Tarlac Branch of Calayo Company, at the end of its first quarter of operations, submitted the following income

statement:

Sales P300,000
Cost of Sales:
Shipments from home office P280,000
Local Purchase 30,000
Total P350,000
Inventory End 50,000 260,000
Gross profit on Sales P 40,000
Expenses 35,000
Net income P 5,000
Shipment to Branch were billed at 140% of cost. The branch inventory on September 30 amounted to P50,000 of
which P6,600 was locally purchased. Markup on local purchases, 20% over cost. Branch expenses incurred by Head
Office amounted to P2,500 not yet recorded by the branch.

Compute:
1. Branch ending inventory that should be presented in the combined income statement
True branch net income
Tarlac Branch of Calayo Company, at the end of its first quarter of operations, submitted the following income statement:
Sales P300,000
Cost of Sales:
Shipments from home office P280,000
Local Purchase 30,000
Total P350,000
Inventory End 50,000 260,000
Gross profit on Sales P 40,000
Expenses 35,000
Net income P 5,000

Shipment to Branch were billed at 140% of cost. The branch inventory on September 30 amounted to P50,000 of which P6,600
was locally purchased. Markup on local purchases, 20% over cost. Branch expenses incurred by Head Office amounted to P2,500
not yet recorded by the branch.

Compute:
2. True branch net income
 HOME OFFICE BRANCH
Sales 1,000,000 500,000
Purchase 1,100,000 45,000
Shipment to Branch - 310,000
Shipment from Home Office 400,000
Operating Expenses 250,000 90,000
Inventory,beg.
from outside purchase 47,000 4,000
from home office at 20% above cost 30,000
Inventory, end.
from outside purchase 450,000 10,000
from home office 290,000

Requirement: Realized mark-up

Individual profit of branch 231,000

Realized mark-up 31,473
True profit of branch 262,473

Individual profit of home office 363,000

Individual profit of branch 231,000
Realized mark-up 31,473
Combined Profit 625,473
Individual Profit of the Branch
Sales 500,000
Cost of Sales:
Inventory, beg. 34,000
Shipments from home office 400,000
Freight in -
Purchases 45,000
Total Goods available for sale 479,000
Inventory,end. 300,000 179,000
Individual gross profit of branch 321,000
Operating expenses 90,000
Individual profit of branch 231,000

True Profit of the Branch

Sales 500,000
Cost of Sales:
Inventory, beg. @cost (4k+(30k/129%)) 27,256
Shipments from home office, @COST 310,078
Freight in -
Purchases 45,000
Total Goods available for sale 382,333
Inventory,end., @COST (290k/129%)+10k) 234,806 147,527
Individual gross profit of branch 352,473
Operating expenses 90,000
True profit of branch 262,473
Individual Profit of Home Office
Sales 1,000,000
Cost of Sales:
Inventory, beg. 47,000
Shipments to home office - 310,000
Freight in -
Purchases 1,100,000
Total Goods available for sale 837,000
Inventory,end. 450,000 387,000
Individual gross profit of home office 613,000
Operating expenses 250,000
Individual profit of home office 363,000

Combined Statement of Profit and Loss

Sales 1,500,000
Cost of Sales:
Inventory, beg. 74,256
SFHO 310,078
STB 240,310
Freight in -
Purchases 1,145,000
Total Goods available for sale 1,769,643
Inventory,end. 684,806 1,084,837
Gross profit 1,084,837 415,163
Operating expenses 340,000
Combined Statement of Profit and Loss 75,163
 HOME OFFICE BRANCH
Sales 1,000,000 500,000
Purchase 1,100,000 45,000
Shipment to Branch - 310,000
Shipment from Home Office 400,000
Operating Expenses 250,000 90,000
Inventory,beg.
from outside purchase 47,000 4,000
from home office at 20% above cost 30,000
Inventory, end.
from outside purchase 450,000 10,000
from home office 290,000

Requirement: Realized mark-up

Allowance for mark-up, beg. 5,000
(30k*20%/120%)
Mark-up on shipment during the period 90,000
(400k-310k)
Allowance for mark-up before year-end adjustment 95,000
Unrealized mark-up on ending inventory 65,193.80
(290k*29%/129%)
Realized mark-up 29,806.20

400,000/310,000= 1.29 billing rate

65,194 End Beg 5,000.00

29,806.20 Realized Current 90,000
Return

95,000.00 SFHO @BP 400,000

STB @Cost - 310,000
Current 90,000
The PRIA Corporation has two branches, Branch P and
Branch Q. The home office shipped P80,000 in merchandise
to Branch P and paid freight charges of P500. A short time
thereafter, Branch P was instructed to ship this merchandise to
Branch Q and pays freight cost of P700. Freight charges for
this merchandise normally cost P1450 when shipped from the
home office directly to Branch Q.

Compute the savings on freight on transfers of merchandise:

 
The McCall Company maintains branches that market the products that
it produces. Merchandise is billed he branches at manufacturing costs,
with the branches paying freight charges from the home office to the
branch. On November 15, Branch No. 1 ships part of stock to Branch
No. 5 upon authorization by the home office. Originally Branch No.1
had been billed for this merchandise at P1,600 and the home office pays
the freight charges of P350 on the shipment to Branch No.1 . Upon
receiving the merchandise, Branch No. 5 pays freight charges of P250
on the shipment from Branch No. 1. If the shipment had been made
from the home office directly to Branch No.5 the freight cost to Branch
No.5 would have been P400.

Compute the excess freight on inter-branch transfer of inventories.

 
The McCall Company maintains branches that market the products
that it produces. Merchandise is billed he branches at manufacturing
costs, with the branches paying freight charges from the home office
to the branch. On November 15, Branch No. 1 ships part of stock to
Branch No. 5 upon authorization by the home office. Originally
Branch No.1 had been billed for this merchandise at P1,600 and the
home office pays the freight charges of P350 on the shipment to
Branch No.1 . Upon receiving the merchandise, Branch No. 5 pays
freight charges of P250 on the shipment from Branch No. 1. If the
shipment had been made from the home office directly to Branch
No.5 the freight cost to Branch No.5 would have been P400.

How should the merchandise transfers be recorded on the books of

(a) Branch No. 1, (b) Branch No. 5, and (c) the home office?
For the year ended 12/31/22, selected line items from the home office and branch
columns of the combining statement worksheet follow:
Home Office Branch
Cost of Sales (500,000) (100,000)
Branch Income 50,000 -
Net Income 180,000 30,000
Intracompany Profit Deferred 6,000 -

*What amount would be reported in the combined column for Cost of Sales?
For the year ended 12/31/22, selected line items from the home office and branch
columns of the combining statement worksheet follow:
Home Office Branch
Cost of Sales (450,000) (60,000)
Branch Income 70,000 -
Net Income 180,000 20,000
Intracompany Profit Deferred 6,000 -

*Compute for the Overvaluation of COGS/Understatement of Net Income

Assume the following information:​
1. Home Office ships good to Branch A, billing the branch for the
goods at Php 1500 ​
     plus freight charges incurred for Php 350
​
2. At a subsequent, the home office authorizes the transfer of these
goods to Branch B​
     Branch A pays the freight charge on the transfer for Php 200. If the
shipment had      been made by the home office directly to the Branch
B, the freight charge would have been Php 220

*Compute for the Interbranch Expense