The Lakers Corporation located in Cebu City, opened a branch on January 1, 2021 in Manga

City. Selected transactions of the home office and branch for the month of September 2021 are
summarized as follows:
9/2/2021 The home office shipped P250,000 cost of merchandise to the branch.
9/5/2021 The branch sold P154,000 to a customer on account.
9/8/2021 Additional merchandise shipped from the home office P90,000.
9/15/2021 The branch returned to the home P6,000(7,500 BP) worth of merchandise.
9/25/2021 Sales for cash in the amount P290,000 were recorded by the branch.
9/27/2021 P120,000 worth of merchandise were shipped to the branch.
9/30/2021 Merchandise in the amount of P8,000(10,000 BP) were returned to the home
office.
* Ending inventory of the branch is at P150,000 (187,500 BP)

Required: (1) Journal entry of the home office and the branch assuming the shipment is (a)
cost (b) billed price (25% of cost)
(2) Compute the gross income of the branch (a) cost (b) billed price
(3) Reconcile the difference between the gross income of the branch as far as the
branch is concerned and the gross income of the branch as far as the home
office is concerned (true branch income).
Requirement 1.
JOURNAL ENTRIES
COST BILLED PRICE
HOME OFFICE BRANCH HOME OFFICE BRANCH
9.2.21 IB 250,000 SFHO 250,000 IB 312,500 SFHO 312,500
STB 250,000 HO 250,000 STB 250,000 HO 312,500
ALOBI 62,500

9.5.21 A/R 154,000 A/R 154,000

SALES 154,000 SALES 154,000

9. 8.21 IB 90,000 SFHO 90,000 IB 112,500 SFHO 112,500

STB 90,000 HO 90,000 STB 90,000 HO 112,500
ALOBI 22,500

9.15.21 STB 6,000 HO 6,000 STB 6,000 HO 7,500

IB 6,000 SFHO 6,000 ALOBI 1,500 SFHO 7,500
IB 7,500

9.25.21 A/R 290,000 A/R 290,000

SALES 290,000 SALES 290,000

9.27.21 IB 120,000 SFHO 120,000 IB 150,000 SFHO 150,000

STB 120,000 HO 120,000 STB 120,000 HO 150,000
ALOBI 30,000

9.30.21 STB 8,000 HO 8,000 STB 8,000 HO 10,000

IB 8,000 SFHO 8,000 ALOBI 2,000 SFHO 10,000
IB 10,000

Requirement 2.
GROSS INCOME
COST BILLED PRICE
SALES P 444,000 P 444,000
COST OF SALES:
SFHO P 446,000 P 557,500
LESS: ENDING INV. 150,000 296,000 187,000 370,000
GROSS PROFIT P 148,000 P 74,000

Requirement 3.
RECONCILATION
BILLED PRICE COST ALOBI
BEGINNING INV.
SFHO/STB P 557,500 P 446,000 P 111,500 CURRENT SHIPMENTS
GOGAS P 557,500 P 446,000 P 111,500 TOTAL ALOBI
ENDING INV. 187,000 150,000 37,500 ADJUSTED ALOBI/ENDING ALOBI
CGS P 370,000 P 296,000 P 74,000 REALIZED ALOBI/ADJUSTMENT ALOBI