Reference no: EM132919901

Question - The income statement submitted by Loon Branch to the Home Office for the month of December 31, 2013 follows:

Sales P600,000

Cost of Sales: Inventory, December 31, 2013 P80,000

Shipments from Home office 350,000

Purchased locally by branch 30,000

Total P460,000

Inventory, December 31, 2013 100,000 360,000

Gross Margin P240,000

Operating Expenses 180,000

Net Income for the month P60,000

The Branch inventories consisted of: 12/1/2012 12/31/2012

Merchandise purchased from home P70,000 P84,000

Local purchases P10,000 P16,000

Total P80,000 P100,000

After effecting the necessary adjustments, the Home Office ascertained the true net income of the Branch to be P156,000.

1. At what percentage of cost did the home office bill the branch for merchandise shipped to it?

2. What is the balance of the Allowance for Overvaluation in the branch inventory at December?