Reference no: EM132902213

The SAVE-Most home office ships merchandise to its Makati branch at 20 percent above cost. Makati branch's book shows a beginning inventory of P135,000 (50% from outside

purchase) and shipments from home office of P405,000. The ending inventory of the Makati branch amounted to P337,500 in which 60% is home office merchandise while the remaining balance is from outside purchases. The Makati branch purchased merchandise costing P317,500. The total sales and operating costs of the branch for the year amounted to P1,040,000 and P220,000 respectively.

Problem 1: What is the entry of the home office upon shipment of merchandise to the branch?

a. None of the choices.

b. Debit Ivnestment in branch-405,000; Credit Shipment to branch-337,500; Credit Allowance for overvaluation-67,500

c. Debit Shipment from home office-405,000; Credit Home office current account-405,000

d. Debit Branch current-405,000; Credit Shipment to branch-405,000

Problem 2: What is the pre-closing balance of the Allowance for Overvaluation of Branch inventory account?

Problem 3: What is the post-closing balance in the Unrealized Profit in Branch Inventory Account?

Problem 4: What is the amount of overvaluation of Cost of Goods Sold or undervaluation in income?

Problem 5: The Allowance for Overvaluation of Branch Inventory Account is adjusted to how much?

Problem 6: The Allowance for Overvaluation of Branch Inventory Account is adjusted by how much?

Problem 7: What is the Overvaluation of Branch Ending Inventory?

Problem 8: How much is the true ending inventory of the branch?

Problem 9: How much is the total Cost of goods sold of the branch?

Problem 10: How much is the true net income of the branch?