1d

2c
3a
4c
5c
6d
7b
8d
9a
10 d
Branch
Sales 864,000
Less: Cost of Sales
Beg.inventory 63,000
Purchases 360,000
Shipments from home office 360,000
Total Cost of Goods available for sale 783,000
Less: Inventory end - 110,400
Cost of sales 672,600 - 672,600
Gross profit 191,400
Expenses - 132,000
Net income 59,400

Net income reported by the branch 59,400.0

Add: Overstatemen of cost of goods sold/
realized gross profit 66,360.0
True branch net income 125,760.0

ALLOWANCE FOR OVERVALUATION

12600 Markup (beginnning)

72000 Markup shipment

84600 Balance before adjustment

Adjustment 66360
18240 Ending balance

(110,400-19,200)*25/125
 Home Office
Sales
Less: Cost of Sales
Beg.inventory 36,000
Purchases 1,080,000
Shipments to branch - 288,000
Total Cost of Goods available for s 828,000
Less: Inventory end - 180,000
Cost of sales 648,000
Gross profit
Expenses
Net income from own operations
True net income of the branch
Combined net income A

re adjustment
 1,440,000

- 648,000
792,000
- 348,000
444,000
125,760
569,760
 ALLOWANCE FOR OVERVALUATION
12000 Markup (beginnning)

64000 Markup shipment

76000 Balance before adjustment

Adjustment 72800
3200 Ending balance

(19200*20/120)

Makup 12000
Mark up base on cost 20%
60000 d
(beginnning)

shipment (320,000*20%)

before adjustment
Bulacan
HOME OFFICE 31,000
SHIPMENTS FROM HOME OFFICE 30,000 (60,000*50%)
FREIGHT-IN 1,000 (2000*50%)

Baguio
SHIPMENTS FROM HOME OFFICE 30,000
FREIGHT-IN 1500
HOME OFFICE 30,500
CASH 1000

INVESTMENT IN BAGUI0 30,500

EXCESS FREIGHT 300 (1000+1000-1500)
INVESTMENT IN BULACAN 31,000
000-1500) D
Sales 95000
Sales discount (81000/.90)*.10 9000
Net Sales 86000
Cost of Sales (95000*70%) 66500
Gross profit 19500
Selling expenses -5500
Freight out -2000
Administrative expenses
(95000*5%) -4750
Samples ( 8200-4550) -3650
Net income 3600 A
 HOME OFFICE BOOKS
UNADJUSTED 1,071,600.00 ( squeeze)
Collection of HO’s AR (8/15) 113600
Cash remittance (11/5) -78000
Return of goods to HO (12/20) -49000
Equipment acquisition (8/3)
Goods from HO (11/10)
Cash
Collection of Branch AR (12/16)
Allocation of expenses to
branch
Adjusted 1,058,200.00
BRANCH BOOKS
111,800.00

840000 (420000*2)
90000 (320000-230000)
2700 (53000-50300)
-25000

38700 (65000*30%)+(96000*20%)
1,058,200.00