, 20x4
Sales........
Sales................
.................
................
.................
..................
...........................
..........................
.................
..................
.................
.................
................
...............
....... P 256,000
256,000
Cost of goods sold:
Merchandise inventory, January 1, 20x4...................................
20x4.................. ................. P 80,000
Purchases..
Purchases.......... ................
..................
.................
...............
.................
.............................
............................
..............
...... 210,000
210,000
Merchandise available for sale................................................. P 290,000
Less:
Less: Shipment
Shipmentss to branch...branch....... ........
........
.......
.......
........
........
........
.......
.......
........
........
........
.......
.....
.. 30,000
30, 000
Merchandise available for own sales................... sales.......................................
.................... P 260,000
Less:
Less: Mercha
Merchandi ndisese Invent
Inventory ory,, Decemb
December er 31, 20x 20x4...4.......
........
........
.......
... 55,000
55, 000
Cost
Cost of goods sold.... sold........ ........
........
........
.......
.......
........
........
........
........
.......
.......
........
........
.......
.......
........
........
.......
..... 205,00
205,0000
Gross profit.....................................
profit................. .......................................
......................................
..........................................
......................................
............... .. P 51,000
Operati
Operating ng Expense
Expenses.. s......
.......
.......
........
........
........
........
.......
.......
........
........
........
........
........
........
........
........
........
.......
.......
........
........
........
.......
..... .....
..... 60,000
60,000
Net loss from own operations........................
operations.........................................
........................................
........................................
.....................
.... P 9, 000
Add
Add branc
branch h net
net income
income... .......
........
........
........
.......
.......
........
........
........
.......
........
.........
........
........
........
........
.......
.......
........
.......
.......
...... .......
....... 13,500
13,500
Total
Total income.
income..... ........
.......
.......
........
........
.......
.......
........
........
........
........
.......
.......
........
........
.........
........
.......
........
........
........
.......
.......
........
........
........
........
.......
... P 4,500
4,500

(2)
RUGGLES CO.
Combined Income Statement for Home Office and Branch
For Year Ended Ended December
December 31, 20x4
Sales...........................................
Sales........................ .........................................
.......................................
...............................
.............. ..............................
............... ............... P 334,500
Cost of goods sold:
Merchandise inventory, January 1, 20x4...................................
20x4.................. ................. P 107,500
Purchases...................................................................................... 230,000
Merchandise available for sale.................................................. P 337,500
Less:
Less: Mercha
Merchandi ndisese Invent
Inventory ory,, Decemb
December er 31, 20x 20x4...4.......
........
........
........
.... 80,000
80, 000
Cost
Cost of goods goods sold..
sold.............
.......
........
........
........
.......
.......
........
........
........
.......
.......
.........
.........
........
........
.......
.......
......
.. 257,50
257,500
0
Gross profit.....................................
profit................. .......................................
......................................
.........................................
...................... ...................
............... .... P 77,000
Operati
Operating ng expens
expenses. es....
.......
........
........
.......
.......
........
........
........
.......
.......
........
........
.........
........
.......
........
........
........
........
.......
.......
........
........
.........
.......
.. 72,500
72,500
Net income........
income................
................
................
................
.................
.................
.................
..................
..............
..... ................
.........................
...................
.......... P 4,500

(3) Merchandise Inventory..........................

Inventory.............................................
..........................................
.........................................
.....................
... 31,500
Sales.......................................................................................................................... 78,500
Incom
Income e Summ
Summary ary........
.....
......
......
......
.....
.....
.....
.....
......
......
......
.....
.....
......
.....
....
.....
......
......
......
.....
.....
.....
.....
......
......
......
.....
.....
.....
.....
.....
.... 110,
110,00
000
0

Income Summary......................................................................................................... 104,500

Merc
Mercha
hand
ndisise
e Inve
Invent ntorory.
y.......
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 32,0
32,000
00
Shipments from Home Office........................................
Office....................... ................. .................................
...................... ........... 40,000
Purc
Purcha
hase
ses.
s...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 20,0
20,000
00
Expe
Expens
nses
es..
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
......
.....
.....
.....
.....
.....
.......
........
......
.....
.....
......
......
.....
.....
.....
.....
......
.....
.....
.....
.....
......
......
..... 12,5
12,500
00
Income Summary..........................
Summary.............................................
.......................................
..........................................
......................................
..................
.. 5, 500
Home Office.........................................
Office..................... ........................
.......................
.......................................
.....................................
................. 5,500

(4) Branch............................................
Branch..................... ..........................................
.......................................
.......................................
................................
............. ... 5,500
Branch Income..................... ........................................
....................... ......................................
...................................
.............. 5,500

Unrealized Intercompany Inventory Profit..........................................

Profit.................. ...........................................
.....................
.. 8,000
Bran
Branch
ch Inco
Income
me..
....
....
....
....
....
....
....
....
....
....
.....
.....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 8,00
8,000
0

Calculation of unrealized profit adjustment:

