Determine the amount of the branch beginning inventory

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Question - A home office ships inventory to its branch at 125% of cost. The deferred profit account balance at the beginning of the year was P20,000. During the year, the branch was billed P350,000 for inventory transfers from home office. At year-end, the branch's statement of financial position shows P80,000 of inventory on hand that was acquired from the home office.

Required -

(1) Determine the amount of the branch's beginning inventory (as shown in its prior year-end financial statement).

(2) Calculate the year-end adjustment to the Deferred Profit account and show the adjusting journal entry.

Reference no: EM133105309

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