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How much should be credited to the Allowance

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Question - Con Company has two branches to which merchandise is transferred at cost plus 35% mark up on cost plus freight charges.

On January 1, 2022, Con Home Office shipped merchandise that cost $550,000 to its Full branch, and the 7% shipping charges based on billed price were paid by Con.

On March 15, 2022, the Fruit branch encountered an inventory shortage, and the Full branch shipped 2/3 of the merchandise to the Fruit branch at a freight cost of $22,000 paid by the Full branch. Shipping charges from the Home office to the Fruit branch would have been $45,000.

Required -

1. How much should be credited to the Allowance for Overvaluation of Branch inventory account in Home Office books as a result of the January 1, 2022 shipment to Full branch?

2. At what amount should the Investment in Branch account be debited in Home Office books as a result of the January 1, 2022 shipment to Full branch?

3. How much is the amount of excess freight-in that should be recorded as expense by Home Office on March 15, 2022?

Reference no: EM132524863

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