Branch inventory, January 1, acquired from home office
at billed price...........................
price......................................
........... ......................................
................ ..............................
........ P 24,500
Less: Cost of inventory
inventory (P24,500/1.
(P24,500/1.225)... 225)...........
.................
.................
................
.................
................
....... 20,000
Unrealized Intercompany Inventory Profit Jan. 1...................................
1................... ................ P 4,500
Add: Increase in unrealized profit for shipments
made during year, billed price of goods,
P40,00
P40,000, 0, cost of goods,
goods, P30,000P30,000... .......
........
........
........
........
.......
.......
........
........
........
.......
.......
.......
... 10,000
10,000
P 14,500
Deduct balance to remain in unrealized profit account:
Branch inventory, December 31,
acquired from home home office....................................... P 26,000
Less: Cost of inventory to home office,
P26,
P26,00 000/
0/1.
1.1/
1/3..
3.....
.....
.....
......
.....
.....
.....
.....
.....
.....
.....
.....
.....
.....
......
.....
.....
.....
.....
.....
.......
.......
.....
..... 19,5
19,500 00 6,500
6,500
Reduction
Reduction in unrealized
unrealized profit
profit account- adjustment adjustment to branch
inco
income
me forfor ove
oversrstat
tatem
emen entt of cos costt of goo goods ds sold
sold...
.....
.....
.....
.....
.....
.....
.....
.....
......
..... 8,000
8,0 00

Branch Income.........................
Income...............................................
...........................
..... .......................................
................... ......................................
.................. 13,500
Inco
Income
me Summ
Summar ary.y...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 13,5
13,500
00

Merchandise Inventory.............................
Inventory................................................
.......................
.... ........................................
.................... .................... .... 55,000
Sales...........................................
Sales........................ .........................................
.......................................
........................................
......................................
............... ....... 256,000
Shipments to Branch.........................
Branch.........................................
................ .......................................
................ .......................................
....................
.... 30,000
Incom
Income e Summ
Summary ary........
.....
......
......
......
.....
.....
.....
.....
......
......
......
.....
.....
......
.....
....
.....
......
......
......
.....
.....
.....
.....
......
......
......
.....
.....
.....
.....
.....
....
.. 341,0
341,000
00

Income Summary..........................
Summary...........................................
................. .......................................
................ ..........................................
.......................
.... 350,000
Merchandise Inventory............................
Inventory...............................................
......................................
....................................
................. 8 0,000
Purc
Purchas
hases.
es...
.....
......
.....
.....
.....
.....
.....
.....
......
.....
....
.....
.....
.....
........
.......
.....
.....
.....
......
......
......
.....
.....
......
......
.....
.....
......
.....
.....
......
......
.....
.....
......
.....
....
.. 210,0
210,000
00
Expe
Expens
nses
es..
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 60,0
60,000
00

Income Summary..................... .....................................

..................... .......................................
..........................................
.........................
...... 4,500
Reta
Retain
ined
ed Earn
Earninings
gs......
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 4,50
4,500
0

Problem IX
1.
Branch H. Office
Current Current
Unadjusted balance, 12/31/20x4 P 6 0,00 0 P 5 1,500
Add (Deduct): Adjustments
1 Remittance I 1,700)
2. Cash in transit 1,800
3. Shipments i n transi t 5,800
 Adjusted balance, 12/31/20x4 P 57
57,300 P 5 7 ,3 0 0

2. Incom
Income e Stateme
Statement nt - Branch
Branch
Sales..........................................
Sales...................... .......................................
......................................
...................................
................ ................................
..................... ........... P 140,000
Cost of goods sold:
Merchandise
Merchandise inventory inventory,, January 1, 20x4 (P11,550 – P1,000)...... P1,000)........ P 10,550
Shipments
Shipments from from home office office (P105,00
(P105,000 0 + P5,000
P5,000 – P10,000)....
P10,000)........ .... 100,000
Frei
Freighght-it-in
n (P5
(P5,5 ,50000 + P250
P250)… )……… ………… ………… ………… ………… ………… ………… …………. ……... 5,75
5,750 0
Merchandise available for sale..................................................... P116,300
Less:
Less: Merchan
Merchandis disee Inventor
Inventory, y, Decembe
Decemberr 31, 20x4...... 20x4..................
.......
.......
...... 14,770
14,770
Cost of goo goods sold.... ........
.......
........
........
.......
.......
.........
........
........
.......
........
..........
........
........
.......
..... 101,530
Gross
Gross profit..
profit............
........
........
........
.......
.......
........
........
........
.......
.......
........
........
........
........
........
........
........
........
........
.......
.......
........
........
........
.......
........
.........
......
.. P 38,470
38,470
Operati
Operating ng expe
expense nses...s.......
........
........
.......
.......
........
........
........
........
.......
.......
.........
.........
........
.......
.......
........
........
........
........
.......
.......
........
........
.......
..... 24,300
24,300
Net income.
income.... .......
........
........
........
........
.......
.......
........
........
........
.......
.......
........
........
........
........
........
........
........
........
........
.......
.......
........
........
........
........
........
......
.. P 14,
14,170
170

Income State
Income Statement
ment – Home Home Office Office
Sales.........
Sales................
................
...................
..................
.................
..........................
...........................
..................
.................
.................
................
..................
..............
.... P 155,000
155,000
Cost of goods sold:
Merchandise
Merchandise inventory inventory,, January 1, 20x4................
20x4..........................
..................
.......... P 23,00023,000
Purchases..
Purchases..........................
..................
.................
...............
...........................
.............................
.................
..............
....... 190,000
190,000
Merchandise available for sale................................................. P 213,000
Less: Shipments
Shipments to branch........
branch................ .................
.................
................
.................
.................
........ 100,000100,000
Merchandise available for own sales.......................................
sales...................... ................. P 113,000
Less:
Less: Merc
Merchan handis dise e Inven
Inventor tory,y, Dece
Decembe mberr 31, 31, 2020x4..
x4......
........
........
.......
..... 30,000
30, 000
Cost of goods sold........................................................................ 83,000
Gross profit........
profit.................
..................
.................
................
.................
.................
..................
.................
................
..................
.................
..................
............ .. P 72,000
Operati
Operating ng Expe
Expense nses..s.....
.......
........
........
........
........
.......
.......
........
........
.......
.......
........
........
.......
.......
.............
.............
........
........
........
........
........
........
...... 42,000
42, 000
Net loss from own operations.....
operations............ ...............
.................
..................
................
................
..................
.................
.................
..............
..... P 30,000
Add
Add bran
branch ch net income
income.... ........
........
........
.......
.......
........
........
.......
........
.........
............
...........
.......
........
.......
.......
........
........
........
........
.......
.......
.... 14,170
14,170
Combine
Combined d net incomeincome... .......
........
........
........
.......
.......
........
........
........
........
........
........
........
........
........
.......
.......
........
........
........
........
........
........
...... P 44,
44,170
170

