Problem 2: For the year 2015, Stark Co.s home office ships goods to its branch in Winterfell at 120% above cost. The reciprocal account in the income statement of the home office amounted to P237,500. The balance of the valuation account is P375,000 before adjustment. Of the beginning inventory of the branch, 93,000 came from outsiders while the remaining amount came from the home office with a cost of P360,000. The branch purchased goods from its own suppliers during the year amounting to P125,200. The ending inventory of the branch as reported in the combined statement of financial position is P345,000. The branch income as reported in the combined financial statements and as reported in the branchs books are P201,125 and P120,750, respectively.

How much is the cost of goods sold to be reported in the branchs income statement for the year ended December 31, 2015?

A. P790,500 B. P514,500 C. P551,075 D. P470,700

Problem 3: The home office transfers inventory to its branch at a 25% mark-up above cost during 2015. This was lower by 15% compared to the mark-up on cost last year. In 2015, the reciprocal account in the income statement of the branch amounts to P300,000. At year-end, the home office adjusted its valuation account downward to P16,000. The home office is aware that the cost of goods sold of the branch in its separate books is overstated by P70,000.

What is the ending inventory per branch books at the end of 2014?

A. P91,000 B. P65,000 C. P80,000 D. P64,000