1. The billing price based on cost imposed by the home office to the branch is?

A. 140%

B. 100%

C. 129%

D. 130%

2. Using the information in the previous question, how much would be the balance of allowance for overvaluation of branch December 31, 2018 after adjustment?

A. P10,000

B. P24,000

C. P16,000

D. P18,000

Show Solution. Thank you. :)

The income statement submitted by a branch to home office for the month of December, 2018 is shown below. After effecting the necessary adjustments the true net income of the branch was ascertained to be P156,000. Sales P600,000 Cost of sales: P80,000 Inventory, beginning (12/01/18) Shipments from Home office 350,000 Local purchases 30,000 Total available for sale 460,000 Ending inventory (12/31/18) 100,000 360,000 Gross profit 240,000 Expenses 180,000 Net income P60,000 The branch inventories were: 12/01/18 12/31/18 P70,000 Description Merchandise from Home office Local purchases Total P84,000 16,000 10,000 80,000 100,000