3.
Combined Income Statement for Home Office and Branch
For Year Ended December 31, 20x4
Sales........
Sales...............
................
...................
..................
.................
................
................
...................
..................
.................
...........
.. ................
..........................
..............
.... P 295,000
295,000
Cost of goods sold:
Merchandise
Merchandise inventory, inventory, Januar January y 1, 20x4.......
20x4.......................
.......................
............
..... P 33,550
Purchases..
Purchases..........................
..................
.................
...............
.................
..................
.................
.................
.................
........ 190,000
190,000
Fre
Freight
ight-i -in
n……… ……… ……… ……… ……… ………… ……… ……… ……… ……… ……… ………… ……… ……… 5,75
5,750 0
Merchandise available for sale................... ...............................
................. .............. P 229,300
Less:
Less: Merc
Merchan handis dise e Inven
Inventor tory,y, Dece
Decembe mberr 31, 31, 2020x4..
x4......
........
........
.......
.....
.. 44,770
44, 770
Cost of goo goods sold.... ........
.......
........
........
.......
.......
.........
........
........
.......
........
..........
........
........
.... 184,5
4,530
Gross profit........
profit.................
..................
.................
................
.................
.................
..................
.................
................
..................
.................
..................
............ ... P 110,470
110,470
Operati
Operating ng expens
expenses. es.....
........
.......
.......
........
........
........
........
........
.......
.......
........
........
.......
.......
........
........
.......
.......
........
........
........
.......
... ........
............
.... 66,300
66,300
Net income.......
income...............
.................
.................
................
.................
.................
..................
..................
................
................
.................
...................
...............
..... P 44,170
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................................
1-17......... .......................................
................ ....... 20,000
P46,400
Cost of goods sold, January 1-17, at billed price:
Net sales, P13,000/1.25..........................
P13,000/1.25...............................................
.........................................
.......................................
................... 10,400
Merchandise on hand, January 17, at billed price.......................................
price..................................... .. P36,000
Merchandise on hand, January 17, at cost, P36,000/1.20.......................
P36,000/1.20............................ ..... P30,000

b. Branch Books:
Loss from Fire (or Home Office)........................................
Office)..................... ................................
............. ....... 36,000
Merchandise Inventory...............................
Inventory................................................
.............................
............ 36,000
Home Office Books:
No entry needs to be made on the t he books of the home office until the end of the fiscal period, w hen
the branch earnings (including the loss from fire) are recognized 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
desired to recognized the loss from fire on the home office office books immediately, the
following entry may be made:
Branch Loss from Fire (or Retained Earnings)...................................... 30,000
Unrealized Intercompany Inventory Profit........................................
Profit................. ............................. 6,000
Branch......................................................................................... 36,000

Problem XI
a. Books of Branch A:
Home Office........................................................................................ 1,500
Cash.
ash...
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 1,500
,500

b. Books of branch B:
Cash...................................................................................................... 1,500
Home
Home Offi Officece......
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.. 1,500
,500

c. Books of Home Office:

Branch B............................................................................................... 1,500
Bran
Branchch A..........
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.....
.....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
....
.... 1,50
1,500
0

Problem XII
a. Books of Branch No. 1 :
Home OfOffice ……
………………………………………………………… ………
…. 1,950
950
Shipments from Home Office…………………………………….. 1,600
Freight In……………………………………………………………… 35 0

b. Books of branch No. 5:

Shipm
hipmen
entsts from
from Home
Home Offic
ffice
e……
………
………
………
………
…………
…………
………
………
………
… 1,60
1,600
0
Freight In…
In………………… ……… ……………………………………………
………
………
…… 400
Home Office…………………………………………………………. 1,750
Cash…………………………………………………………………… 2 50

c. Books of the Home Office

Branc
anch No.
No. 5…
5………
……… …………………………………… ………………
……… ……….. 1,750
750
Exce
Excess
ss Freig
reight
ht on Inte
Interr bran
branch
ch Tran
Transsfer
fer of Merc
Mercha
hand
ndis
ise…
e……
…….
…... 200
200
Branch No. 1………………………………………………………… 1,950

Ship
Shipme
ment
ntss to Bran
Branch
ch No.
No. 1…
1………
…………
…………
…………
…………
…………
…………
…………
……..
.. 1,60
1,600
0
Shipments to Branch No. 5………………………………………… 1,600
Multiple Choice Problems
1. c - P50,40
P50,400,
0, billed
billed pric
price
e x 40/140
40/140 = P 14,400
14,400

2. b
Ending inventory in the combined income statement:
From Home Office: (P50,000-P6,600) x 100/140 P 31
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

4. a – P30,00
P30,000
0 x (90,000
(90,000 – 60,
60,000
000)/9
)/90,0
0,000
00

5. a

6. d – (P50,0
(P50,000
00 – P40,00
P40,000)/
0)/P40
P40,00
,000
0 = 25% marku
markup
p on cost
cost

