Estonia Home Office ships merchandise to the branch at 20% above cost. All of the branch’s inventory comes from the home office and no interbranch transaction has been recorded except for shipments of merchandise from office to the branch. The unrealized profit on branch inventory before adjustment was Php264,000, and has decreased by Php3,000 at the end of the year. Shipments from home office during the period is five times the merchandise remain unsold from last period.

1. Using the same information of Estonia, by how much would the branch current account in the separate financial statements of the home office will increase as a result of branch income, if the branch’s true net profit margin is 40% and sales are made by branch with a mark-up of 20% based on billed price?

2. Using the same information of Estonia home office, but instead, the Php3,000 changed in the unrealized profit on branch inventory is an increase, the journal entry to adjust the unrealized profit account in the home office books would include a debit to Unrealized profit on branch inventory and a credit to Branch income summary for

Answer rating: 100% (QA)

1 Php3000 x 5 Php15000 Php15000 x 40 Php6000 Php6000 80 Php7500 2 Unrealized profi... View the full answer