On January 1, 2020, Dragon Emp

On January 1, 2020, Dragon Empire, Inc., created a separate branch in Palawan City by transferring to the branch cash of P40,000, inventory with a book value of P120,000, and land with a book value of P150,000.  At that time, the inventory had a fair value of P180,000, and the land was worth P190,000.  The transfers were recorded at fair value by both the home office and the branch.


The branch purchases all its inventory from the home office.  During 2020, Dragon Empire purchased additional inventory for P200,000 and sold it to the branch for P280,000.  Both the home office and the branch uses a FIFO cost flow assumption for inventory.


In 2020, the branch decided not to build on the land transferred from the home office and sold it for P165,000.  An income statement prepared by the branch for 2020 contained the following items:  

Sales                                                         P450,000

Cost of goods sold     P320,000

Rent Expense                  40,000

Loss on Sale of Land       25,000                385,000

Contribution to Profits                                65,000

Determine the correct net income of the branch as far as the home office is concerned.

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