7. c – (P480,
(P480,000
000 – P360,00
P360,000)
0) x (P80,0
(P80,000/
00/P48
P480,0
0,000)
00) = P20,00
P20,000
0

8. c – P700,000,
P700,000, since
since the problem
problem stated that the “home
“home office adjusted
adjusted the
the intracomp
intracompany
any Profit
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
Income in so
so far as home office
office is concern
concerned
ed per home
home office
office books. 50,000
Overvaluation of branch cost
cost of goods sold…………………………………………P
sold…………………………………………P 20,000 20,000

Cost of sales of Home Office…………………………………

Office…………………………………………………………….P
………………………….P 500,000
Cost of sales of Branch………………………………………………
Branch…………………………………………………………………… …………………… 100,000
Overvaluati
Overvaluation
on of branch
branch cost of sales……
sales………………
………………………
………………………
……………………(
…………( 20,000)
20,000)
Combined cost of sales……………………………………………………
sales…………………………………………………………………...P580,000
……………...P580,000
10. c – the amount
amount of net
net income
income as reported
reported by Home office is conside
considered
red the combine
combined
d net
income.

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

Billing Price: P336,000 / P240,000 = 140%.

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
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
(P45,000 / 1.20)]P 87,500
Add: Purchases…
Purchases………………
………………………… ………………………… ……………………. ………. 500,000
500,000
Cost of Goods Available for Sale…………………………... P 587,500
Less
Less:: MI,
MI, endi
ending
ng [P70
[P70,0
,000
00 + (P60
(P60,0
,000
00 / 1.20
1.20)]
)]……
………………………….. 120,
120,00
000
0 467,
467,50
5000
Gross pr
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
P16,800 x 20/120………………
20/120………………………… ………………………
………………………………………….
………. 2,800
Overvaluation of Cost of Goods Sold…………………………………….
Sold……………………………………. ….P 4,400
 Adjusted branch net income:
Sales………………………………………………………………………………………P60,000
Less: Cost of goods sold:
Inventory, January 1, 2003……………………………….P 30,000
Add:
Add: Purcha
Purchases
ses………
……………… ……………………………… ………………
…………..
….....
... 11,
11,000
000
Ship
Shipme
mentntss from
from home off
offic
ice…
e………
…………
…………
……….
…... 19,2
19,200
00
Cost of Goods available for sale……………………… P 60,200
Less: Inventory, December ber 31, 2003…………………. 20,000 40,200
Gross profit………………………………………………………………
profit…………………………………………………………………………….. …………….. P 19,200
Less:
Less: Expenses………
Expenses…………………… ………………………… ……………………… …………………………
………………………………………….. .. 12,000
12,000
Unadjusted
Unadjusted branch net income……………………
income……………………………… ………………………
…………………….P ……….P 7,800
Add:
Add: Over
Overvavalu
luati
ation
on of Cos
Costt of Goods
Goods Sol
Sold…
d………
…………
…………
…………
………… ………………….…. 4,40
4,400
0
Adjusted branch net income…………………………
income………………………………………………………..P
……………………………..P 12,000

16. d
Billed Price CostAllowance
Merchandise Inventory, 12/31/2005 *P 36,000 P 30,000P 6
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
P6,000 = P36,000.
From outside
outsiders:
rs: P45,000
P45,000 – P36,000
P36,000 = P9,000
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.

Merchandise inventory, December 1, 20x4…………………………………P 15,000

Less: Shipmen
Shipments
ts from
from home office
office at billed
billed price*…………
price*……………………
………………
…… 12,000
12,000
Merchandise from outsiders……………………………
outsiders……………………………………………………P ………………………P 3,000

18. d
Combined Cost of Goods Sold:
Merchandise Inventory, 1/1/2003:
Home Office,
Office, cost…………………
cost……………………………… ……………………… ……………… …… P 3,500
Branch: Outsiders, ……………………………...........................P 300
From
From Home
Home Offi
Office
ce (P2,
(P2,500
500 – P300
P300)/)/11
110%.
0%....
......
.....
.....
.....
.....
... 2,00
2,000
0 2,300
2,300 P 5,80
5,800
0
Add Purchases (P240,000 + P11,000)…………………………….. 251,000
COGAS………………………………………………………………… P256,800
Less: Merchandise Inventory, 12/31/2003
Home Office, cost………………………………
cost………………………………………………. ………………. P 3,000
Branch: Outsiders………………………………
Outsiders………………………………………………. ………………. P 150
From
From Home Office
Office (P1,80
(P1,800
0 – P150)/
P150)/110
110%...
%.......
.......
.......
......
.. 1,5
1,500
00 1,650
1,650 4,650
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 (P(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 _ 1313,100
Net income from own operations P 7,900

(2) Combined Cost of Goods Sold:

Merchandise Inventory, 1/1/2003:
of Home Office, cost………………………………………
cost……………………………………………..P
……..P 17,000
of Bran
Branch
ch,, cost
cost:: P4,
P4,950
950 / 110%
110%……
………
………
………
………
…………
…………
……….
…. 4,5
4,500 P 21,5
21,50
00
Add Purchases…………………………………………………………. 50,000
COGAS………………………………………………………………….. P 71,500
Less: Merchandise Inventory, 12/31/2003
of Home Office, cost………………………………………………
cost……………………………………………… P 14,000
of Branch, co
cost: P6
P6,050 /1
/100%………………………………….. 5,500 19,500
Cost of Goods Sold……………………………………………………. P 52,000

