SEATWORK #9

Answer the following problem and provide a supporting solution for each question.

Do this in google docs instead of spreadsheet.

The following information are taken from the books and record of Charity Company and its branch. The
balances at December 31, 2021, the second year of operations are:

The branch obtains all of its merchandise from the office. The home office ships the merchandise at 125%
of its cost. The ending inventory of the branch is P40,000 at billed price.

1. What was the billed price of the branch beginning inventory?

Answer:
Allowance for overvaluation of branch inventory 57,500
Overvaluation on shipment (200,000 x 25%) (50,000)
Branch beg.inventory 7,500
Cost of branch inventory beg. (7,500 x 25%) 30,000
Billed price of the branch beginning inventory 37,500

2. Using the same data, the branch net income as far as the home office is concern is?

Answer:
Sales 400,000
Less:
Beg. inventory 30,000
Shipment from HO 200,000
End. Inventory(40,000/125%) (32,000) 198,000
Gross profit 202,000
Expenses (100,000)
Branch Net Income 102,000

The Bradley Company decided to open a branch store in Ortigas Center. Shipments of merchandise to the
branch totaled P108,000 which included a 20% mark-up on cost. All accounting records are to be kept at
home office.

The branch submitted the following report summarizing its operation for the period ended December 31,
2021.
3. How much is the ending inventory at cost?
Answer:
End. inventory on hand (60,00x80%)/120% 40,000
Acquired from outsider (60,000x20%) 12,000
Ending inventory-at cost 52,000

4. Using the same data, what is the branch net income?

Answer:
Sales(148,000+144,000) 192,000
Less:
Shipment from HO (108,000/120%) 90,000
Purchase 52,000
End. Inventory (52,000) (90,000)
Gross Profit 192,000
Expenses (76,000+24,000) (100,000)
Branch Net Income 2,000

Presented below are items taken from the unadjusted trial balances of Winkelman
Company and its branch on December 31, 2021.
It is the company’s policy to bill all branches for merchandise shipments at 30% above cost.

5. How much of the branch inventory on January 1 represents purchases from outside suppliers?

Answer:

Inventory, january 1 54,600

Less:
Shipments from HO 390,000
Shipments to branch 300,000
Allowance for overvaluation of branch inventory 99,900 (9,900)
(-9,900/30%) (33,000)
Total inventory 11,700