Home office bills its branches for merchandise shipments at 25% above cost of. The following are some of the account balances appearing on the books of home office and its branch as of December 31

Home Office Books Branch Books

Inventory, Jan. 1 22,500 36,000

Shipments from home office 210,000

Purchases 675,000 225,000

Shipments to branch 180,000

Allowance for overvaluation of branch inventory 49,500

Sales 900,000 540,000

Operating expenses 217,500 82,500

The ending inventory of the branch of 54,000 includes goods from outside purchases of 12,000; the ending inventory of the home office is 112,500.

Required:

I. The amount of shipments in transit at cost

II. The overstatement of branch cost of sales

III. The combined net income for the year