Chapter 13 Problem I Sales....................................................................................................................... 42,000 Shipments to Newark Branch................................................................ 35,000 Unrealized Intercompany Inventory Profit........................................... 7,000 Cost of merchandise shipped t branch: P42,000/1.20= P35,000. Shipments to Newark Branch............................................................................. Unrealized Intercompany Inventory Profit........................................................ Sales Returns........................................................................................... 750 Cost of merchandise returned by branch: P750/1.20= P625.
625 125
Newark Branch Income..................................................................................... Newark Branch....................................................................................... 2,600
2,600
Unrealized Intercompany Inventory Profit........................................................ 4,125 Newark Branch....................................................................................... 4,125 Decrease in Unrealized Intercompany Inventory Profit: Balance prior to adjustment, 12/31, P7,000 – P125............... P6,875 Balance required in account, 12/31, P16,500 – (P16,500/1.20)........................................................... 2,750 Decrease.................................................................................... P4,125 Newark Branch Income...................................................................................... 1,525 Income Summary.................................................................................... 1,525 Problem II a. Unrealized Intercompany Inventory Profit has a credit balance of P9,450 before adjustment on December 31, calculated as follows: Merchandise transferred by home office at billed price, 35% above cost (P16,200 plus P20,250)............................................. P36,450 Merchandise transferred by home office at cost, P36,450/1.35.... 27,000 Additions to unrealized profit account resulting from transfers by home office..................................................................................... P9,450 b. Unrealized Intercompany Inventory Profit.................................................. 4,550 Cash.......................................................................................................
4,550
Balance of unrealized profit account at December 31 (as calculated above).......................................................................................................... P 9,450 Required balance, December 31, to reduce inventory to cost: Ending inventory of merchandise shipped to branch by home office: At billed price................................................................................................. P 18,900 At cost (P 18,900/1.35).................................................................................. 14,000 4,900 Required decrease in unrealized profit account as a result
of branch sales...................................................................................................................... P4,550 c. Branch Books: Home Office........................................................................................... 540 Shipments from Home office................................................... Home Office Books: Shipments to Branch.............................................................................. 400 Unrealized Intercompany Inventory Profit........................................... 140 Branch........................................................................................ Cost of merchandise returned: P540/1.35, or P400.
540
540
Problem III a. The branch office inventory as of December 1 considered of: Shipments from Home Office (see below)............................................................. P 12,000 Purchases from outsiders (balance of inventory).................................................. 3,000 Total inventory........................................................................................................... P 15,000 Goods acquired from home office and included in branch inventory at billed price are calculated as follows: Balance of unrealized intercompany inventory profit, December 31.................... P 3,600 Additions to unrealized profit account during December, 20% of shipments to branch (20% x P8,000)............................................................................. 1,600 Balance of unrealized profit account, December 1.................................................. P 2,000 Balance of unrealized profit account, December 1, P2,000 / 20% markup on cost equals December 1 inventory at cost................................................................ P 10,000 Add 20% markup........................................................................................................... 2,000 Goods in branch inventory at billed price................................................................. P 12,000 b. Unrealized Intercompany Inventory Profit......................................... 2,200 Branch Income............................................................................
2,200
Calculation of reduction in Unrealized Intercompany Inventory Profit: Balance of unrealized profit account, December 31.........................P 3,600 Required balance, December 31, to reduce inventory to cost At billed price................................................................... P8,400 At cost (P8,400/1.20)....................................................... 7,000 1,400 Required decrease in unrealized profit account as a result of branch sales........................................................................................ P 2,200 Problem IV (1) Dec.31 Selling Expenses............................................................................ 260 Store Supplies............................................................................ Supplies used: P400 – P140, or P260. 31
Selling Expenses............................................................................ 80 Accumulated Depreciation-Store Furniture........................ 80 Depreciation:1% of P8,000, or P80.
260
31 Selling Expenses............................................................................ Accrued Expenses Payable.................................................
120
31 Prepaid Selling Expenses............................................................. 150 Selling Expenses..................................................................... 31 Income Summary......................................................................... 16,000 Merchandise Summary......................................................... 31 Merchandise Summary................................................................. 16,950 Income Summary...................................................................... 31 Notes Payable..................................................................................1,000 Home Office...............................................................................
120 150 16,000 16,950 1,000
31 Sales.................................................................................................20,500 Income Summary....................................................................... 20,500 31 Income Summary........................................................................... 21,900 Purchases.................................................................................... Shipments from Home Office................................................... Selling Expenses.......................................................................... General Expenses....................................................................... 31 Home Office....................................................................................... 450 Income Summary....................................................................... (2) Dec.31 Branch No. 1.................................................................................... 1,000 Cash............................................................................................ Branch No. 1 Income..................................................................... Branch No. 1...............................................................................
450
31 Unrealized Intercompany Inventory Profit....................................... 2,200 Branch No. 1 Income.................................................................
5,000 10,500 4,560 1,840 450 1,000 450 2,200
Calculations of unrealized profit adjustment on merchandise shipped by home office: Billing to Cost Unrealized Branch (Billing/1.1 Profit /3) (Billing Price Minus Cost) Inventory, P 12,500 P 9,375 P 3,125 Dec.1............................................................ Shipments during 10,500 7,875 2,625 December...................................... Total in unrealized profit on December P 5,750 31................. Inventory, 14,200 10,650 3,550 Dec.31......................................................... Reduction in unrealized profit accountadjustment to branch profit for overstated of cost of goods P 2,200 sold................................................................. 31 Branch No. 1 Income............................................................... 1,750
Income Summary.............................................................
