Reference no: EM132640491

Question - On December 1, PP Company opened a branch inTarlac in to which merchandise billed at P30,000 was shipped. During the month, Additional shipments were made at billed prices of P12,000. During December, Tarlac branch returned merchandise that was defective and received credits of P750 on the returns. At the end of the month, the branch records its inventory at P18, 500, which is from the following sources:

Merchandise acquired from home office at billed price P 16,500

Merchandise acquired from outsiders P2,000

Total inventory P18,500

A branch loss for December calculated at P2,600. The home office has followed the practice of billing the branch at 20% above merchandise cost.

Required -

1) Compute the balance of the allowance for overvaluation of branch inventory at December 31, before adjustments?

2) Compute the net income (loss) of the branch in so far as the home office is concerned?