ABC Company's has two merchandise outlets, its main store in Baguio City and its San Fernando City branch. For control purposes, all purchases aremade by the main store and shipped to the San Fernando City branch at cost plus 10%. on January 1, 2021, the inventories of the main store inBaguio City and the San Fernando City branch are P13,600 and P3,960, respectively. During 2021, the main store purchases merchandise costingP40,000 and shipped 40% of it to the San Fernando City branch. At December 31, 2021, the follawing journal entry to prepare the books for thenext accounting periad was prepared:Sales32,000Inventory4,840Inventory3,960Shipments from Main Store17,600Expenses10,480Main Store4,800Compute for the amount of overvaluation that was realized from the branch sales.

Branch costing means the different item or group of products are manufactured in the single entity…

Answered: t ABC Company's has

Business

Accounting

t ABC Company's has

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

100%

ABC Company's has two merchandise outlets, its main store in Baguio City and its San Fernando City branch. For control purposes, all purchases are
made by the main store and shipped to the San Fernando City branch at cost plus 10%. on January 1, 2021, the inventories of the main store in
Baguio City and the San Fernando City branch are P13,600 and P3,960, respectively. During 2021, the main store purchases merchandise costing
P40,000 and shipped 40% of it to the San Fernando City branch. At December 31, 2021, the follawing journal entry to prepare the books for the
next accounting periad was prepared:
Sales
32,000
Inventory
4,840
Inventory
3,960
Shipments from Main Store
17,600
Expenses
10,480
Main Store
4,800
Compute for the amount of overvaluation that was realized from the branch sales.

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