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The home office consistently bills its branch from shipment at 120% of cost. The following selected information was taken from the records of the
The home office consistently bills its branch from shipment at 120% of cost. The following selected information was taken from the records of the home office and the branch. Home office books Branch books Sales 1,600,000 Inventory, end Inventory, beg 50,000 -From outside purchases 18,000 Purchases 850,000 -From home office(at billed price, excluding freight-in) Freight-in 30,000 120,000 Shipment to branch Cash sales (300,000) 300,000 Markup shipments to branch (60,000) Collections on receivables 200,000 Inventory end 320,000 Operating expenses 120,000 Disbursement for purchases from outside parties Disbursement for operating expenses 40,000 60,000 Investment in branch-end 640,000 Remittances of collections to home office 25,000 Additional information: . Accounts receivable has a net increase of 80,000 while accounts payable has a net decrease of 10,000. . Accrued expenses has an ending balance of 5,000. Not included in this account is a 2000 allocated expense from the home office. There were no accrued expenses as of the beginning of the period. As at year end, a shipment from a home office with a billed price at 12,000 was in transit. Normally, the home office pays a 5% freight based on the billed price of the goods shipped to the branch. The realized mark up is 41,000 while the combined profit of the home office and branch is 1,441,700. Requirements: a. True profit of branch b. beginning inventory of branch from outside purchases c. Beginning balance of Home office
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