Compute the balance of the allowance for overvaluation

Reference no: EM132825637

If on March 31, 2016, the fair value of contingent consideration increased to P60,000 when there is 90% chance of winning the said pending case. Then on June 30, 2016, the court decided in affirmative. How much will be the goodwill or income as of December 31, 2016? (Put in parenthesis if your answer is income)

On December 1, Philip Company opened a branch in Cebu to which merchandise billed at P30,000 was shopped. During the month, additional shipments were made at billed prices of P12,000. During December, Cebu branch returned merchandise that was defective and received credits of P750 on the returns. At the end of the month, the branch record its inventory at P18,500, which is from the following sources:

Merchandise acquired from home office at billed price P16,500
Merchandise acquired from outsiders P2,000
Total Inventory P18,500

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

Problem 1. Compute the balance of the allowance for overvaluation of branch inventory at December 31 before adjustments.

Reference no: EM132825637

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