The Baguio District branch of Kapa Enterprises, Agdao, was billed for merchandise shipments form home office at

cost plus 25% in 2020 and cost plus 20% in 2021. Other pertinent data for 2021 show:

Baguio District Branch Home office

Sales 60,000 210,000

Inventory, beginning

At cost 25,000

At billed price 10,900

Purchases 170,000

Inventory transfers

To Baguio District, at cost 51,600

From Agdao, at billed price 60,00

Inventory, end

At cost 28,800

At billed price 12,000

Expenses 25,000 70,500

Compute the ending inventory that should be presented in the combined income statement.

a. 2,170 c. 2,150
b. 2,180 d. 2,160

Ans. B.

Realized profit from branch sales:

Inventory, beginning (10,900 x 25/125) 2,180

Add: shipments (60,000 x 20/120) 10,000

Total 12,180

Less: Inventory, ending (12,000 x 100/120) 10,000

Realized inventory profit from branch sales 2,180