The following information pertains to the head office and thebranch of KATSE.

Branch inventory on hand at selling price:

1 January2017..................................................................................R33500
31 December2017............................................................................R38900

Transactions of the branch for the year ended 31December 2017:

Inventory transferred to the branch (selling price)......................................... R 200 000
Cash sales at the branch..............................................................................R 190 200
Settlement discount granted to branch debtors............................................. R 2 796
Branch administrative expenses paid by head office..................................... R 15 965
Damaged inventory written off (at cost)......................................................... R 3000

Additional information:

1. Inventory is purchased by the head office and supplied to thebranch at selling price, which is cost
price plus 25%. During August 2017 inventory with a selling priceof R2 175 was stolen at the branch.
No entries have been made to record this theft.

QUESTION 9
Which of the following alternatives represents the correctsurplus/deficit in the branch inventory account?
1. R 610 surplus
2. R 610 deficit
3. R1 525 surplus
4. R 525 deficit