Chapter 13: MULTIPLE CHOICE 1. C. 14,400 Merchandise Inventory 50,400 X 40/140 14,400 2. B. 37,600
Ending Inventory in the combined income statement:
From Home Office 31,000
From Outsiders 6,600
37,600 3. A. 70,100
Shipments from Home Office 280,000
Less: Ending Inventory, at billed 43,000 Cost of goods sold from home office at billed price 236,600
Multiplied by: Mark up 40/140
67,600
Unrecorded Branch Expenses 2,500
True Branch Net Income 70,100
4. A. 10,000
Merchandise Inventory 30,000
Multiplied by: Mark Up 1/3
Unrealized Intracompany Profit 10,000
5. A Branch Income Cost of Sales 6. D. 25 (50,000 – 40,000)/40,000 25% 7. C. 20,000 (480,000 – 360,000) x (80,000/480,000) 20,000 8. C. 700,000 9. B. 580,000
Reported branch net income (per branch books) 30,000 Branch income (per home office books) 50,000
Overvaluation of branch COGS 20,000
Cost of Sales of Home Office 500,000
Cost of Sales of Branch 100,000
Overvaluation of branch COGS 20,000
Combined Cost of Sales 580,000
11. A. 140%
True Branch Net Income 156,000
Branch Net Income reported 60,000
Overvaluation of COGS 96,000
Less: COGS from Home Office, at billed
Inventory, beg 70,000
Shipment from HO 350,000
COGAS 420,000
Inventory, end 84,000 336,000
CGS from HO, at cost 240,000
336,000/240,000 = 140% 12. C. 24,000
84,000 x 40/140 = 24,000 13. B. 109,000
Branch Net income reported 20,000
Rental Expense 6,000
Adjusted Net Income 14,000
Overvaluation of CGS SFHO 550,000 COGAS 550,000 MI, end 75,000 COGS, at billed 475,000 Mark up 25/125 95,000
Adjusted Branch Net Income 109,000
14. D. Sales 837,500 COGS MI, beg 87,500 Purchases 500,000 COGAS 587,500 MI, end 120,000 467,500 Gross Profit 370,000 Expenses 170,000 Net Income 200,000 15. D.
Unrealized Profit in Branch Inventory 7,200 Allowance of branch inventory, end 2,800
Overvaluation of COGS 4,400 Sales 60,000 COGS Inventory, beg 30,000 Purchases 11,000 SFHO 19,200 COGAS 60,200
MI, end 20,000 40,200
Gross Profit 19,200
Expenses 12,000
Unadjusted Branch Net Income 7,800
Overvaluation of COGS 4,400
Adjusted branch net income 12,000
17. D. 9,000 36,000
Billed Price Cost Allowance
Merchandise Inventory 36,000 30,000
6,000
Shipments 28,800 24,000
4,800
COGS 10,800
From HO at billed price 6,000/20% = 30,000 + 6,000 = 36,000 From outsiders 45,000 – 36,000 = 9,000
18. D. 3,000 12,000
Billed Price Cost Allowance
Merchandise Inventory 12,000 10,000
2,000
Shipments 9,600 8,000
1,600
COGS 3,600
From HO at billed price 2,000/20% = 10,000 + 2,000 = 12,000 From outsiders 15,000 – 12,000 = 3,000
19. D. 252,150 MI, beg
HO, cost 3,500
Branch, outsiders 300
From Home Office 2,000 2,300
5,800 Purchases 251,000 COGAS 256,800 MI, end HO, cost 3,000 Branch, outsiders 150
From Home Office 1,500 1,650
4,650
COGS 252,150
20. D. 46,000 debit
Billed Price Cost Allowance
Merchandise Inventory
32,000
Shipments 60,000 36,000
24,000
MI, end 10,000
Overvaluation of CGS
46,000
21. D. 120,000
Billed Price Cost Allowance
Merchandise Inventory 60,000 Shipments 400,000 100,000 COGS 160,000 MI, end 40,000 Overvaluation of CGS 120,000 22. B. 7,900 52,000 Sales 40,000 COGS MI, beg 4,500 SFHO 20,000 COGAS 24,500 MI, end 5,500 19,000 Gross Profit 21,000 Expenses 13,100 Net Income 7,900 MI, beg HO, cost 17,000 Branch, cost 4,500 21,500 Purchases 50,000 COGAS 71,500 MI, end HO, cost 14,000 Branch, cost 5,500 19,500 COGS 52,000 23. A. 40,000 48,000 / 120% = 40,000 24. A. 8,000 48,000 / 20%/120% = 8,000 25. B. 2,000 Sales 192,000 COGS Inventory, beg