Problems V (1)
1,750
SPENCER CO. Balance Sheet for Branch December 31,20x4
Assets Liabilities____________________ Cash..................................................... P 2,650 P 4,200 Accounts receivable........................ 12,850 105 Merchandise inventory..................... 14,600 office............................................... 29,239 Store supplies...................................... 300 Prepaid expenses............................... 120 Furniture and fixtures.............. P 3,600 Less: Accumulated depreciation.............. 576 3,024 ________ Total assets....................................... P 33,544 liabilities............................................ P 33,544
Accounts payable................................... Accrued expenses................................... Home
Total
SPENCER CO. Income Statement for Branch For Month Ended December 31, 20x4 Sales........................................................................................................................................... P 20,000 Cost of goods sold: Merchandise inventory, December 1................................................ P 14,400 Purchases.............................................................................................. 4,100 Shipments from home office............................................................... 10,200 Merchandise available for sale.......................................................... P 28,700 Less: Merchandise Inventory, December 31..................................... 14,600 Cost of goods sold....................................................................................................... 14,100 Gross profit................................................................................................................................. P 5,900 Operating expenses: Advertising expense............................................................................. P 2,800 Salaries and commissions expense..................................................... 2,350 Store supplies expense......................................................................... 280 Miscellaneous selling expense............................................................ 1,050 Rent expense........................................................................................ 1,500 Depreciation expense – furniture and fixtures.................................. 36 Miscellaneous general expense......................................................... 905 Total operating expenses.......................................................................................... 8,921
Net loss...................................................................................................................................... P 3,021 SPENCER CO. Balance Sheet for Home Office December 31, 20x4 Liabilities and Stockholder’s
Assets Equity_______ Cash..................................................... P10,350 Cash in transit..................................... 1,500 Accounts receivable........................ 26,200 P 35,660 Merchandise inventory..................... 24,200 Store supplies...................................... 380 Prepaid expenses............................... 350 60,524 Furniture and fixtures.............. P 8,500 Less: Accumulated depreciation.............. 2, 585 5,915 Branch..................................... P29,239 Less: Unrealized intercompany inventory profit............ 1,950 27,289 ________ Total assets........................................ P 96,184 96,184
Liabilities Accounts payable................ P 35,400 Accrued expenses............... 260 Stockholders’ Equity Capital Stock......................... P 65,000 Less deficit.............................. 4,476
Total liabilities and stockholder’s equity............................... P
SPENCER CO. Income Statement for Home Office For Month Ended December 31, 20x4 Sales........................................................................................................................................... P 44,850 Cost of goods sold: Merchandise inventory, December 1................................................ P 31,500 Purchases.............................................................................................. 27,600 Merchandise available for sale.......................................................... P 59,100 Less: Shipments to branch................................................................... 8,500 Merchandise available for own sales................................................ P 50,600 Less: Merchandise Inventory, December 31..................................... 24,200 Cost of goods sold.......................................................................................... 26,400 Gross profit................................................................................................................................. P 18,450 Operating expenses: Advertising expense............................................................................. P 2,850 Salaries and commissions expense..................................................... 4,250 Store supplies expense......................................................................... 560 Miscellaneous selling expense............................................................ 1,850 Rent expense........................................................................................ 2,700 Depreciation expense – furniture and fixtures.................................. 85 Miscellaneous general expense......................................................... 2,510 Total operating expenses............................................................................. 14,805
Net income from own operations......................................................................................... P 3,645 Less: Branch net loss................................................................................................................ 1,271 Total income............................................................................................................................ P 2,374 2. WORKSHEET – refer to a separate sheet SPENCER CO. Combined Balance Sheet for Home Office and Branch December 31, 20x4 Assets
Liabilities and Stockholders’ Equity
Cash ………………………………. P 14,500 Accounts Receivable ………… 39,050 Merchandise Inv ………………. 36,850 39,965 Store Supplies ………………….. 680 Prepaid Expenses …………….. Furniture & Fixtures ……… P12,100 60,524 Less accumulated Depreciation …... 3,161 8,939 Total assets ……………………… P100,489 P100,489
Liabilities Accounts Payable ……….. Accrued Expenses ……….
P39,600 365
P
Stockholders’ Equity 470 Capital Stock ……………… P65,000 Less deficit …………………. 4,476 Total liabilities and stockholders’
equity
……………
SPENCER CO. Combined Income Statement for Home Office and Branch For Month Ended December 31, 20x4 Sales ………………………………………………………………………………………………………… P64,850 Cost of goods sold: Merchandise Inventory, December 1 …………………………………… P43,900 Purchases ……………………………………………………………………… 31,700 Merchandise available for sale …………………………………………… P75,600 Less merchandise inventory, December 31 ……………………………. 36,850 Cost of goods sold ………………………………………………………….. 38,750 Gross profit ……………………………………………………………………………… P26,100 Operating Expenses: Advertising Expense ………………………………………………………… P 5,650 Salaries and Commissions expense ……………………………………… 6,600 Store supplies expense …………………………………………………….. 840 Miscellaneous selling expense …………………………………………… 2,900 Rent expense ………………………………………………………………… 4,200 Depreciation Expense – F&F ………………………………………………. 121 Miscellaneous general expense …………………………………………. 3,415 Total operating expense ………………………………………………………………………. 23,726 Net Income ………………………………………………………………………………………………… P 2,374
(a) Dec
Dec.
Branch Books 31
Income Summary …………………………………………….. Merchandise Inventory ……………………………..
14,400
31
Merchandise Inventory ……………………………………… Income Summary …………………………………….
14,600
Store Supplies Expense ………………………………………. Store Supplies ………………………………………… Store supplies used: P580 – P300, or P280
31
Prepaid Expenses ………………………………………………… Miscellaneous General Expense …………………….
120
31
Miscellaneous General Expense ……………………………… Accrued Expenses ……………………………………..
105
31
Depreciation Expense – F&F ………………………………….. Accumulated Depreciation ………………………… Depreciation: 1% of P3,600
36
31
Miscellaneous General Expense …………………………….. Home Office ……………………………………………
220
31
Sales ……………………………………………………………… 20,000 Income Summary …………………………………….
31
31 (b) Dec
14,600
31
20,000
280
280
120 105
Income Summary ……………………………………………… 22,221 Purchases ……………………………………………… Shipments from Home Office ……………………… Advertising Expense …………………………………. Salaries and Commissions Expense ………………. Store Supplies Expense ……………………………… Miscellaneous Selling Expense …………………….. Rent Expense …………………………………………. Depreciation Expense – F&F ………………………. Miscellaneous General Expense …………………. Home Office ……………………………………………………. Income Summary ……………………………………..
14,400
3,021
36
220
4,100 10,200 2,800 2,350 280 1,050 1,500 36 905 3,021
Home Office Books 31
Income Summary ………………………………………………. Merchandise Inventory ……………………………….
31,500
31
Merchandise Inventory ………………………………………... Income Summary ………………………………………
24,200
31
Store Supplies Expense …………………………………………. Store Supplies …………………………………………… Store supplies used: P940 – P380, or : 560
31,500 24,200
560 560
Dec
31
Prepaid Expense ………………………………………………… Miscellaneous General Expense ……………………
350
31
Miscellaneous General Expense …………………………….. Accrued Expenses …………………………………….
260
31
Depreciation Expense ………………………………………….. Accumulated Depreciation – F&F …………………. Depreciation: 1% of P8,500, or P85
85
31
Cash in Transit …………………………………………………. Branch …………………………………………………
1,500
31
Sales …………………………………………………………… Shipments to branch ………………………....................... Income Summary ………………………………….
