Questions 1 & 2 are based on the following information. On February 14, 2012, Therese Company established a sales agency in Tagbilaran. Upon establishment of the sales agency, the home office sent samples costing P8,000 and a working fund of P3,000 to be maintained on the imprest basis. During the six months period, the sales agency reported to the home office sales orders. These were billed at P70,000 of which of P40,000 was collected) the sales agency paid expenses of P5,800 but was reimbursed by the home office. On August 15, 2012, the sales agency samples were valued at P2,000. It was estimated that the gross profit on goods shipped to fill sales order averaged 40% of cost. 1. The cost of sales of the sales agency for the six months period is 2. The net income of the sales agency for the six months period is 3. 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: Questions 4 and 5 are based on the following information. The income statement submitted by Loon Branch to the Home Office for the month of December 31, 2013 follows: Sales Cost of Sales: Inventory, December 31, 2013 Shipments from Home office Purchased locally by branch Total Inventory, December 31, 2013 Gross Margin Operating Expenses Net Income for the month P600,000 P80,000 350,000 30,000 P460,000 100,000 360,000 P240,000 180,000 P 60,000 The Branch inventories consisted of: Merchandise purchased from home 12/1/2012 P70,000 12/31/2012 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. 4. At what percentage of cost did the home office bill the branch for merchandise shipped to it? 5. What is the balance of the Allowance for Overvaluation in the branch inventory at December 31, 2013? Questions 6 and 7 are based on the following information. The following information is extracted from the books and records of Elaine Company and its branch. The balances are at December 31, 2012 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. 6. What is the realized profit in branch inventory? 7. What is the amount of branch merchandise beginning inventory that was acquired from the home office? Questions 8 and 9 are based on the following information. Auto Supply Company is engaged in merchandising both at its home office in Cebu City and its branch in Toledo City. Selected accounts taken from the trial balances of the home office and the branch as of December 31, 2012 follow: Debits Inventory, January 1, 2012 Toledo Branch Purchases Freight in from home office Sundry Expenses Credits Home Office Sales Sales to branch Allowance for Overvaluation of branch inventory Cebu City P 23,000 58,300 190,000 52,000 P155,000 110,000 Toledo Branch P 11,550 105,000 5,500 28,000 P 53,300 140,000 at January 1, 2012. 1,000 Additional information: The Toledo City branch gets all of its merchandise from the home office. The home office bills the goods at cost plus a 10% mark-up. At December 31, 2012, a shipment with a billed value of P5,000 was still in transit. Freight on this shipment was P250 and is to be treated as part of the inventory. Inventories on December 31, 2012, excluding the shipment in transit, follow: Home office, at cost………………………………….……….. P30,000 Branch, at billed price (excluding freight of P520…… 10,000 8. What is the net income of the home office from own operations? 9. What is the net income of the branch in so far as the home office is concerned? 10. Durable Textile Company has a single branch in Bohol. On March 1, 2012, the home office accounting records included an Allowance for Overvaluation of Inventories – Bohol Branch ledger account with a credit balance of P32,000. During March, merchandise costing P36,000 was shipped to the Bohol Branch and billed at a price representing a 40% markup on the billed price. On March 31, 2012, the branch prepared an income statement indicating a net loss of P11,500 for March and ending inventories at billed prices of P25,000. What is the amount of adjustment for allowance for Overvaluation of Inventories to reflect the true branch net income?