[Topic 1] Chapter 13 and Chapter 14 Exam Flashcards
A debit to the Income Summary ledger account and a credit to the Home Office account appear in:
a. The accounting records of the home office to record the net income of the home office
b. The accounting records of the branch to record the net income of the home office
c. The accounting records of the home office to record the net income of the branch
d. The accounting records of the branch to record the net income of the branch
The accounting records of the branch to record the net income of the branch.
If excess freight results from a mistake in order for goods by a branch from some other branch failure, the charge should be borne by the Home Office and reported on its books.
FALSE
In transactions between branches, a branch records the transfer in the Investment to Branch account.
FALSE
The “Shipments to Branch” account is added to the Home Office’s purchases account in determining Home Office cost of goods sold
FALSE.
It is deducted from the Home Office’s purchases account.
If the Home Office of ABC Company maintains the accounting records for the plant assets of its branch, and the branch acquired equipment for P355,000. The appropriate journal entry for the branch is:
a. Dr HO Current, Cr Equipment for P355,000
B. Dr Cash, Cr HO Current for P355,000
c. Dr HO Current, Cr Cash for P355,000
d. Dr Equipment, Cr HO Current for P355,000
Dr HO Current, Cr Cash for P355,000
When a home office ships merchandise to its branch at a transfer price greater than cost and this merchandise is resold by the branch to outside entities, the branch profit will be overstated.
FALSE.
Cost of goods sold will be overstated but the branch profit will be understated.
Unrealized profits from transactions between a Home Office and its branch are eliminated in preparing combined financial statements for the enterprise.
TRUE
Depreciable branch assets are normally carried in the books of the ______________.
HOME OFFICE
An organization that is normally provided with a working fund and has no separate accounting or business entity or does not require a complete set of books.
AGENCY
______________ is the reciprocal account to the Investment in Branch or Branch Current account
HOME OFFICE CURRENT ACCOUNT
An organization that possess the authority to engage in transactions as an independent business.
BRANCH
The Home Office ledger account in the accounting records of a branch is best described as a component of ________________.
EQUITY
Inter-branch transfers of merchandise, like inter-branch transfers of cash, are normally cleared through the _________________.
Home Office Current Account
A reconciliation that updates the home office books and the branch books.
RECONCILIATION OF RECIPROCAL ACCOUNTS
The account used to monitor prices in excess of costs for intercompany transactions
ALLOWANCE FOR OVERVALUATION OF BRANCH INVENTORY
Another term for Allowance of Overvaluation of Branch is:
a. Unrealized intercompany inventory profit
b. Deferred profit
c. Overvaluation of cost of goods sold
d. