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The home office consistently bills its branch for shipments at 120% of cost. However, shipments to branch are subject to 5% freight cost on billed

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The home office consistently bills its branch for shipments at 120% of cost. However, shipments to branch are subject to 5% freight cost on billed price, which the home

office prepays before shipment. The following information was taken from the records of

the branch:

Cash and cash equivalents, Jan. 1 66,000

Accounts receivable, Jan. 1 258,000

Inventory, Jan. 1

-From outside purchases 54,000

-From home office (at billed price, 378,000 432,000

freight-in)

Equipment, net, Jan. 1 1,200,000

Accounts Payable, Jan. 1 360,000

Sales 1,800,000

Shipments from home office at billed price, excluding

freight-in 1,080,000

Purchases 150,000

Inventory, Dec. 31

-From outside purchases 18,000

-From home office (at billed price, 529,200 547,200

freight-in)

Requirements: Compute for the following:

a. Beginning balance of the home office account

b. Beginning and ending balances of inventory at cost

c. Understatement or overstatement in the "cost of goods sold" and

d. Understatement or overstatement in the "gross profit" of the branch as far as the

home office is concerned.

image text in transcribedimage text in transcribed
The home office consistently bills its branch for shipments at 120% of cost. However, shipments to branch are subject to 5% freight cost on billed price, which the home office prepays before shipment. The following information was taken from the records of the branch: Cash and cash equivalents, Jan. 1 66,000 Accounts receivable, Jan. 1 258,000 Inventory, Jan. 1 -From outside purchases 54,000 -From home office (at billed price, 378,000 432,000 freight-in) Equipment, net, Jan. 1 1,200,000 Accounts Payable, Jan. 1 360,000 Sales 1,800,000 Shipments from home office at billed price, excluding freight-in 1,080,000 Purchases 150,000 Inventory, Dec. 31 -From outside purchases 18,000 -From home office (at billed price, 529,200 547,200 freight-in) Requirements: Compute for the following: a. Beginning balance of the home office account b. Beginning and ending balances of inventory at cost c. Understatement or overstatement in the "cost of goods sold" and d. Understatement or overstatement in the "gross profit" of the branch as far as the home office is concerned.On February 14, 2012, Therese Company established a sales agency in Tagbilaran. Upon establishment of the sales agency, the home office sent samples costing P8,000 and a working fund of P3,000 to be maintained on the imprest basis. During the six months period, the sales agency reported to the home office sales orders. These were billed atP70,000 of which of P40,000 was collected) the sales agency paid expenses of P5,800 but was reimbursed by the home office.On August 15, 2012, the sales agency samples were valued at P2,000. It was estimated that the gross profit on goods shipped to fill sales order averaged 40% of cost. 1. 1. The cost of sales of the sales agency for the six months period is? 2. The net income of the sales agency for the six months period is

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