44,850 8,500
31
31
260
Income Summary ……………………………………………… 42,405 Purchases ……………………………………………… Advertising Expense …………………………………. Salaries and Commissions Expense ………………. Store Supplies Expense ……………………………… Miscellaneous Selling Expense …………………….. Rent Expense …………………………………………. Depreciation Expense – F&F ………………………. Miscellaneous General Expense …………………. Branch Income ……………………………………………….. Branch …………………………………………………
3,021
31
Unrealized Intercompany Inventory Profit ………………. Branch Income ……………………………………… Calculation of unrealized profit adjustment: Balance of unrealized profit account, December 31 ……………………….. P3,700 Inventory merchandise received from Home office at billed price on December 31, P11,700 Inventory at cost: P11,700/ 1.20, or P9,750 Balance of unrealized profit account on December 31, P11,700 – P9,750 .... 1,950 Required decreased in unrealized profit Adjustment to branch income for Overstatement of cost of goods Sold …………………………………….. P1,750
1,750
31
Income Summary …………………………………………… Branch Income …………………………………….
1,271
31
Income Summary …………………………………………… Retained Earnings ………………………………….
2,374
Problem VI
350
85
1,500
53,350 27,600 2,850 4,250 560 1,850 2,700 85 2,510 3,021 1,750
1,271 2,374
1. Branch Current Unadjusted balance, 12/31/20x4 Add (Deduct): Adjustments 1 Cash in transit 2. Merchandise in transit 3. Branch expenses paid by home office 4. Cash in transit from home office Adjusted balance, 12/31/20x4
P 44,000
H. Office Current P 9,000
( 10,000)
_______ P 34,000
10,000 12,000 3,000 P34,000
2. Combined Income Statement Sales [(P350,000 – P105,000) + P150,000)………....................................................... P395,000 Less: Cost of goods sold [(P220,000 – P84,000) + (P93,000 + P3,600 – P21,000 – P1,200)]……………………………………. 210,400 Gross profit................................................................................................................... P184,600 Operating expenses (P70,000 + P41,000 + P12,000)................................................ 123,000 Net income................................................................................................................... P 61,600 Problem VII (1) PAXTON CO. Income Statement for Dayton Branch For Year Ended December 31, 20x5 Sales.............................................................................................................................. P315,000 Cost of goods sold: Merchandise inventory, January 1, 20x5................................... P 44,500 Shipments from home office...................................................... 252,000 Merchandise available for sale................................................. P296,500 Less: Merchandise Inventory, December 31, 20x5.................. 58,500 238,000 Gross profit................................................................................................................. P 77,000 Operating expenses................................................................................................. 101,500 Net loss....................................................................................................................... P 24,500 PAXTON CO. Income Statement for Cincinnati Home Office For Year Ended December 31, 20x5 Sales.............................................................................................................................. P1,060,000 Cost of goods sold: Merchandise inventory, January 1, 20x5................................... P115,000 Shipments from home office...................................................... 820,000 Merchandise available for sale................................................. P935,000 Less: Shipments to branch.......................................................... 210,000 Merchandise available for own sales....................................... P725,000 Less: Merchandise Inventory, December 31, 20x5.................. 142,500 Gross profit.................................................................................................................. P477,500 Expenses...................................................................................................................... 382,000
582,500
Net income from own operations............................................................................ Add branch net income........................................................................................... Total income...............................................................................................................
P 95,500 16,650 P112,150
(2) PAXTON CO. Combined Income Statement for Home Office and Branch For Year Ended December 31, 20x5 Sales.............................................................................................................................. P1,375,000 Cost of goods sold: Merchandise inventory, January 1, 20x5...................................P 150,600 Purchases...................................................................................... 820,000 Merchandise available for sale................................................. P970,600 Less: Merchandise Inventory, December 31, 20x5.................. 191,250 779,350 Gross profit.................................................................................................................... P595,650 Operating expenses.................................................................................................... 483,500 Net income................................................................................................................... P112,150 (3) Merchandise Inventory, December 31................................................................ 58,500 Sales.......................................................................................................................... 315,000 Income Summary............................................................................................ 373,500 Income Summary......................................................................................................... 398,000 Merchandise Inventory, January 1................................................................ 44,500 Shipments from Home Office......................................................................... 252,000 Operating expenses........................................................................................ 101,500 Home Office............................................................................................................... Income Summary.......................................................................................... 24,500
24,500
(4) Branch Income..................................................................................................... Branch............................................................................................................ 24,500
24,500
Unrealized Intercompany Inventory Profit............................................................... 41,150 Branch Income.............................................................................................. 41,150 Calculation of unrealized profit adjustment: Branch inventory, January 1, acquired from home office at billed price...................................................................................... P 44,500 Less: Cost of inventory (P44,500/1.25)......................................................... 35,600 Unrealized Intercompany Inventory Profit Jan. 1....................................... P 8,900 Add: Increase in unrealized profit for shipments made during year, billed price of goods, P252,000, cost of goods, P210,000.................................................... 42,000 P 50,900
Deduct balance to remain in unrealized profit account: Branch inventory, December 31, acquired from home office....................................... P 58,500 Less: Cost of inventory to home office, P58,500/1.20................................................................ 48,750 Reduction in unrealized profit account- adjustment to branch income for overstatement of cost of goods sold..................................................................
