COMPLETE SOLUTION...

7. Durable Textile Company has a single branch in Bohol. On March 1,2012 , the home office accounting records included an Allowance for Overvaluation of Inventories - Bohol Branch ledger account with a credit balance of P32,000. During March, merchandise costing P36,000 was shipped to the Bohol Branch and billed at a price representing a 40% markup on the billed price. On March 31, 2012, the branch prepared an income statement indicating a net loss of P11,500 for March and ending inventories at billed prices of P25,000. What is the amount of adjustment for allowance for Overvaluation of Inventories to reflect the true branch net income? a. P39,257 debit c. P39,333 debit b. P46,000 credit d. P46,000 debit