22.
22. a - P48,
P48,00
000
0 / 120%
120% = P40,
P40,00
000
0

23. a – P48,000
P48,000 x 20/120 = P8,000
P8,000 (note: adjuste
adjusted
d allowance
allowance refers to the allowance related
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
12/31/x4 (P
(P60,000 x 80
8 0%) 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 1 00 , 00 0
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
12/31/x4 (P
(P60,000 x 80
8 0%) 60,000
Overvaluation of CGS(230,000x 25/125) 230,000 46,000*

26.
26. d – P326,
P326,00
000
0
Sales
Sales (P600
(P600,00
,000 0 + P300
P300,00
,000)
0) P 900,0
900,000
00
Less: Cost of goods sold
Merchandise inventory, beg.
[P100,000 + (P40,000/1.25)] P132,000
Ad d : Pu r cha se s 35 0, 000
Cost of goods available for sale P482,000
Less: MI, ending
[P 30, 0 0 0 + (P 60, 0 0 0/1 . 2 5 )] 78 ,0 0 0 40 4 , 00 0
Gr os s pro f it P 49 6, 00 0
Le ss : Ex pe ns e s (P 120 ,0 0 0 + P 50, 00 0) _ 1 7 0, 0 00
Ne t In com e P 3 2 6 ,0 00

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
Ad d : Pu r cha se s 50 0, 000
Cost of goods available for sale P587,500
Less: MI, ending
[P 70, 0 0 0 + ( P 60, 0 0 0/1 .2 0) ] 12 0, 0 00 46 7 ,50 0
Gr os s pro f it P 3 70, 0 00
Le ss : Ex pe ns e s (P 120 ,0 0 0 + P 50, 00 0) _ 17 0 ,00 0
Ne t In com e P 2 00 , 0 00

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:
Add: Purc
Purchas
hases
es (P7
(P70,
0,00
000
0 + P11,
P11,000
000)…
)………
…………
……………… 81,0
81,000
00
 Cost of Goods Available
Available for Sale……………………P 147,000
Less
Less:: MI,
MI, endi
ending
ng [P4
[P40,
0,00
000
0 + P3,2
P3,200
00 + (P1
(P16,
6,80
800
0 / 1.20
1.20)]
)] 57,2
57,200
00 89,8
89,800 00
Gross profit……………………………………………………… P 9 0 , 20 0
Less: Expenses (P28,000 + P12,000)………………………… 4 0 , 00 0
Net Income……………………………………………………. P 5 0 , 20 0

29. d
Sales (P
(P100,000 – P33,000 + P5
P50,000)…………………………………… P 117,000
Less: Cost of goods sold:
Inventory,
Inventory, beg.
beg. [P15,000
[P15,000 + (P5,500
(P5,500/110%)
/110%) or
or (P5,500
(P5,500 – P500)]
P500)] P20,000
P20,000
Add: Purchases
Purchases (P50,0
(P50,000
00 + P7,00
P7,000)…………
0)………………………
…………………… ……… 57,000
57,000
COGAS………………………………………………………………..
COGAS………………………………………… …………………….. P77,000
Less: Inventory, end [P11,000 + P1,050 +
(P6,000-
(P6,000- P1,050)/110
P1,050)/110%]…………
%]…………………… ……………………………………… ……… 16,550
16,550 60,450
Gross prof
rofit……
t………………………………………………………… ……… ………
……… … P 56,
56,550
550
Less: Expenses (P20,000 + P6,000 + P5,000)……………………………… 31 , 00 0
Combinbined Net income
come…… ……… …………………………………… ……… ……………… …. P 25,55
5,550 0

30. c
S al es P 15 5, 00 0
Less: Cost of Sales
I nv en t or y , 1 /1/ 10 P 2 3,0 00
P ur ch a se s 19 0, 000
Cost of goods available for sale P213,000
Less: Shipment/Sales to Branch,
a t c os t ( P1 10 ,0 00 /11 0 % ) 1 0 0 ,0 00
Cost of goods available for HO
S ale P 11 3, 000
L es s : In ven t ory , 12 /31 /1 0 3 0,0 0 0 8 3,0 00
G ro s s p r of it P 7 2, 00 0
L es s : E x pe nse s 5 2 ,00 0
Net income – home office P 2 0, 00 0

31. a
S al es P 14 0, 00 0
Less: Cost of Sales
I nv en t or y , 1 /1/ 10 P 1 1,5 50
P ur ch a se s 10 5, 000
F re ig h t- i n 5 ,5 00
Ship
Shipme ment
nt in tran
transi
sit
t (P5,
(P5,00
000+
0+P2
P250
50)
) 5,25
5,250 0
Cost of goods available for sale P127,300
Less: Inventory, 12/31/10
(P10,400 + P520 + P5,250) 1 6,1 7 0 11 1 , 130
G ro s s p r of it P 2 8, 87 0
L es s : E x pe nse s 2 8 ,00 0
N e t i nc o m e pe r br a nc h bo ok s/u n adj us te d P 8 70
A dd : Ov e rv alu a tio n o f CG S* 9 ,6 00
N e t I nc o m e o f Dav a o B ra n c h , ad ju st ed P 10 , 470

BP C os t A ll ow anc e
MI . 1/1 /2 0 1 0 1,0 0 0
Shipments
1 10 ,0 00 10 0 ,00 0 * *1 0, 000
 Av ai lab l e f o r s al e 11 ,00 0
- : M I , 12 /3 1/ 10 ** *1 5,4 0 0 ** * * 1, 400
CG S 9, 60 0
**110,000 x 10/110
***10,400 + 5,000, in transit
****15,400 x 10/110