9,750 41,150
Branch Income............................................................................................................. 16,650 Income Summary............................................................................................ 16,650 Merchandise Inventory, December 31...................................................................... 142,500 Sales............................................................................................................................... 1,060,000 Shipments to Branch.................................................................................................... 210,000 Income Summary............................................................................................. 1,412,500 Income Summary......................................................................................................... 1,317,000 Merchandise Inventory, January 1................................................................ 115,000 Purchases......................................................................................................... 820,000 Expenses........................................................................................................... 382,000 Income Summary.......................................................................................................... 112,150 Retained Earnings............................................................................................ 112,150 Problem VIII (1) RUGGLES CO. Income Statement for Branch For Year Ended December 31, 20x4 Sales................................................................................................................................ 78,500 Cost of goods sold: Merchandise inventory, January 1, 20x4......................................... P 32,000 Shipments from home office........................................... P 40,000 Purchases from outsiders................................................. 20,000 60,000 Merchandise available for sale....................................................... P 92,000 Less: Merchandise Inventory, December 31, 20x4........................ 31,500 Cost of goods sold............................................................................. Gross profit.................................................................................................................... 18,000 Operating expenses.................................................................................................... Net income................................................................................................................... RUGGLES CO. Income Statement for Home Office For Year Ended December 31, 20x4
P
60,500 P P
12,500 5,500
Sales.............................................................................................................................. P 256,000 Cost of goods sold: Merchandise inventory, January 1, 20x4................................... P 80,000 Purchases...................................................................................... 210,000 Merchandise available for sale................................................. P 290,000 Less: Shipments to branch.......................................................... 30,000 Merchandise available for own sales....................................... P 260,000 Less: Merchandise Inventory, December 31, 20x4.................. 55,000 Cost of goods sold............................................................................. 205,000 Gross profit................................................................................................................... P 51,000 Operating Expenses.................................................................................................... 60,000 Net loss from own operations..................................................................................... P 9,000 Add branch net income............................................................................................ 13,500 Total income................................................................................................................ P 4,500 (2)
RUGGLES CO. Combined Income Statement for Home Office and Branch For Year Ended December 31, 20x4 Sales.............................................................................................................................. P 334,500 Cost of goods sold: Merchandise inventory, January 1, 20x4................................... P 107,500 Purchases...................................................................................... 230,000 Merchandise available for sale.................................................. P 337,500 Less: Merchandise Inventory, December 31, 20x4................... 80,000 Cost of goods sold............................................................................. 257,500 Gross profit.................................................................................................................... P 77,000 Operating expenses.................................................................................................... 72,500 Net income................................................................................................................... P 4,500 (3) Merchandise Inventory......................................................................................... 31,500 Sales.......................................................................................................................... 78,500 Income Summary............................................................................................ 110,000 Income Summary......................................................................................................... 104,500 Merchandise Inventory................................................................................... 32,000 Shipments from Home Office......................................................................... 40,000 Purchases......................................................................................................... 20,000 Expenses........................................................................................................... 12,500 Income Summary......................................................................................................... Home Office..................................................................................................... 5,500
5,500
(4) Branch...................................................................................................................... Branch Income................................................................................................ 5,500 Unrealized Intercompany Inventory Profit............................................................... Branch Income.............................................................................................. 8,000
5,500
8,000
Calculation of unrealized profit adjustment: Branch inventory, January 1, acquired from home office at billed price.................................................................................... P 24,500 Less: Cost of inventory (P24,500/1.225).................................................... 20,000 Unrealized Intercompany Inventory Profit Jan. 1................................... P 4,500 Add: Increase in unrealized profit for shipments made during year, billed price of goods, P40,000, cost of goods, P30,000.................................................... 10,000 P 14,500 Deduct balance to remain in unrealized profit account: Branch inventory, December 31, acquired from home office....................................... P 26,000 Less: Cost of inventory to home office, P26,000/1.1/3................................................................ 19,500 6,500 Reduction in unrealized profit account- adjustment to branch income for overstatement of cost of goods sold........................... 8,000 Branch Income............................................................................................................. 13,500 Income Summary............................................................................................ 13,500 Merchandise Inventory................................................................................................ 55,000 Sales............................................................................................................................... 256,000 Shipments to Branch.................................................................................................... 30,000 Income Summary............................................................................................. 341,000 Income Summary......................................................................................................... 350,000 Merchandise Inventory................................................................................... 80,000 Purchases......................................................................................................... 210,000 Expenses........................................................................................................... 60,000 Income Summary.......................................................................................................... Retained Earnings............................................................................................ 4,500 Problem IX 1. Branch Current Unadjusted balance, 12/31/20x4 Add (Deduct): Adjustments 1 Remittance
P 60,000 I 1,700)
H. Office Current P 51,500
4,500
2. Cash in transit 3. Shipments in transit Adjusted balance, 12/31/20x4
P 57,300
1,800 5,800 P 57,300
2. Income Statement - Branch Sales................................................................................................................................ P 140,000 Cost of goods sold: Merchandise inventory, January 1, 20x4 (P11,550 – P1,000)....... P 10,550 Shipments from home office (P105,000 + P5,000 – P10,000)........ 100,000 Freight-in (P5,500 + P250)…………………………………………….. 5,750 Merchandise available for sale..................................................... P116,300 Less: Merchandise Inventory, December 31, 20x4...................... 14,770 Cost of goods sold............................................................................. 101,530 Gross profit.................................................................................................................... P 38,470 Operating expenses.................................................................................................... 24,300 Net income................................................................................................................... P 14,170 Income Statement – Home Office Sales.............................................................................................................................. P 155,000 Cost of goods sold: Merchandise inventory, January 1, 20x4................................... P 23,000 Purchases...................................................................................... 190,000 Merchandise available for sale................................................. P 213,000 Less: Shipments to branch.......................................................... 100,000 Merchandise available for own sales....................................... P 113,000 Less: Merchandise Inventory, December 31, 20x4.................. 30,000 Cost of goods sold........................................................................ 83,000 Gross profit................................................................................................................... P 72,000 Operating Expenses.................................................................................................... 42,000 Net loss from own operations..................................................................................... P 30,000 Add branch net income............................................................................................ 14,170 Combined net income.............................................................................................. P 44,170 3. Combined Income Statement for Home Office and Branch For Year Ended December 31, 20x4 Sales.............................................................................................................................. P 295,000 Cost of goods sold: Merchandise inventory, January 1, 20x4................................... P 33,550 Purchases...................................................................................... 190,000 Freight-in……………………………………………………………… 5,750
Merchandise available for sale.................................................. P 229,300 Less: Merchandise Inventory, December 31, 20x4................... 44,770 Cost of goods sold........................................................................ 184,530 Gross profit.................................................................................................................... P 110,470 Operating expenses.................................................................................................... 66,300 Net income................................................................................................................... P 44,170 Problem X a. The cost of the merchandise destroyed was P30,000. Total merchandise acquired from home ofiice, at billed price: Inventory, January 1...................................................................................... P26,400 Shipments from home office, Jan. 1-17....................................................... 20,000 P46,400 Cost of goods sold, January 1-17, at billed price: Net sales, P13,000/1.25...................................................................................... 10,400 Merchandise on hand, January 17, at billed price....................................... P36,000 Merchandise on hand, January 17, at cost, P36,000/1.20............................ P30,000 b. Branch Books: Loss from Fire (or Home Office)............................................................ 36,000 Merchandise Inventory............................................................ 36,000 Home Office Books: No entry needs to be made on the books of the home office until the end of the fiscal period, when the branch earnings (including the loss from fire) are recognized and when the balance of the account Unrealized Intercompany Inventory Profit is adjusted to conform to the branch ending inventory. If it is desired to recognized the loss from fire on the home office books immediately, the following entry may be made: Branch Loss from Fire (or Retained Earnings)...................................... 30,000 Unrealized Intercompany Inventory Profit........................................... 6,000 Branch......................................................................................... 36,000 Problem XI a. Books of Branch A: Home Office........................................................................................ 1,500 Cash.........................................................................................
1,500
b. Books of branch B: Cash...................................................................................................... 1,500 Home Office............................................................................
1,500
c. Books of Home Office: Branch B............................................................................................... 1,500 Branch A.................................................................................. Problem XII a. Books of Branch No. 1 : Home Office ……………………………………………………………. Shipments from Home Office……………………………………..
