Exam 4: Accounting for Branches; Combined Financial Statements

The Income: Branch ledger account is maintained in the accounting records of:

The following journal entry (explanation omitted) appeared in the accounting records of Marty Corporation's only branch: The journal entry indicates that:

In a combined balance sheet for home office and branch, the balance of the Allowance for Overvaluation of Inventories: Branch ledger account is deducted from the balance of the Investment in Branch account.

If the home office bills merchandise shipments to the branch at prices above home office cost, the net income reported to the home office by the branch is overstated from a total company point of view.

The balance of the Allowance for Overvaluation of Inventories: Branch ledger account is deducted from the balance of the Investment in Branch account in the separate balance sheet of the home office.

If both the home office and the branch of a business enterprise use the perpetual inventory system, a Shipments to Branch ledger account appears in the accounting records of:

Closing entries for the Columbia Branch of Carolina Company on January 31, 2006, the end of a fiscal year, were as follows: Columbia Branch receives all its merchandise from the home office of Carolina Company at a markup of 20% on billed price. Prepare journal entries for the home office of Carolina Company on January 31, 2006, to record the operating results of the Columbia Branch. Show any supporting computations in the explanations for the entries.

In a working paper for combined financial statements of home office and branch, the branch's net income is included in:

Separate financial statements of home office and branch do not meet the needs of investors, creditors, or other outside users of financial statements.

If branch managers are responsible for ordering merchandise from the home office, any excess freight costs incurred as a result of interbranch shipments are absorbed by the appropriate branch rather than by the home office.

The Allowance for Overvaluation of Inventories: Branch ledger account of the home office is debited:

On January 31, 2006, the home office of Wall Company collected a trade account receivable of Doris Branch. The accounting for this transaction by Wall Company should include a:

Among the journal entries (explanation omitted) in the accounting records of the home office of Price Company was the following: This journal entry indicates that:

The Shipments to Branch ledger account in the accounting records of the home office of a business enterprise:

On October 5, 2006, Brentwood Company established the Palisades Branch. Following are the initial transactions between the home office and Palisades Branch: Both the home office and the Palisades Branch use the perpetual inventory system. Prepare journal entries for the foregoing transactions in the accounting records of the (a) home office, and (b) Palisades Branch of Brentwood Company.

An expense item allocated by the home office to a branch is recorded by the branch by a debit to an expense ledger account and a credit to the Home Office account.

If at the end of an accounting period the balance of the Investment in Branch ledger account in the accounting records of the home office is $20,000 and the balance of the Home Office account in the accounting records of the branch (after the branch recorded closing entries) is $25,500, the most likely explanation for the discrepancy of $5,500 is a:

The following journal entry (explanation omitted) appeared in the accounting records of the home office of Silversmith Company: This journal entry indicates that:

The following ledger account was in the accounting records of the County Branch of City Company on December 31, 2006: The home office of City Company used the perpetual inventory system, and billed the branch for merchandise shipments at 25% above home office cost. Prepare journal entries to record the above indicated transactions and events in the accounting records of the home office of City Company. Adjusting entries are not required.