Purchases 52,000 SFHO 108,000 COGAS 160,000 MI, end 60,000 100,000 Gross Profit 92,000 Expenses 100,000
Unadjusted Branch Net Income 8,000
Overvaluation of COGS 10,000
Adjusted branch net income 2,000
26. C. 46,000
Billed Price Cost Allowance
Merchandise Inventory 40,000 Shipments 250,000 COGS 290,000 MI, end 60,000 Overvaluation of CGS 230,000 46,000 27. B. 326,000 Sales 900,000 COGS MI, beg 132,000 Purchases 350,000 COGAS 482,000 MI, end 78,000 404,000 Gross Profit 496,000 Expenses 170,000 Net Income 326,000 28. D. 25,550 Sales 117,000 COGS MI, beg 20,000 Purchases 57,000 COGAS 77,000 MI, end 16,550 60,450 Gross Profit 56,550 Expenses 31,000 Net Income 25,550 29. C. 20,000 Sales 155,000 COGS MI, beg 23,000 Purchases 190,000 COGAS 213,000 STBO 100,000 COGAS for HO 113,000 MI, end 30,000 83,000
Gross Profit 72,000 Expenses 52,000 Net Income 20,000 30. A. 10,470 Sales 140,000 COGS Inventory, beg 11,550 Purchases 105,000 Freight In 5,500 Shipment in Transit 5,250 COGAS 127,300 MI, end 16,170 111,130 Gross Profit 28,870 Expenses 28,000
Unadjusted Branch Net Income 870
Overvaluation of COGS 9,600
Adjusted branch net income 10,470
31. A. 120,000
Inventory, beg, at billed price 165,000
Shipments, at billed price 110,000
COGAS, at billed price 275,000
CGS at BP:
Sales 169,000
Sales returns and allowances 3,750 Sales price of mdse. From outsiders 9,000 Net sales of mdse. from HO 156,250
Intercompany cost ratio 100/125 125,000
Inventory, end, at billed price 150,000
Cost ratio 100/125
Merchandise inventory at cost destroyed by fire 120,000 32. D. 400
Freight actually paid by:
Home Office 500
Branch 700
Total 1,200
Freight that should be recorded 800
Excess freight 400
33. D. Charged to the Head Office 34. C. 23,400
Inventory of the Branch:
Shipments from HO, at billed price 37,700
Ending Inventory 60%
Ending inventory, at billed price 22,620
Freight 780
35. B. 20,280
Inventory of the Branch:
Shipments from HO, at billed price 32,500
Ending Inventory 60%
Ending inventory, at billed price 19,500
Freight 780
20,280 36. C.
Branch Current – Baguio 19,630
Excess Freight 520
Branch Current – Davao 20,150
37. C. A year-end adjusting entry or entries to establish an unrealized profit (loading) account of 12,500
(300,000 x ¼) x (300,000 – 250,000)/300,000 = 12,500 38. D. No year-end adjusting entry for the freight charges 39. D. It record the receipt of cash from the branch
40. B. 7,900 Sales 40,000 COGS MI, beg 4,500 SFHO 20,000 COGAS 24,500 MI, end 5,500 19,000 Gross Profit 21,000 Expenses 13,100 Net Income 7,900 41. B. 19,500 MI, beg HO, cost 17,000 Branch, cost 4,500 21,500 Purchases 50,000 COGAS 71,500 MI, end HO, cost 14,000 Branch, cost 5,500 19,500 COGS 52,000 42. C. 52,000 MI, beg HO, cost 17,000
Branch, cost 4,500 21,500 Purchases 50,000 COGAS 71,500 MI, end HO, cost 14,000 Branch, cost 5,500 19,500 COGS 52,000
43. C. Rock will have both a Stone Home Office account and Shipments from Stone Account on its branch office books.
44. D. Debit the Rock Branch Account for the 2,000 of branch profit, credit the Rock Branch Profit account for the 2,000 branch profit md combine the 5,000 of branch ending inventory.
