Problem 4. "The Capitol" Inc. opens a sales agency in District 13 and a working fund of P15,000 is established on imprest basis.

The fund was replenished in the amount of P12,000 (various agency expenses). The entry in the home office books for the

replenishment is

a. Dr - Investment in District 13 agency and Cr - Working fund for P12,000.

b. Dr - District 13 agency expenses and Cr - Working fund for P12,000.

c. Dr - District 13 agency expenses and Cr - Cash for P12,000.

d. Dr - Investment in District 13 agency and Cr - Cash for P12,000.

Part 2

Problem 1. A home office ships inventory to its branch at 125% of cost. The required balance of the deferred profit account is

P 78,750. During the year, the home office sent merchandise to the branch costing P 784,000. At the start of the year, the

branch's Statement of Financial Position shows P315,000 of inventory on hand that was acquired from the home office. By what

amount is the cost of goods sold (COGS) overstated?

a. P -0- b. P180,250 c. P196,000 d. P1,076,250

Problem 2. A home office ships inventory to its branch at a mark-up of 125% above cost. The required balance of the allowance

for overvaluation account is P 1,425,000. During the year, the home office sent merchandise to the branch costing P 9,000,000.

At the start of the year, the branch's Statement of Financial Position shows P1,800,000 of inventory on hand that was acquired

from the home office. By what amount will the Allowance for Unrealized Gross Margin in Branch Inventory account be debited

at the end of the year?

a. P2,610,000 b. P1,185,000 c. P10,825,000 d. P12,250,000