Statement 1: The home office and branch report individual profits of P25,000 and P10,000 respectively. If the realized mark-up on inventory shipments to the branch billed above cost is P5,000 the combined profit must be P40,000 Statement 2: The branch reports ending inventory of P15,000 consisting of goods from home office billed at 125% above cost. The related "allowance" account in the home office books must have a credit balance of P3,000. A. Both statements are correct. B. Only S2 is correct. C. Both statements are incorrect. D. Only S1 is correct.
Statement 1: The home office and branch report individual profits of P25,000 and P10,000 respectively. If the realized mark-up on inventory shipments to the branch billed above cost is P5,000 the combined profit must be P40,000 Statement 2: The branch reports ending inventory of P15,000 consisting of goods from home office billed at 125% above cost. The related "allowance" account in the home office books must have a credit balance of P3,000. A. Both statements are correct. B. Only S2 is correct. C. Both statements are incorrect. D. Only S1 is correct.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Statement 1: The home office and branch report individual profits of P25,000 and P10,000 respectively. If the realized mark-up on inventory shipments to the branch billed above cost is P5,000 the combined profit must be P40,000
Statement 2: The branch reports ending inventory of P15,000 consisting of goods from home office billed at 125% above cost. The related "allowance" account in the home office books must have a credit balance of P3,000.
A. Both statements are correct.
B. Only S2 is correct.
C. Both statements are incorrect.
D. Only S1 is correct.
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