1,950
1,600
1,500
Freight In……………………………………………………………… b. Books of branch No. 5: Shipments from Home Office………………………………………… Freight In…………………………………………………………………… Home Office…………………………………………………………. Cash…………………………………………………………………… c. Books of the Home Office Branch No. 5…………………………………………………………….. Excess Freight on Inter branch Transfer of Merchandise……….. Branch No. 1………………………………………………………… Shipments to Branch No. 1…………………………………………….. Shipments to Branch No. 5………………………………………… Multiple Choice Problems 1. c - P50,400, billed price x 40/140 = P 14,400
350
1,600 400 1,750 250 1,750 200 1,950 1,600 1,600
2. b Ending inventory in the combined income statement: From Home Office: (P50,000-P6,600) x 100/140 From Outsiders 3. a
True Branch Net Income Branch Net Income Add (deduct): Overvaluation of cost of goods sold/realized profit from sales made by branch: Shipments from home office. P 280,000 Less: Ending inventory, at billed price (P50,000 – P6,600) 43,400 Cost of goods sold from home office at billed price P 236,600 Multiplied by: Mark-up 40/140 Unrecorded branch expenses True Branch Net Income
4. a – P30,000 x (90,000 – 60,000)/90,000 5. a 6. d – (P50,000 – P40,000)/P40,000 = 25% markup on cost
P 31,000 6,600 P 37,600 P 5,000
67,600 ( 2,500) P 70,100
7. c – (P480,000 – P360,000) x (P80,000/P480,000) = P20,000 8. c – P700,000, since the problem stated that the “home office adjusted the intracompany Profit Deferred account” and the amount of P700,000 is the amount of net income in the adjusted financial statements of the home office, and therefore it is understood to be combined net income. 9. b Note to teachers: The Intercompany Profit Deferred amounting to P6,000 should be in the column of Home Office Reported (unadjusted) branch net income (per branch books) ………………..P 30,000 Branch Income in so far as home office is concerned per home office books. 50,000 Overvaluation of branch cost of goods sold…………………………………………P 20,000 Cost of sales of Home Office…………………………………………………………….P 500,000 Cost of sales of Branch…………………………………………………………………… 100,000 Overvaluation of branch cost of sales…………………………………………………( 20,000) Combined cost of sales…………………………………………………………………...P580,000
10. c – the amount of net income as reported by Home office is considered the combined net income. 11. c True Branch Net Income Less: branch Net Income as reported by the branch Overvaluation of CGS Less: Cost of goods sold from home office at BP Inventory, December 1 Shipment from HO COGAS Less: Inventory, December 31 CGS from home office, at cost
P156,000 60,000 P 96,000 P 70,000 350,000 P 420,000 84,000
336,000 P 240,000
Billing Price: P336,000 / P240,000 = 140%. 12. c – Allowance for overvaluation after adjustment / for December 31 inventory: P84,000 x 40/140 = P24,000. 13. b Net Income as reported by the Branch Less: Rental expense charged by the home office (P1,000 x 6 months) Adjusted NI as reported by the Branch Add: Overvaluation of CGS MI, beginning SFHO COGAS
P 20,000 6,000 P 14,000 Billed Price 0 550,000 550,000
Less: MI, ending CGS, at BP X: Mark-up ratio True/Adjusted/Real Branch Net Income 14. d
15. d
75,000 475,000 25/125
95,000 P109,000
Sales (P537,500 + P300,000)……………………………………………….………. P 837,500 Less: Cost of goods sold Merchandise inventory, beg. [P50,000 + (P45,000 / 1.20)]P 87,500 Add: Purchases…………………………………………………. 500,000 Cost of Goods Available for Sale…………………………... P 587,500 Less: MI, ending [P70,000 + (P60,000 / 1.20)]………………. 120,000 467,500 Gross profit………………………………………………………………. P 370,000 Less: Expenses (P120,000 + P50,000..………………………………. 170,000 Net Income……………………………………………………………… P 200,000 Overvaluation of Cost of Goods Sold: Unrealized Profit in branch inventory/ before adjustment……………….P 7,200 Less: Allowance of ending branch inventory (P20,000 x 84% = P16,800 x 20/120…………………………………………………………. 2,800 Overvaluation of Cost of Goods Sold……………………………………. ….P 4,400
Adjusted branch net income: Sales………………………………………………………………………………………P60,000 Less: Cost of goods sold: Inventory, January 1, 2003……………………………….P 30,000 Add: Purchases…………………………………………..... 11,000 Shipments from home office…………………….. 19,200 Cost of Goods available for sale……………………… P 60,200 Less: Inventory, December 31, 2003…………………. 20,000 40,200 Gross profit…………………………………………………………………………….. P 19,200 Less: Expenses………………………………………………………………………….. 12,000 Unadjusted branch net income…………………………………………………….P 7,800 Add: Overvaluation of Cost of Goods Sold……………………………………. 4,400 Adjusted branch net income………………………………………………………..P 12,000 16. d Billed Price *P 36,000 28,800
Cost
Allowance
Merchandise Inventory, 12/31/2005 P 30,000 P 6,000 Shipments 24,000 4,800 Cost of goods sold P10,800 From Home at billed price: *P6,000 / 20% = P30,000 + P6,000 = P36,000. From outsiders: P45,000 – P36,000 = P9,000 17.
d Billed Price Merch. Inventory, 12/31/20x4 *P12,000 Shipments 9,600 Cost of Goods Sold *P2,000 / 20% = P10,000 + P2,000 = P12,000.
