Question

Jellyfish Branch of Aqua Company prepared and submitted trial balance as of December 31, 20x8 after its first year of operation.

	Debit	Credit
Cash	P 15,300
Accounts receivable	22,700
Shipments from home office	121,500
Home office current		P 83,000
Sales		120,000
Expenses	43,500
	P203,000	P203,000

Merchandise inventory end, P43,200;

Shipments to the branch are billed at P135% of home office cost.

The overstatement in the Branch inventory at December 31, 20x8 is

Select one:

a. P 11,700

b. P 11,200

c. P 1,500

d. P -0-

Answer 1

Since Inventory in Branch is overstated as it is billed at P135%

So actual Cost = P 43200/135%

= P 32000

Overstatement = End Merchandised inventory - Actual cost

= P 43200 - 32000

= P 11200