Reference no: EM132999141

The LEGIT COMPANY established a BRANCH in MAKATI CITY on June 1, 2019. The BRANCH is to receive substantially all merchandise from the HOME OFFICE. During the remainder of 2019, shipments to the branch amounted to P144,000 which included a 20% mark-up on cost. The BRANCH purchased P36,000 additional merchandise for cash and reported unsold merchandise of P48,000 at year-end.

The BRANCH made sales of P234,000, paid expenses of P57,600 and remitted to the HOME OFFICE all sales proceeds. The allowance for overvaluation of branch inventory account on the HOME OFFICE books showed a balance of P6,000 after adjustment.

Problem 1: Compute the: (1) BRANCH inventory on December 31, 2019 at cost, and (2) the BRANCH net income as far as the HOME OFFICE is concerned:

a. (1) P42,000; (2) P62,400

b. (1) P36,000; (2) P62,400

c. (1) P41,600; (2) P44,400

d. (1) P50,000; (2) P79,500