Cost P10,000 8,000
Allowance P 2,000 1,600 P 3,600
Merchandise inventory, December 1, 20x4…………………………………P 15,000
Less: Shipments from home office at billed price*………………………… 12,000 Merchandise from outsiders……………………………………………………P 3,000 18. d Combined Cost of Goods Sold: Merchandise Inventory, 1/1/2003: Home Office, cost……………………………………………… P 3,500 Branch: Outsiders, ……………………………...........................P 300 From Home Office (P2,500 – P300)/110%................. 2,000 2,300 P 5,800 Add Purchases (P240,000 + P11,000)…………………………….. 251,000 COGAS………………………………………………………………… P256,800 Less: Merchandise Inventory, 12/31/2003 Home Office, cost………………………………………………. P 3,000 Branch: Outsiders………………………………………………. P 150 From Home Office (P1,800 – P150)/110%................ 1,500 1,650 4,650 Cost of Goods Sold………………………………………………… P252,150 19. d 100% 60% 40% Billed Price Cost Allowance Merchandise inventory, 1/1/x4 32,000 Shipments *60,000 36,000 *24,000 Cost of goods available for sale 56,000 Less: MI, 3/31/x4 (25,000 x 40%) 10,000 Overvaluation of CGS** 46,000 *36,000 cost / 60% = 60,000 x 40% = 24,000. (Note: Markup is based on billed price) **Realized Profit from Branch Sales 20. d Billed Price Merchandise inventory, 8/1/x4 Shipments (400,000 x 25%) Cost of goods available for sale Less: MI, 8/31/x4 (160,000 x 25%) Overvaluation of CGS/RPBSales
400,000 160,000
Cost
Allowance 60,000 *100,,000 160,000 40,000 120,000
21. b (1) Sales P 40,000 Less: Cost of goods sold: Inventory, 1/1/2003 (P4,950 / 110%) P 4,500 Add: Shipments (P22,000 / 110%) 20,000 COGAS P 24,500 Less: Inventory, 12/31/2003 (P6,050 / 110%) 5,500 19,000 Gross profit P 21,000 Less: Expenses _ 13,100 Net income from own operations P 7,900 (2) Combined Cost of Goods Sold: Merchandise Inventory, 1/1/2003: of Home Office, cost……………………………………………..P 17,000 of Branch, cost: P4,950 / 110%…………………………………. 4,500 P 21,500 Add Purchases…………………………………………………………. 50,000 COGAS………………………………………………………………….. P 71,500 Less: Merchandise Inventory, 12/31/2003
of Home Office, cost……………………………………………… P 14,000 of Branch, cost: P6,050 /100%………………………………….. 5,500 19,500 Cost of Goods Sold……………………………………………………. P 52,000 22. a - P48,000 / 120% = P40,000 23. a – P48,000 x 20/120 = P8,000 (note: adjusted allowance refers to the allowance related to the ending inventory, so, the allowance related to the CGS, which is P10,00 in this case is considered to be the adjustments in the books of Home Office to determine the adjusted branch net income) 120% 100% 20% Billed Price Cost Allowance Merchandise inventory, 1/1/x4 0 Shipments 108,000 Cost of goods available for sale 108,000 Less: MI, 12/31/x4 (P60,000 x 80%) 48,000 Overvaluation of CGS (60,000 x 60,000 10,000* 20/120) 24. b
Sales (P148,000 + P44,000) Less: Cost of Sales Inventory, 1/1/20x4 Purchases Shipments from home office Cost of goods available for sale Less: Inventory, 12/31/20x4 Gross profit Less: Expenses (P76,000 + P24,000) Net income, unadjusted Add: Overvaluation of CGS Adjusted branch net income
25. c Merchandise inventory, 1/1/x4 Shipments Cost of goods available for sale Less: MI, 12/31/x4 (P60,000 x 80%) Overvaluation of CGS(230,000x 25/125)
P192,000 P
0 52,000 108,000 P 160,000 60,000 100,000 P 92,000 100,000 P( 8,000) 10,000 P 2,000
125% Billed Price 40,000 250,000 290,000 60,000 230,000
26. d – P326,000 Sales (P600,000 + P300,000) Less: Cost of goods sold Merchandise inventory, beg. [P100,000 + (P40,000/1.25)] Add: Purchases Cost of goods available for sale Less: MI, ending [P30,000 + (P60,000/1.25)] Gross profit
100% Cost
25% Allowance
46,000*
P 900,000 P132,000 350,000 P482,000 78,000
404,000 P 496,000
Less: Expenses (P120,000 + P50,000) Net Income 27. b Sales (P537,500 + P300,000) Less: Cost of goods sold Merchandise inventory, beg. [P50,000 + (P60,000/1.20)] Add: Purchases Cost of goods available for sale Less: MI, ending [P70,000 + (P60,000/1.20)] Gross profit Less: Expenses (P120,000 + P50,000) Net Income
_ 170,000 P 326,000 P 837,500 P 87,500 500,000 P587,500 120,000
467,500 P 370,000 _ 170,000 P 200,000
28. c Sales (P120,000 + P60,000)……………………………………… P 180,000 Less: Cost of goods sold: Merchandise inventory, beg. [P40,000 + P6,000 + (P24,000 / 1.2)]……………………………… P 66,000 Add: Purchases (P70,000 + P11,000)………………… 81,000 Cost of Goods Available for Sale……………………P 147,000 Less: MI, ending [P40,000 + P3,200 + (P16,800 / 1.20)] 57,200 89,800 Gross profit……………………………………………………… P 90,200 Less: Expenses (P28,000 + P12,000)………………………… 40,000 Net Income……………………………………………………. P 50,200 29. d Sales (P100,000 – P33,000 + P50,000)…………………………………… P 117,000 Less: Cost of goods sold: Inventory, beg. [P15,000 + (P5,500/110%) or (P5,500 – P500)] P20,000 Add: Purchases (P50,000 + P7,000)……………………………… 57,000 COGAS……………………………………………………………….. P77,000 Less: Inventory, end [P11,000 + P1,050 + (P6,000- P1,050)/110%]……………………………………… 16,550 60,450 Gross profit…………………………………………………………………… P 56,550 Less: Expenses (P20,000 + P6,000 + P5,000)……………………………… 31,000 Combined Net income……………………………………………………. P 25,550 30. c Sales Less: Cost of Sales Inventory, 1/1/10 Purchases Cost of goods available for sale Less: Shipment/Sales to Branch, at cost (P110,000/110%) Cost of goods available for HO Sale Less: Inventory, 12/31/10 Gross profit Less: Expenses Net income – home office
P155,000 P 23,000 190,000 P213,000 100,000 P113,000 30,000
83,000 P 72,000 52,000 P 20,000
31. a Sales P140,000 Less: Cost of Sales Inventory, 1/1/10 P 11,550 Purchases 105,000 Freight-in 5,500 Shipment in transit (P5,000+P250) 5,250 Cost of goods available for sale P127,300 Less: Inventory, 12/31/10 (P10,400 + P520 + P5,250) 16,170 111,130 Gross profit P 28,870 Less: Expenses 28,000 Net income per branch books/unadjusted P 870 Add: Overvaluation of CGS* 9,600 Net Income of Davao Branch, adjusted P 10,470 BP
Cost
MI. 1/1/2010 Shipments 110,000 Available for sale -: MI, 12/31/10 ***15,400 CGS **110,000 x 10/110 ***10,400 + 5,000, in transit ****15,400 x 10/110
100,000
Allowance 1,000 **10,00 0 11,000 ****1,400 9,600
32. a Inventory, 1/1 at billed price P165,000 Add: Shipments at billed price 110,000 Cost of goods available for sale at billed price P275,000 Less: CGS at BP: Sales P169,000 Less: Sales returns and allowances 3,750 Sales price of merchandise acquired from outsiders (P7,500 / 120%) 9,000 Net Sales of merchandise acquired from home office P156,250 x: Intercompany cost ratio 100/125 125,000 Inventory, 8/1/2008 at billed price P150,000 x: Cost ratio 100/125 Merchandise inventory at cost destroyed by fire P120,000 33. d Freight actually paid by: Home Office……………………………………………………………………P 500 Branch P………………………………………………………………………… 700 Total………………………………………………………………………………P 1,200 Less: Freight that should be recorded…………………………………………….. 800 Excess freight……………………………………………………………………………P 400
34. d – in arriving at the cost of merchandise inventory at the end of the period, freight charges are properly recognized as a part of the cost. But a branch should not be charged with excessive freight charges when, because of indirect routing, excessive costs are incurred. Under such circumstances, the branch acquiring the goods should be charged for no more than the normal freight from the usual shipping point. The office directing the inter-branch transfers are responsible for the excessive cost should absorb the excess as an expense because it represents management mistakes (or inefficiencies.) 35. c
36. b
Inventory of the Branch: Shipments from home office at billed price.........................................P 37,700 X: Ending inventory %................................................................................ 60% Ending inventory at billed price……………………………………...……..P 22,620 Add: Freight (P1,300 x 60%)………………………………………………...... 780 P 23,400 Or, P39,000 x 60% = P23,400 Inventory in the published balance sheet, at cost Shipments at cost…………………………………..........................................P 32,500 X: Ending inventory %....................................................................................
