Please help me understand this problem

Questions 8 and 9 are based on the following information. Auto Supply Company is engaged in merchandising both at its home office in Cebu City and its branch in Toledo City. Selected accounts taken from the trial balances of the home office and the branch as of December 31, 2012 follow: Debits Cebu City Toledo Branch Inventory, January 1, 2012 P 23,000 P 11,550 Toledo Branch 58,300 Purchases 190,000 105,000 Freight in from home office 5,500 Sundry Expenses 52,000 28,000 Credits Home Office P 53,300 Sales P155,000 140,000 Sales to branch 110.000 Allowance for Overvaluation of branch inventory at January 1, 2012. 1,000 Additional information: . The Toledo City branch gets all of its merchandise from the home office. The home office bills the goods at cost plus a 10% mark-up. At December 31, 2012, a shipment with a billed value of P5,000 was still in transit. Freight on this shipment was P250 and is to be treated as part of the inventory. * Inventories on December 31, 2012, excluding the shipment in transit, follow; Home office, at cost.... P30,000 Branch, at billed price (excluding freight of P520...... 10,000