Choose the best answer for each of the following questions.
In accounting for branch transactions, transactions, it is improper improper for the home home oce to:
A)
B)
C)
Credit cash received from a branch to the Investment in Branch ledger account. Maintain Common Stoc and !etained "arnings ledger accounts for onl# the home oce. $ebit shipments of merchandise to the branch from the home oce to the Investment in Branch ledger account. Credit shipments of merchandise to the branch to the Sales ledger account.
D)
%he &ome 'ce 'ce ledger account in the accounting records records of the %ahoe Branch Branch had a credit credit balance of ()*,+++ at the end of pril, and the Investment in Branch account in the accounting records of the home oce had a debit balance of ()-,+++. %he most liel# reason for the discrepanc# in the two ledger account balances is:
A)
Merchandise Merchandise shipped b# the home oce to the branch had not been recorded b# the branch. %he home oce had not recorded recorded the branch net income income for pril. pril.
B)
C)
%he branch had had ust collected collected home oce trade accounts accounts receivable receivable in the amount of (/,+++. %he branch had had not #et recorded recorded the the home oce net net income for pril.
D)
0a#haw Compan# Compan# has numerous numerous branches branches in the the state of 1ansas. 1ansas. %he home oce purchases purchases merchandise merchandise and maes shipments to branches from a central warehouse at the request of branch managers. 2hich of the following would be an improper accounting practice3 %he Investment in Branch ledger ledger account account is debited in the accounting accounting records of the home oce when merchandise is shipped to a branch, and A) the Shipments to Branch account is credited 4assume use of the periodic inventor# s#stem5.
B)
%he home oce debits %rade %rade ccounts ccounts !eceivable !eceivable and and credits credits Sales when when merchandise merchandise is shipped to a branch. Cash received from a branch is credited to the Investment in Branch ledger account b# the home oce.
C)
D)
'nl# the home oce maintains a Common Stoc ledger account and a !etained "arnings account.
6either the 7almer Branch nor the home oce of !upert Compan# had completed an# intracompan# transactions during the last half of Ma#, #et the credit balance of the branch8s &ome 'ce ledger account on Ma# /) was larger than the debit balance of the home oce8s Investment in 7almer Branch account. %he most liel# reason for this discrepanc# is: %he home oce reported a net loss for the month of Ma#. A)
%he branch reported a net loss for the month of Ma#. B)
%he branch returned merchandise to the home oce. C)
%he branch reported a net income for the month of Ma#. D)
2hich of the following ledger accounts is displa#ed in the combined 9nancial statements for a home oce and branch3 Shipments to Branch A)
&ome 'ce B)
$ividends $eclared C)
llowance for 'vervaluation of Inventories: Branch D)
%he home oce of Irb# Compan# bills merchandise to branches at *- above home oce cost. Information taen from the accounting records of 1ipp Branch is as follows: Beginning inventories 4at billed prices5
();,+++
Shipments from home oce 4at billed prices5
<*,-++
"nding inventories 4at billed prices5
*+,+++
6et loss for accounting period
),-++
%he net income or net loss of 1ipp Branch, based on home oce cost of branch merchandise, is: (;,=++ net income A)
(=,<++ net loss B)
(>,<++ net income C)
(;,+++ net income D)
Some other amount E) Feedback: ($42,500 x 0.20) - $1,500 = $7,000
In a centrali?ed accounting s#stem for branches, the branch accounting records are maintained b# the home oce. %rue A)
@alse B)
Both the &ome 'ce ledger account and the Investment in Branch account are displa#ed in the combined 9nancial statements for the home oce and the branch. %rue A)
@alse B)
%he combined net income for the home oce and branches would be the same when the home oce bills merchandise to branches at home oce cost as when the home oce bills branches at amounts above home oce cost. %rue A)
@alse B)
In most cases, a branch is operated more as a cost center than as a pro9t center. %rue A)
@alse B)
Billing at above home oce cost is the simplest procedure and widel# used. %rue A)
@alse B)
balance sheet for distribution to creditors, stocholders, and government agencies must show the 9nancial position of the business enterprise having branches as a single entit#. %rue A)
@alse B)
%raditionall#, a branch will have more autonom# than a division. %rue A)
@alse B)
&ome oce and Investment in Branch are reciprocal accounts. %rue A)
@alse B)
