ANSWERS WITH SOLUTIONS :)

Use the following information for the next two questions:

The trial balances of INTERIM TEMPORARY Co.'s home office and branch are shown below:

INTERIM TEMPORARY Co.

Trial balance

December 31, 2021

Home office Branch

Dr. (Cr.) Dr. (Cr.)

Cash 4,400,000 1,668,000

Accounts receivable 720,000 400,000

Inventory, beg. 2,600,000 -

Shipments from home office - 920,000

Purchases 288,000 160,000

Freight-in 88,000 72,000

Shipments to branch (920,000)

Investment in branch 3,308,000

Equipment 2,880,000 1,600,000

Accumulated depreciation - equipment (288,000) (160,000)

Furniture 360,000 200,000

Accumulated depreciation - furniture (36,000) (20,000)

Accounts payable (288,000) (160,000)

Accrued expenses (180,000) (100,000)

Share capital (8,000,000)

Share premium (2,000,000)

Retained earnings - beg. (824,800)

Home office - (3,308,000)

Sales (3,600,000) (2,000,000)

Depreciation expense 672,000 272,000

Utilities expense 72,000 40,000

General overhead expense 28,800 16,000

Various operating expenses 720,000 400,000

Totals - -

The home office and the branch have ending inventories of 1,080,000 and 600,000, respectively.

1.How much is the total assets in the combined statement of financial position?

a. 13,440,000

b. 14,800,000

c. 14,340,000

d. 13,404,000

2.How much is the total profit in the combined statement of profit or loss?

a. 1,851,200

b. 1,960,200

c. 1,815,200

d. 1,720,200

The following information was taken from the books of the home office and its branch. Shipments to branch are billed at 120% above cost.

Home office Branch

Dr. (Cr.) Dr. (Cr.)

Cash 4,400,000 264,000

Accounts receivable 720,000 400,000

Inventory, beg. 1,200,000 -

Shipments from home office 1,824,000

Purchases 4,800,000 160,000

Freight-in 128,000 72,000

Shipments to branch (1,520,000)

Investment in branch 2,400,000

Allowance for markup (304,000)

Equipment 2,880,000 1,600,000

Accumulated depreciation - equipment (288,000) (160,000)

Accounts payable (288,000) (160,000)

Share capital (8,000,000)

Retained earnings - beg. (608,000)

Home office (2,400,000)

Sales (6,400,000) (2,000,000)

Operating expenses 880,000 400,000

Totals - -

Inventory, end.

- From outside purchases 1,840,000 40,000

- From home office 960,000

3.How much is the combined profit?

a. 4,340,000

b. 3,440,000

c. 4,300,000

d. 3,400,000

Use the following information for the next two questions:

ABC Co. operates a branch in Davao. There are shipments in transit from home office to the branch. The home office ships merchandise to the branch at 125% of cost in year 2021. Profit and loss data for the home office and branch for 2021 follows:

Home Office Branch

Sales 250,000 75,000

Purchase from outsiders 200,000 15,000

Shipments to branch/from home office:

Cost to Home Office 30,000

Billing price to branch 32,500

Expenses 40,000 10,000

Inventories, Jan. 1, 2021:

Home Office, acquired from outsiders, at cost 80,000

Branch: Acquired from outsiders at cost 7,500

Acquired from home office at billing price

which averaged 20% above cost 24,000

Inventories, Dec. 31, 2021:

Home Office, acquired from outsiders at cost 55,000

Branch: Acquired from outsiders at cost 5,500

Acquired from Home Office, in 2021, at billed price (physical count) 21,000

4.How much is the amount of merchandise in transit at billed price?

a. 3,000c. 5,000

b. 3,500d. 5,500

5.How much is the combined cost of goods sold?

a. 241,200c. 242,400

b. 240,000 d. 245,200