Problem 1

Selected accounts from the December 31, 2021 trial balance of Betty Star Co. and its branch follow:
Betty star Branch
Inventory, Jan. 1 P 46,000 P23,100
Branch Current 116,000 -
Purchases 380,000 -
Shipments from home office 209,000
Freight in 10,450
Expenses 104,000 58,100
Home office current - (106,600)
Sales (310,000) (280,000)
Shipments to branch (200,000) -
Branch merchandise mark-up (22,000) -
As of December 31, 2021, a shipment with a billing price of P11,000 was in transit to the branch.
Freight cost, typically 5% of the billing price is inventoriable. Merchandise on hand at year-end were:
at home office, P64,000 at cost; at branch, P33,000 at billing price.
1. Compute the branch net income is so far as the home office is concerned.
2. Compute the combined net income for 2021.

Problem 2

Home office bills its branch for merchandise shipments at 30% above cost. The following are some of
the account balances on the books of home office and its branch as of December 31, 2021:
Home office book Branch books
Inventory, January P 5,000 P 14,500
Shipments from home office 47,125
Purchases 225,000 50,000
Shipments to branch 36,250
Branch inventory allowance 13,125
Sales 300,000 180,000
Operating expenses 72,500 27,500
Per physical count, the ending inventory of the branch is P19,925 including from outside purchases of
P6,925; the ending inventory of the home office is P30,000. What is the combined net income for the
year?