COMPLETE SOLUTION...

Questions 5 and 6 are based on the following information. Auto Supply Company is engaged in merchandising both at its home office in Cebu City and its branch in Toledo City. Selected accounts taken from the trial balances of the home office and the branch as of December 31,2012 follow: Addiional information: - The Toledo City branch gets all of its merchandise from the home office. The home office bills the goods at cost plus a 10% mark-up. At December 31,2012 , a shipment with a billed value of P5,000 was still in transit. Freight on this shipment was P250 and is to be treated as part of the inventory. - Inventories on December 31, 2012, excluding the shipment in transit, follow: Home office, at cost. Branch, at billed price (excluding freight of P520..... 10,000 6. What is the net income of the branch in so far as the home office is concerned? a. P870 c. P1,500 b. P10,470 d. P12,000