32. a
Inv en t o ry , 1/ 1 a t bil le d pri c e P 16 5,0 00
Add : S h ip me nt s a t bil le d pri c e 1 1 0 ,0 00
Cost of goods available for sale at billed price P2 7 5 ,00 0
Less: CGS at BP:
S ale s P 169 ,0 00
Less: Sales returns and allowances 3,750
Sales price of merchandise
acquired from outsiders
( P7 ,50 0 / 1 2 0% ) 9,0 00
Net Sales of merchandise acquired from
ho m e o ffi ce P1 56 ,25 0
x : I nt er co mp a n y co st ra t io 1 00 /1 2 5 1 25, 0 00
Inv en t o ry , 8/ 1/2 0 0 8 a t bi lle d pr ic e P1 5 0, 0 00
x : Cos t ra ti o 10 0/ 12 5
Merchandise i in
n v en tor y aat
t cco
ost d deestroyed b
by
y f
fi
ir e P12 0 , 000

33. d
Freight actually paid by:
Home Office………………………………………………
Office……………………………………………………………………P ……………………P 500
Bran
Branch
ch P…
P…………………
………… ………………………………
…………
…………
…………
…………
…………
…………
…………
………
… 700
700
Total………………………………………………………………………………P
Total…………………………………………… …………………………………P 1,200
Less:
Less: Freigh
Freightt that
that shou
should
ld be record
recorded…
ed…………
………………
………………
………………
………………
…………..
….. 800
Excess
Excess freigh
freight……
t……………
……………… …………………………
………………
………………
………………
………………
………………
…………P
…P 400

34. d – in arriving at the cost of merchandise inventory

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
Ending invent
inventory
ory %......
%..........
..........
.........
.......
........
........
........
........
........
.......
.......
........
.......
.......
........
........
............
...........
... 60%
Ending inventory
inventory at billed price……………………………………...……..P
price……………………………………...……..P 22,620
Add: Freight (P1,300 x 60%)……………………………………………
60%)………………………………………………...... …...... 780
P 23,400
Or, P39,000
P39,000 x 60%
60% = P23,400
P23,400
36. b
Inventory in the published balance sheet, at cost
Shipments at cost…………………………………..........................................P 32,500
X: Ending
Ending inventory
inventory %...............
%.......................
.................
................
................
..................
.................
.............
..............
..............
..... 60%
Ending inventory at billed price……………………………………
price……………………………………………….P19,500 ………….P19,500
Add: Freight (P1,300 x 60%)………………………………………….......…….. 780
 P 20,280

37. c
Home Office Books Davao Branch Baguio Branch
Davao Branch…39,000 SFHO…………….37,700
STB, cost……. 32,500 Freight-in………. 1,300
Unrealized profit 5,200 HOC………….. 39,000
Cash (f
(freight)…. 1,300
BC – Baguio
Baguio……1……19,6
9,630
30 HOC……………….20,150 SFHO………18,850
Excess freight… 520 SFHO(50%)… 18 , 85 0 Freight-in.. 780
BC-Davao……. 20,150 Freight-in (50%) 6 50 HOC……... 19,630
Cash…………...... 650

38. c – (P300,000
(P300,000 x ¼ = P75,000,
P75,000, ending
ending invent
inventory
ory x ((P300,0
P300,000
00 – P250,000)/P
P250,000)/P300,00
300,000
0 = P12,500
P12,500
39. d
40. d
41.
41. b – refe
referr to No.
No. 21
42.
42. b – refe
referr to No.
No. 21
43.
43. c – refe
referr to No.
No. 21
44. c
45. d

Quiz – XIII
1. P63,
P63,000
000
Merchandis
Merchandise
e inventory,
inventory, December 31 at cost – 
From
From outs
outsid
ider
erss (se
(see
e no.
no.2)
2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 18,
18,00
000
0
From
From home
home offic
fficee (se
(see
e no.
no.2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,0
45,000
00
P63,000

2. P18,0
18,000
00
Branch inventory, 12/31 per books . . . . . . . . . . . . . . . . . P 72,000
Less Branch inventory from HO at billed price:
Over
Ov erva
valu
luat
atio
ion
n of bran
branc
ch inve
inventntor
ory y ........... P 9,00
9,000
0
Cost of branch inventory (P9,000 ÷ 20%) . . . . . . . 45,000 54,000
Branch inventory from outsiders . . . . . . . . . . . . . . . . . . . P 18,000

3. P93,6
93,600
00
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 351,000
Cost of sales:
Pur
Purchas
chase es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,0
54,000
00
Shipm
hipme ents
nts from
from HO at cos cost (P2(P21616,0,000
00 ÷120
÷120%) %) . . . 180,
180,0
000
Cos
Cost of of goo
good ds avai
availa labl
blee per
per salsalee . .. .. . .. .. .. . 234,
234,0000
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. P14,0
14,040
40
Allowance for overvaluation of branch inventory . . . P119,880
Less Overvaluation of shipments from HO:
 Bil
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

Merchandise inventory, January 1 . . . . . . . . . . . . . . . . P 65,520

Less Beginning inventory from HO, at billed b illed price
(see above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,480
Beginning inventory from outsiders . . . . . . . . . . . . . . . P 14,040

5. P47,3
47,340
40
Sales ……………………………………………………… P648,000
Cost of sales:
Merchandise inventory January 1-. . . . . . . . . . . .
From
rom outs
outsid ideers (see
see no.no.4) 4) . . . . . . . . . . . . . . . . . P14,
P14,04
040
0
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 December 31 -
From outsiders (P (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
income in so far as the HO is
concerned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 47,340