60%
Ending inventory at billed price……………………………………………….P19,500 Add: Freight (P1,300 x 60%)………………………………………….......…….. 780 P 20,280 37. c Home Office Books Davao Branch…39,000 STB, cost……. 32,500 Unrealized profit 5,200 Cash (freight)…. 1,300 BC – Baguio……19,630 Excess freight… 520 BC-Davao……. 20,150
Davao Branch SFHO…………….37,700 Freight-in………. 1,300 HOC………….. 39,000
HOC……………….20,150 SFHO(50%)… 18,850 Freight-in (50%) 650 Cash…………...... 650
Baguio Branch
SFHO………18,850 Freight-in.. 780 HOC……... 19,630
38. c – (P300,000 x ¼ = P75,000, ending inventory x (P300,000 – P250,000)/P300,000 = P12,500 39. d 40. d 41. b – refer to No. 21 42. b – refer to No. 21 43. c – refer to No. 21 44. c 45. d
Quiz – XIII 1. P63,000
Merchandise inventory, December 31 at cost – From outsiders (see no.2) . . . . . . . . . . . . . . . . . . . . . . . . . . ..... From home office (see no.2) . . . . . . . . . . . . . . . . . . . . . . . . ....
P 18,000 45,000 P63,000
2. P18,000 Branch inventory, 12/31 per books . . . . . . . . . . . . . .... Less Branch inventory from HO at billed price: Overvaluation of branch inventory . . . . . . . . . . . Cost of branch inventory (P9,000 ÷ 20%) . . . . . . . Branch inventory from outsiders . . . . . . . . . . . . . . . .... 3. P93,600 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... Cost of sales: Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... Shipments from HO at cost (P216,000 ÷120%) . . . Cost of goods available per sale . . . . . . . . . . . .. Less inventory, 12/31 (see no.1) . . . . . . . . . . . . . . . Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... Branch net income as far as the HO is concerned . . . 4. P14,040 Allowance for overvaluation of branch inventory . . . Less Overvaluation of shipments from HO: Billed price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost (P468,000 ÷ 130%) . . . . . . . . . . . . . . . . ..... Overvaluation of beginning inventory from HO: . . . . Add Beginning inventory from HO, at cost (11,880 ÷ 30%) . Beginning inventory from HO, at billed price . . . . .
P 72,000 P 9,000 45,000
54,000 P 18,000
P 351,000 54,000 180,000 234,000 63,000
171,000 180,000 86,400 P 93,600
P119,880 468,000 360,000
108,000 P 11,880 39,600 P 51,480
.. Merchandise inventory, January 1................ Less Beginning inventory from HO, at billed price (see above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Beginning inventory from outsiders . . . . . . . . . . . . . . . 5. P47,340 Sales ……………………………………………………… Cost of sales: Merchandise inventory January 1-. . . . . . . . . . . . From outsiders (see no.4) . . . . . . . . . . . . . . . . . From HO, at cost (see no.4) . . . . . . . . . . . . ... Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... Shipments from HO, at cost (equal Shipments to Branch) . . . . . . . . . . . . . . . ... CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... Less Merchandise inventory, December 31 From outsiders (P58,500– P46,800) . . . . . . .... From HO, at cost (P46,800 ÷ 130%) . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... Branch net income in so far as the HO is concerned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...
P 65,520 51,480 P 14,040
P648,000
P14,040 39,600
P 53,640 173,520 360,000 587,160
11,700 36,000
6. P45,000 Balance of Allowance for overvaluation of branch inventory account before adjustment . . . . . . . . . Less Overvaluation of shipments from HO: Billed price (P240,000 x 125%). . . . . . . . . . . . . . . . . Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overvaluation of beginning inventory. . . . . . . . . . . . . Add Beginning inventory at cost (P11,640 ÷ 25%) . . . . Branch beginning inventory at billed price . . . . . . . . . 7. P63,000 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales: (see no.6) . . . . . . . . . . . . . . . . . . . . . . . . .
47,700
539,460 108,540 61,200 P 47,340
P 69,000 P 250,000 200,000
60,000 9,000 36,000 P 45,000 P 480,000
Beginning inventory. . . . . . . . . . . . . . . . . . . . . . . . . Shipments from HO (P240,000 x 125%). . . . . . . . . . CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less ending inventory. . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Branch net income, per books . . . . . . . . . . . . . . . . . . . 8. P122,400 Branch net income, per books (see no. 7) . . . . . . . . . Add realized profit Allowance for overvaluation of branch inventory Less Overvaluation of branch ending inventory: Billed price. . . . . . . . . . . . . . . . . . . . . . . . . ..... Cost (P48,000 ÷ 125%). . . . . . . . . . . . . . . ..... True branch net income. . . . . . . . . . . . . . . . . . . . . ...
P 45,000 300,000 345,000 48,000
297,000 183,000 120,000 P 63,000 P 63,000
P 69,000 P 48,000 38,400
9,600
59,40 0 P 122,400
9. 20% Inventories, January 1, 20x5 at billed price. . . . . . . . . . . . . . . . . . . . . . Shipments from HO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... Less Allowance for overvaluation of branch inventory. . . . . . . . . . . . Cost of merchandise from home office . . . . . . . . . . . . . . . . . . . . . . . . Allowance for overvaluation of branch inventory . . . . . . . . . . . . . . . Divide by Cost of merchandise from HO (see above) . . . . . . . . . . . . Percentage of profit on cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 10. P360,000 Shipments from HO, at billed price . . . . . . . . . . . . . . . . . . . . . . . ..... Divide by the billing percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance of shipments to Branch account. . . . . . . . . . . . . . . . . . . ... 11. P129,000 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......
