Reference no: EM133105846

Question 1 - Crest Corporation established its Poblacion branch in 2019. Merchandise costing P120,000 is shipped to this branch. During the initial year, the home office acquires an equipment for P80,000 to be carried in the branch books, and the branch maintains physical possession and use. The equipment has a useful life of 4 years. The branch sells 60 percent of the inventory for P100,800 on account and subsequently collected half of the amount. The branch remits 80 percent in cash to the Home Office.

What is the correct Home Office account balance on the records of the branch? Present solution in good accounting form.

Question 2 - On January 01, 2020 Kit Company, Inc. establishes a branch in Bauang. During the year, Kit Inc. transfers cash and merchandise to the branch worth P15,000 and P45,000 respectively. Freight was paid by the home office worth P1,500 included in the cost of merchandise. The home office also incurred P5,700 expenses of which 30 percent was allocated to the branch. On December 31, 2020, the branch incurred a loss of P4,000.

What is the balance of the branch account as per home office books. Present solution in good accounting form.

Question 3 - The home office ships merchandise to the branch at 25 percent above cost.

At what amount should the Home Office account be credited if merchandise costing P120,000 will be shipped? Present solution in good accounting form.