Problem 1

Answers
a. 255,000
b. 243,200
c. 538,700
d. 12,000
e. 187,700
Billed Price Cost Allowance for Overvaluation
130% 100% 30%
Beginning Inventory xx xx xx
Shipments from Home Office xx xx xx
Goods Available for Sale xx xx xx
Ending Inventory (xx) (xx) (xx)
Cost of Sales xx xx xx

Billed Price Cost Allowance for Overvaluation

130% 100% 30%
Beginning Inventory
Shipments from Home Office 188,500
Goods Available for Sale 52,500
Ending Inventory (52,000)
Cost of Sales

Billed Price Cost Allowance for Overvaluation

130% 100% 30%
Beginning Inventory 39,000 30,000 9,000
Shipments from Home Office 188,500 145,000 43,500
Goods Available for Sale 227,500 175,000 52,500
Ending Inventory (52,000) (40,000) (12,000)
Cost of Sales 175,500 135,000 40,500

Ending Inventory billed price (79,700 – 27,700 = 52,000)

Allowance for overvaluation of 52,500 is allowance on GAS or the unadjusted balance of allowance

Branch Computation – Outside Suppliers

Beginning Inventory 19,000 (58,000 – 39,000)
Purchases 200,000
Ending Inventory (27,700)
Cost of Sales 191,300

Home Office Computation – Net Income

Sales 1,200,000
Cost of Sales
Beginning Inventory 20,000
Purchases 900,000
Shipments to Branch (145,000)
Ending Inventory (120,000) (655,000)
Operating Expenses (290,000)
Net Income 255,000

Branch Computation – Net Income

Sales 720,000
Cost of Sales
Home Office 175,500
Outsiders 191,300 (366,800)
Operating Expenses (110,000)
Net Income 243,200

Branch Income 243,500

Income from Allowance 40,500
True Income of Branch 283,700
Home Office Income 255,000
Combined Income 538,700
Home Office – ending inventory 120,000
Branch – ending inventory from HO at cost 40,000
Branch – ending inventory from outsiders 27,700
Total 187,700

Problem 2
Question 1 b
Question 2 c
Question 3 c
Question 4 b

Billed Price Cost Allowance for Overvaluation

Beginning Inventory
Shipments from Home Office 10,000 8,000
Goods Available for Sale 3,600
Ending Inventory (7,500)
Cost of Sales

Billed Price Cost Allowance for Overvaluation

125% 100% 25%
Beginning Inventory 8,000 6,400 1,600
Shipments from Home Office 10,000 8,000 2,000
Goods Available for Sale 18,000 14,400 3,600
Ending Inventory (7,500) (6,000) (1,500)
Cost of Sales 10,500 8,400 2,100

Branch Computation – Outside Suppliers

Beginning Inventory 7,000 (15,000 – 8,000)
Purchases 5,500
Ending Inventory (2,500)
Cost of Sales 10,000

Home Office Computation – Net Income

Sales 60,000
Cost of Sales
Beginning Inventory 20,000
Purchases 35,000
Shipments to branch (8,000)
Ending Inventory (20,000) (27,000)
Operating Expenses (14,000)
Net Income 19,000

Branch Computation – Net Income

Sales 30,000
Cost of Sales
Home Office 10,500
Outsiders 10,000 (20,500)
Operating Expenses (6,000)
Net Income 3,500

Combined Net Income

Home Office Net Income 19,000
Branch Home Office 3,500
Realized Profit from COS 2,100
Total 24,600