P 90,000 432,000 522,000 87,000 P435,000 P 87,000 P 435,000 20%
P 432,000 120% P 360,000
P 720,000
Cost of sales: Inventories, January 1 at cost (P90,000 ÷ 120%) . . . . . ..... Shipments from HO, at cost (see no. 10) . . . . . . . . . . . . . . . .
P 75,000 360,000 435,000
CGAS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories, December 31 at cost (P100,800 ÷ 120%) . ..... Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... Adjusted branch profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 12. P4,800 Inventory , January 1 per books . . . . . . . . . . . . . . . . . . . . . . . .... Less Inventory, January 1 from HO at billed price Allowance for overvaluation of branch inventory . . . . . . .. Overvaluation of shipments from HO (P96,000 – P72,000) . . Overvaluation of beginning inventory from HO . . . . . . . ... Add Inventory for HO, at cost (P4,800 ÷ 33.33%) . . . . . . . . . . Inventory, January 1 from outsiders. . . . . . . . . . . . . . . . . . . . . . . . . 13. P66,000 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... Cost of sales: Inventory, January 1(cost) From outsiders (see no.12) . . . . . . . . . . . . . . . . ..... From HO, at cost . . . . . . . . . . . . . . . . . . . . . . . . ..... Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... Shipments from HO, at cost . . . . . . . . . . . . . . . . . . ....
84,000
351,000 369,000 240,00 0 P 129,000 P 24,000
P 28,900 24,000 4,800 14,500
19,200 P 4,800
P 240,000 P 4,800 14,500
P 19,200 36,000 72,000 127,200
CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. Less Inventory, December 31 (cost) From outsiders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . From HO, at cost (P24,000 ÷ 133%). . . . . . . . .
7,200 18,000
25,200
102,000
..... Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... True branch net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138,000 72,000 P66,000
14. 25% Shipments from home office (billed price) . . . . . . . . . . . . . . . . . . . . . . . . . Divide by shipments to branch (cost) . . . . . . . . . . . . . . . . . . . . . . . . ..... Billing percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less percentage at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rate of mark-up on cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. P24,000 Balance of allowance for overvaluation of branch inventory account Less Overvaluation of shipments from HO (P450,00 – P360,000) . . . .... Overvaluation of beginning inventory from HO . . . . . . . . . . . . . . . . . .... Add Cost of beginning inventory from HO (P4,800 ÷ 25%) . . . . . . . . .... Branch beginning inventory from HO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. P89,040 Balance of allowance for overvaluation of branch inventory Less Overvaluation of branch ending inventory: Billed price (P49,680 – P20,880) . . . . . . . . . . . . . . . . . . . . . Cost (P28,800 ÷ 125%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Realized profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......
P 450,000 360,000 125% 100 25%
P 94,800 90,000 4,800 19,200 P 24,000
P 94,800 P 28,800 23,040
17. P36,000 Balance of Allowance for overvaluation of branch inventory . . . . . .. Less Overvaluation of shipments from HO (P115,200 – P96,000) . . . . ... Overvaluation of beginning inventory from HO . . . . . . . . . . . . . . . . . . . . Add Cost of beginning inventory from HO (P24,000 ÷ 20%) . . . . . . . ....
5,760 P89,040
P 43,200 19,200 24,000 120,000
Beginning inventory from HO, at billed price. . . . . . . . . . . . . . . . . . . .... Merchandise inventory, January 1 per books . . . . . . . . . . . . . . . . . . . . . . Less beginning inventory from HO (see above) . . . . . . . . . . . . . . . . . . . . . Branch beginning inventory from outsiders . . . . . . . . . . . . . . . . . . . . . . . . 18. P26,400 Balance of allowance for overvaluation of branch inventory Less Overvaluation of branch ending inventory from HO: Billed price (P120,000 – P19,200) . . . . . . . . . . . . . . . ..... Cost (P100,800 ÷ 120%) . . . . . . . . . . . . . . . . . . . . . . . . . . . Realized branch profit to be adjusted . . . . . . . . . . . . . . . . . . . 19. P9,990 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... Cost of sales: Inventory, January 1 at cost (P27,000÷ 125%) . . . . . . . . Shipments from HO, at cost . . . . . . . . . . . . . . . . . . . .... CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... Inventory, December 31 at cost P35,100 ÷ 120%) . .... Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... True branch income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20. P67,290 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... Cost of sales: Inventory, January 1. . . . . . . . . . . . . . . . . . . . . . . . . .....
P 36,000
P 43,200 P100,80 0 84,000
16,800 P 26,400 P 189,000
P 21,360 126,000 147,360 29,250
118,110 70,890 60,900 P 9,990
P 636,000 P 69,000 492,000
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. CGAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......
P 144,000 P 180,000 144,000
561,000
Less Shipment to branch . . . . . . . . . . . . . . . . . . . . . ..... Cost of goods available for own sale . . . . . . . . . . . . ... Less Inventory, December 31. . . . . . . . . . . . . . . . . . .... Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... Net income of home office . . . . . . . . . . . . . . . . . . . . . . . . . . . Add Branch net income (see no. 19) . . . . . . . . . . . . . . . . . . . Combined net income . . . . . . . . . . . . . . . . . . . . . . . . . . . ...
126,000 435,000 85,500
349,500 286,500 229,200 57,300 9,990 P 67,290
21. Branch Inventory, 12/31/20x4: P30,000 x 60%...................................P 18,000 22. Branch Inventory, at cost: (P25,000 + P1,000) x 60%.........................P 15,600 23. P30,000 Merchandise inventory, January 1 P 26,400 Shipments from home office __20,000 Cost of goods available for sale P 46,400 Less: Cost of goods sold, at BP: Sales P 15,000 Less: Sales returns ___2,000 Net sales P 13,000 Divided by: SP based on cost ____125% __10,400 Merchandise inventory, ending at BP P 36,000 Divided by: Billed price ____120% Merchandise inventory, ending at cost lost due to fire) P 30,000 Theories 1 . 2 . 3 . 4 . 5 .
True
6.
False
11.
False
16.
True
21.
D
False
7.
False
12.
True
17.
True
22.
A
True
8.
False
13.
False
18.
True
23.
d
True
9.
True
14.
True
19.
False
24.
d
10.
True
15.
False
20.
d
25.
a
26.
c
False
