Bicol Company is engaged in merchandising both at its Head Office in Makati and a Branch in Cebu. Selected accounts

in the trial balances of the Bicol Company and the Cebu Branch at December 31, 2016 follow:

Debit Home Office Branch

Inventory, January 1 14,720 7,392

Branch 37,312

Purchases 121,600

Shipments from Home Office 67,200

Freight In from the Home Office 3,520

Sundry Expenses 32,000 16,000

Credit

Home Office 34,112

Sales 99,200 89,600

Shipments to Branch 64,000

Allowance for Overvaluation - Dec. 31 7,040

Additional Information:

a. Cebu Branch receives all its merchandise from the Head Office. The Head Office bills the goods at cost plus 10%

mark-up. At December 31, 2016, a shipment with a billing price of 3,200 was in transit to the Branch. Freight on

this shipment was 160 which is to be treated as part of inventory.

b. December 31, 2016 inventories, excluding the shipment in transit

Head Office, at cost 19,200

Cebu Branch, at billed value (excluding freight of 333) 6,656