Question

Fill in the blanks to determine how much markup is included in the ending inventory and cost of goods sold that must be adjusted to reflected te correct net income of branch and home office.

	Billed price	Home office Cost	Markup 20% on cost
Beginning inventory	$10,000
Shipments to branch		$100,000
Available
Less ending Inventory			$5,000
Cost of goods sold

Answer 1

	Billed price	Home office Cost	Markup 20% on cost
Beginning inventory	$ 10,000.00	$    8,333.33	$ 1,666.67
Shipments to branch	$120,000.00	$ 100,000.00	$20,000.00
Available	$130,000.00	$ 108,333.33	$21,666.67
Less ending Inventory	$ 30,000.00	$   25,000.00	$ 5,000.00
Cost of goods sold	$100,000.00	$   83,333.33	$16,666.67

Beginning inventory
Billed price	10000
billed value = 1.20 * Home office Cost
10000 = 1.20 * Home office Cost
10000/1.20 = Home office Cost
10000/1.20 = Home office Cost
8333.33 = Home office cost
Shipments to branch
Home office Cost	100000
billed value = 1.20 * 100000
billed value = 120000
ending Inventory
Markup = Home office Cost * 20%
5000 = Home office Cost * 20%
5000/20% = Home office Cost
25000 = Home office Cost
billed value = 1.20 * Home office Cost
billed value = 1.20 * 25000
billed value = 30000