6. P45,0
45,000
00
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. P63,0
63,000
00
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. P122,40
P122,4000
Branch net income, per books (see no. 7) . . . . . . . . . P 63,000
Add realized
realized profit
profit -
Allowance for overvaluation of branch inventory P 69,000
Less Overvaluation of branch ending inventory:
Bill
Billed
ed pric
price.
e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 48,
48,00
000
0
Cost (P48,000 ÷ 125%). . . . . . . . . . . . . . . . . . . . 38,400 9,600 59,400
True branch net income. . . . . . . . . . . . . . . . . . . . . . . . P 122,400

9. 20%
Inven
Inventor
torieies,
s, Janu
Januar aryy 1, 20x
20x5 5 at
at bill
billed
ed pric
price. e. . . . . . . . . . . . . . . . . . . . . . P 90,
90,00
0000
Shipm
Shipmenents ts from
from HO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432,
432,00
000
0
Total
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522,
522,00
0000
Less
Less Allllow
owanancece forfor ove
overv rval
alua
uati tion
on of branbranch ch inve
invent ntorory.
y. . . . . . . . . . . . 87,0
87,000
00
Cost
Cost of merc
mercha hand ndisise
e from
from home
home off offic
icee . .. . .. . .. . .. . .. . .. . .. . .. P435
P435,0
,000
00

Allow
Allowan
ance
ce for
for ove
overv
rval
alua
uati
tion
on of branc
branch h inv
invenento tory
ry . . . . . . . . . . . . . . . P 87,
87,00
000
0
Divide
Divide by Cost
Cost of mercha
merchandi
ndise
se from
from HO (see (see above
above)) . . . . . . . . . . . . P 435,
435,000
000
Percentag
tage of pro
profit on
on cos
cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20%

10.
10. P360
P360,0
,000
00
Shipme
Shipments
nts from
from HO,
HO, at billed
billed price
price . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 432,
432,000
000
Divi
Divide
de by the
the bil
billiling
ng perc
percen
enta
tage
ge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120%
120%
Balan
Balance
ce of ship
shipme
ments nts to Branc
Branchh acco
accoun unt.t. . . . . . . . . . . . . . . . . . . . . . P 360
360,0
,000
00

11.
11. P129
P129,0
,000
00
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 720,000
Cost of sales:
Inve
Invent ntor
orie
ies,
s, Janu
January ary 1 at cost cost (P9 (P90,0,00
000 0 ÷ 120
120%) %) . . . . . . . . . . P 75,
75,00
0000
Ship
Shipmement ntss fro
fromm HO,HO, at at cos
costt (se
(see e no.
no. 10)10) . . . . . . . . . . . . . . . . 360,
360,00
000
0
CGA
CGAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435,
435,00
0000
Inventories, De December 3 31
1 at
at cocost (P (P100,800 ÷ 120%) . . . . . . 84,000 351,000
Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369,000
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,000
Adjusted branch profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 129,000

12.
12. P4,8
P4,800
00
Inventory , January 1 per books . . . . . . . . . . . . . . . . . . . . . . . . . . . P 24,000
Less Inventory, January 1 from HO at billed price
Allo
Allowan
wancece for
for ove
overva
rvalu
luati
ation
on of branc
branch h inv
invenentotoryry . . . . . . . . P 28,
28,90
9000
Over
Ov erv
valu
aluatio
ation
n of shipm
hipmen
ents
ts from
from HO (P96, P96,00 000 0 – P72,
P72,00000)0) . . 24,0
24,00
00
Over
Ov erv
valu
aluatio
ation
n of beg
beginni
inning
ng inv
invento
entory ry fro
from HO . . . . . . . . . . 4,80
4,8000
Add Inventory for HO, at cost (P (P4,800 ÷ 33.33%) . . . . . . . . . . 14,500 19,200
Inventory, January 1 from outsiders. . . . . . . . . . . . . . . . . . . . . . . . . P 4,800

13.
13. P66,
P66,00
000
0
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 240,000
Cost of sales:
 Inventory, January 1(cost)
From
From outsi
outsiderderss (see
(see no.1no.12) 2) . . . . . . . . . . . . . . . . . . . . . P 4,
4,800
800
From
From HO,
HO, at at cos
costt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,5
14,500
00 P 19,2
19,200
00
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000
Shipments from HO, at cost . . . . . . . . . . . . . . . . . . . . . . 72,000
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,200
Less Inventory
Inventory,, December 31 (cost) (cost) -
From
From outs
outsid ider
ers.s. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,20
7,200
0
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%
Shipme
Shipments nts from
from home
home offic
office e (bille
(billed d price
price)) . . . . . . . . . . . . . . . . . . . . . . . . . P 450,0
450,000
00
Divi
Divide
de by ship
shipme
mentntss to
to branc
branch h (cos
(cost) t) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360,
360,00
0000
Bill
Billin
ing
g per
perce
centntag
age.
e. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125%
125%
Less
Less perc
perceentag
ntage e at cost
ost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
100
Rate
ate of of mar
mark-k-u
up on
on cos
costt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%
25%

