Reference no: EM132769828

Question - Retails merchandise through its home office and through a branch store in distant city. Separate ledgers are maintained by the home office and the branch. The branch store purchases merchandise from the home office (t 120% of home office cost), as well as from outside suppliers. Selected information from the December 31, 2012 trial balances of the home office and branch is as follows:

Home Office Branch

Sales P120,000 P60,000

Shipments to branch 16,000

Purchases 70,000 11,000

Expenses 28,000 7,200

Inventory, January 1 40,000 30,000

Shipments from home office 19,200

Unrealized profit in branch inventory 7,200 26,000

Additional information:

a. The entire difference between the shipment accounts is due to the practice of billing the branch at cost plus 20%.

b. December 31, 2012 inventories are P40,000 and P20,000 for the home office and the branch, respectively. (Note: the branch purchased 16% of its ending inventory from outside suppliers.)

c. Branch beginning and ending inventories include merchandise acquired from the home office as well as from outside suppliers. Merchandise acquired from the home office is inventoried at 120% of home office cost.

Required - Determine the combined net income of the home office and the branch for the year 2012:

a. P40,800

b. P49,000

c. P50,200

d. P55,800