Reference no: EM132949004

Problem 1 - Most home office ships merchandise to its Makati branch at 20 percent above cost. Makati branch's book shows a beginning inventory of P135,000 (50% from outside purchase) and shipments from home office of P405,000. The ending inventory of the Makati branch amounted to P337,500 in which 60% is home office merchandise while the remaining balance is from outside purchases. The Makati branch purchased merchandise costing P317,500. The total sales and operating costs of the branch for the year amounted to P1,040,000 and P220,000 respectively.

Q1-What is the entry of the home office upon shipment of merchandise to the branch?

Q2-What is the pre-closing balance of the Allowance for Overvaluation of Branch inventory account?

Q3-What is the post-closing balance in the Unrealized Profit in Branch Inventory Account?

Q4-What is the amount of overvaluation of Cost of Goods Sold or undervaluation in income?

Q5-The Allowance for Overvaluation of Branch Inventory Account is adjusted to how much?

Q6-The Allowance for Overvaluation of Branch Inventory Account is adjusted by how much?

Q7-What is the Overvaluation of Branch Ending Inventory? Q8-How much is the true ending inventory of the branch?

Q9-How much is the total Cost of goods sold of the branch?

Q10-How much is the true net income of the branch?

Problem 2 - The Office in Global City bills its Manila branch for shipments of goods at 25% above cost. At the close of the business on April 27, 2016, a fire gutted the branch warehouse and destroyed 70% of the merchandise stock stored therein. Thereafter, the following data were gathered:

January 1 Inventory P672,000

Shipments from Home office, Jan. 1 through April 27 1,008,000

Net Sales, January 1 through April 27 1,428,000

Undamaged merchandise recovered are marked to sell for 378,000

Q1-What is the amount of inventory destroyed by fire per home office records at cost?

Q2-How much is the branch cost of goods sold?

Q3-How much is the overvaluation in branch Cost of Goods Sold?

Q4-How much is the branch net income as provided by GAAP?