15.
15. P24,
P24,00
000
0
Balan
Balance
ce of
of allo
allowan
wance
ce for
for over
overva
valu
luati
ation
on of
of branc
branch
h inve
invent
ntor
ory
y acco
accoun
untt P 94,
94,80
800
0
Less
Less Ov
Over
erva
valu
luat
atio
ion
n of ship
shipme
ment
ntss from
from HO (P45
(P450,
0,00
00 – P360
P360,0
,000
00)) . . . . . . . 90,0
90,000
00
Over
Overva
valu
luat
atio
ion
n of
of beg
begin
inni
ning
ng inve
invent
ntor
ory
y from
from HO . . . . . . . . . . . . . . . . . . . . . 4,80
4,800
0
Add Cost
Cost of begi
beginn
nnin
ing
g inv
inven
ento
tory
ry from
from HO (P4
(P4,8
,800
00 ÷ 25%
25%)) . . . . . . . . . . . . 19,2
19,200
00
Branch
Branch begi
beginni
nning
ng inve
invento
ntory
ry from
from HO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 24,0
24,000
00

16.
16. P89,
P89,04
040
0
Balance of allowance for overvaluation of branch inventory P 94,800
Less Overvaluation of branch ending inventory:
Bille
Billed
d pri
price
ce (P49
(P49,6 ,680
80 – P20,
P20,88 880)0) . . . . . . . . . . . . . . . . . . . . . P 28,
28,80
800
0
Cost (P28,800 ÷ 125%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,040 5,760
Realized profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P89,040

17.
17. P36,
P36,00
000
0
Balance
Balance of Allow
Allowanc
ancee for overva
overvalua luatio
tion
n of branch
branch invent inventory ory . . . . . . . P 43,
43,200
200
Less
Less Ov
Overerva
valuluat
atio
ion
n of ship
shipme
mentntss from
from HO (P11
(P115,5,202000 – P96,
P96,00 000)0) . . . . . . . 19,2
19,200
00
Over
Ov erva
valu
luati
ation
on of begin
beginnining
ng inve
inventontory
ry from
from HO . . . . . . . . . . . . . . . . . . . . 24,0
24,000
00
Add
Add Cos
Costt of begi
beginn
nnin
ingg inv
inven
entor
toryy fro
from
m HO (P24
(P24,0 ,000
00 ÷ 20%)
20%) . . . . . . . . . . . 120,
120,00
0000
Beginn
Beginning
ing invent
inventory
ory from
from HO, at bille
billed
d price
price.. . . . . . . . . . . . . . . . . . . . . . . P 144,0
144,000
00
Mercha
Merchandi
ndise
se inve
invento
ntory,
ry, January
January 1 per books
books . . . . . . . . . . . . . . . . . . . . . . P 180,0
180,000
00
Less
Less begin
beginni
ning
ng inve
invent
ntor
oryy fro
from
m HO
HO (se
(see
e abov
above) e) . . . . . . . . . . . . . . . . . . . . . 144,
144,00
000
0
Branch
Branch begi
beginni
nning
ng inve
invento
ntory
ry from
from outside
outsiders
rs . . . . . . . . . . . . . . . . . . . . . . . . P 36,0
36,000
00

18.
18. P26,
P26,40
400
0
Balance of allowance for overvaluation of branch inventory P 43,200
Less Overvaluation of branch ending inventory from HO:
Bille
Billed
d pri
price
ce (P12
(P120,0
0,000
00 – P19,
P19,20200)0) . . . . . . . . . . . . . . . . . . . . P100,
P100,80
800
0
Cost (P100,8
0,800 ÷ 120%) . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,000 16,800
 Realized branch profit to be adjusted . . . . . . . . . . . . . . . . . . . P 26,400

19.
19. P9,9
P9,990
90
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 189,000
Cost of sales:
Inve
Invent ntor
ory,
y, Janu
Januar aryy 1 at costcost (P27,
(P27,00 000÷0÷ 125%)
125%) . . . . . . . . P 21,
21,36
3600
Ship
Shipmement ntss fro
fromm HO,HO, at cost cost . . . . . . . . . . . . . . . . . . . . . . . 126,
126,00
000
0
CGAS
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,
147,36
3600
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.
20. P67,
P67,29
290
0
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 636,000
Cost of sales:
Inve
Invent ntor
ory,
y, Janu
Januar aryy 1.
1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P 69,
69,00
0000
Purc
Purchashases es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,
492,00
000
0
CGAS
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,
561,00
000
0
Less
Less Ship
Shipme ment nt to branc
branch h .. .. .. .. .. .. .. .. .. .. .. .. .. 126,
126,00
0000
Cost
Cost of goodsgoods avai availab lable le for
for own
own sale sale . . . . . . . . . . . . . . . 435,
435,00
0000
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

21. Branch Inventory,

Inventory, 12/31/20x4:
12/31/20x4: P30,000 x 60%............
60%....................
.................
...............P
......P 18,000
22. Branch Inventory,
Inventory, at cost: (P25,000
(P25,000 + P1,000) x 60%..................
60%.........................P
.......P 15,600
15,600
23. P30,00
P30,000
0
Merchandise inventory, January 1 P 26,400
Shipments from home office __20,000
Cost of goods available for sale P 46,400
Less: Cost of goods sold, at BP:
Sales P 15,000
Less: Sales returns ___2,000
Net sales P 13,000
Divided by: SP based on cost ____125% __10,400
Merchandise inventory, ending at BP P 36,000
Divided by: Billed price ____120%
Merchandise inventory, ending at cost
lost due to fire) P 30,000

Theories

1. True 6. False 11 . False 16 . True 21. D

2. False 7. False 12 . True 17 . True 22. A
3. True 8. False 13 . False 18 . True 23. d
4. True 9. True 14 . True 1 9. False 24. d
5. False 10. True 15 . False 20 . d 25. a
26. c