1. Twin’s Corp.’s shipments to and from its Talibon branch are billed at 120% of cost.

On December 31,
Talibon branch reported the following data, at billed prices: inventory, January 1, P33,600; shipments
received from home office of P840,000; shipments returned of P48,000; and inventory, December 31, of
P36,000. What is the balance of the allowance for over-valuation of branch inventory on December 31,
before adjustments?

a. P5,600 b. P137,600 c. P6,000 d. P145,600

Beg. Inventory P 33,600

SFHO 840,000
Shipments Returned (48,000)
COGAS P 825,600
Multiply by 120%
Cost P 688,000
Multiply by 20%
Total ALOBI P 137,600
ALOBI – End 6,000
Realized ALOBI P 131,600

2. During 2021, Willie Corp. transferred inventory from its home office to its Laguna branch at a billed price of
P110,000. The inventory originally cost the company P90,000. The home office reported sales and cost of
goods of P1,400,000 and P590,000, respectively. The Laguna branch reported sales and cost of goods of
P675,000 and P300,000, respectively. The entire inventory had been sold by year-end. What is the cost of
goods sold to be reported in the 2021 income statement for the company as a whole?

a. P890,000 b. P870,000 c. P800,000 d. P780,000

3. A branch’s ending inventory of merchandise shipped by the home office and purchased from outside
vendors amounts to P50,000. The post-closing balance in the Unrealized Gross Profit in Branch Inventory
account is P6,000 due to the home office practice of shipping merchandise at 20% above cost. The
merchandise purchased from outside vendors contained in the ending inventory of the branch amounts to:
a. P38,000 b. P30,000 c. P18,000 d. P14,000

Total Ending Inventory P 50,000

Less: Ending Inventory from HO at billed price:
Ending ALOBI P 6,000
Divided by 20%
Ending Inventory at cost P 30,000
Multiply by 120% 36,000
Ending Inventory from outsider P 14,000

Ending Inventory at cost (P30,000+14,000) P 44,000

4. The home office of Glendale Company, which uses the perpetual inventory system, bills shipments of
merchandise to the Montrose Branch at a mark-up of 25% on the billed price. On August 31, 2021, the credit
balance of the home office’s Allowance for Overvaluation of Inventories – Montrose Branch ledger account
was P60,000. On September 17, 2021, the home office shipped merchandise to the branch at a billed price
of P400,000. The branch reported an ending inventory, at billed price, of P160,000 on September 30, 2021.
Compute the realized gross profit?
a. P108,000 b. P20,000 c. P120,000 d. P28,000

Billed Price Cost ALOBI

Beg. Inventory 300,000 240,000 60,000 (300,000/125%=240,000)
SFHO 400,000 320,000 80,000 (400,000/125%=320,000)
COGAS 140,000
Ending Inventory 160,000 128,000 32,000 (160,000/125%=128,000)
Cost of Goods Sold 108,000