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Home Office Income Computation

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155 views2 pages

Home Office Income Computation

Uploaded by

sangguniangkabataan.60council
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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HOME OFFICE INCOME/TRUE BRANCH INCOME COMPUTATION

PROBLEM 1

A branch’s ending inventory of merchandise shipped by the home office and purchased from outside
vendors amounts to P 50,000. The post-closing trial balance in the Unrealized Gross Profit in Branch
Inventory account is P 6,000 due to the home office practice of shipping merchandise at 20% above cost.
The merchandise purchased from outside vendors contained in the ending inventory of the branch
amounts to ___________.

PROBLEM 2

The income statement submitted by Loon Branch to the Home Office for the month of December 31,
2023 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 P 460,000
Inventory, December 31, 2013 100,000 360,000
Gross Margin P240,000
Operating Expenses 180,000
Net Income for the month P 60,000

The Branch inventories consisted of: 12/1/2023 12/31/2023


Merchandise purchased from home P70,000 P84,000
Local purchases P10,000 P16,000

Shipments to Branch based on the record of the home office amounted to 250,000.

Guide questions:
a. How much is the billing percentage of the home office to branch?
b. How much is the total allowance for overvaluation before recognizing the realized profit?
c. How much is the unrealized profit on the merchandise shipped?
d. How much is the realized profit on the merchandise shipped?
e. How much is the true branch net income?
f. How much is the actual cost of sales based on cost?

PROBLEM 3
The following information is extracted from the books and records of Elaine Company and its branch.
The balances at December 31, 2022 of the company’s operations.
Home Office Branch

Sales P260,000
Shipments to branch P 78,000
Shipments from home office 104,000
Purchases 39,000
Expenses 78,000
Inventory, January 1, 2012 26,000
Allowance for overvaluation of branch inventory 31,200

However, no shipments in transit between home office and the branch were made. Both shipments
accounts are properly recorded. The ending inventory includes merchandise acquired from the home
office in the amount of P26,000 and P7,800 acquired from outsiders acquired from the home office in
the amount of P26,000 and P7,800 acquired from outsiders for a total of P33,800.
A. Billing percentage
B. Realized profit
C. True branch income
D. What is the amount of branch merchandise beginning inventory that was acquired from the
home office?

PROBLEM 4
Selected information from the trial balances for the home office and the branch of Lalay Company at
December 31, 2022 is provided. The branch acquires merchandise from the home office and outside
suppliers.
Home Office Branch
Sales P60,000 P30,000
Shipments to branch 8,000
Allowance for overvaluation of branch inventory 3,600
Shipments from home office 10,000
Purchase (outsiders) 35,000 5,500
Merchandise inventory 12.01.12 20,000 15,000
Expenses 14,000 6,000
Additional information: Merchandise inventory, December 31, 2012: Home office P20,000 Branch
(P7,500 from home office and P2,500 from outsiders) 10,000 17.

a. The billing rate of home office to branch for merchandise shipments is


b. How much of the December 1 inventory of the branch represent purchases from outsiders and
goods shipped from home office?
c. The net income reported by the branch is
d. The combined net income for Home office and branch operations is

PROBLEM 5

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