Questions 1 & 2 are based on the following information.

On February 14, 2012, Therese Company established a sales agency in Tagbilaran.Upon

establishment of the sales agency, the home office sent samples costingP8,000 and a
working fund of P3,000 to be maintained on the imprest basis. Duringthe six-month period, the
sales agency reported to the home office sales orders.These were billed at P70,000 of which of
P40,000 was collected) the sales agencypaid expenses of P5,800 but was reimbursed by the
home office.

On August 15, 2012, the

sales agency samples were
valued at P2,000. It was
estimated that the gross profit on
goods shipped to fill sales order
averaged 40% of
cost.
On August 15, 2012, the sales agency samples were valued at P2,000. It was
estimated that the gross profit on goods shipped to fill sales order averaged 40% of
cost.

1. The cost of sales of the sales

agency for the six-month period is
a. P42,000 c. P48,000
b. P44,000 d. P50,000
1. The cost of sales of the sales agency for the six-month period is
a. P42,000 c. P48,000
b. P44,000 d. P50,000
2. The net income of the sales agency for the six-month period is
a. P16,200 c. P10,200
b. P14,200 d. P8,200

The income statement submitted

3.

by Loon Branch to the Home

Office for the month
of December 31, 2013 follows:
3. The income statement submitted by Loon Branch to the Home Office for the month
of December 31, 2013 follows:

The Branch inventories consisted of:

After effecting the necessary
adjustments, the Home Office
ascertained the true net
income of the Branch to be
P156,000
After effecting the necessary adjustments, the Home Office ascertained the true net
income of the Branch to be P156,000

At what percentage of cost did the

home office bill the branch for
merchandise
shipped to it?
a. 100% c. 120%
b. 140% d. 150%
At what percentage of cost did the
home office bill the branch for
merchandise
shipped to it?
a. 100% c. 120%
b. 140% d. 150%
3. At what percentage of cost did the home office bill the branch for merchandise
shipped to it?
a. 100% c. 120%
b. 140% d. 150%
What is the balance of the Allowance for Overvaluation in the branch inventory
at December 31, 2013?
a. P10,000 c. P16,000
b. P24,000 d. P34,000