Question
At the beginning of the year. RID Company establishes branches in Makati and Cebu. The following transactions occur during the year. The home office purchased
At the beginning of the year. RID Company establishes branches in Makati and Cebu. The following transactions occur during the year.
The home office purchased equipment on account for P40,000 and immediately transfer half of each to the two branches at cost.
The home office transfers cash of P3,000 to the Makati branch and P5,000 to Cebu.
The company sells inventory to unrelated parties at a 40% profit and transfers inventory to its branches at cost. During the year, the home office has sales of P175,000 to unrelated parties and transfers inventory to the Makati branch at a P140,000 price and to the Cebu branch at a P150,000 price.
The branch sells inventory, all acquired from the home office, at a 25% gross profit. Selected balance sheet accounts at the end of the year are as follows:
*Home Office
Accts. Receivable - 28,000
Inventory - 45,000
Accts. Payable - 20,000
Notes payable - 30,000
Accum. Depreciation - 28,000
*Makati Branch
Accts. Receivable - 11,000
Inventory - 38,000
Accts. Payable - 1,000
Notes payable - 35,000
Accum. Depreciation - 4,000
*Cebu Branch
Accts. Receivable - 14,000
Inventory - 36,000
Accts. Payable - 2,000
Notes payable - 40,000
Accum. Depreciation - 4,000
During the year, the Makati branch transfer P135,000 of cash to the home office and the Cebu branch transfers P151,000.
The cost of sales of the Makati branch and the cost of Makati branch inventory at the end of the year is;
A. 140,000; 38,000
B. 108,800; 28,500
C. 136,000; 31,667
D. 102,000; 30,400
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