question archive The Simon Company always ships merchandise to a branch outlet at a 30 percent mark-up above cost
The Simon Company always ships merchandise to a branch outlet at a 30 percent mark-up above cost
Subject:AccountingPrice:3.87 Bought7
The Simon Company always ships merchandise to a branch outlet at a 30 percent mark-up above cost. During 2013, this branch received P182,000 in such shipments while also acquiring goods from outside vendors at a cost of P96,000. Half of the branch's December 31, 2013, inventory of P57,200 came from home office acquisitions. At the beginning of 2013, the branch held merchandise with a transfer price of P49,400. All of this inventory had been purchased directly from home office. At the end of 2013, what is the adjusted balance in Simon's Allowance for Overvaluation in Branch Inventory account?
A. P4,250
B. P5,340
CP6,000
D P6.600
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Answer:
6,600
Step-by-step explanation
Ending inventory is 57,200. Half of which came from the home office, 28,600. This 28,600 includes the mark up price of 30%. We have to divide 28,600 to 1.30 then we'll get its original cost of 22,000. Difference of 6,600 is the allowance for overvaluation.
