Reference no: EM132784236

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.

Problem 1: 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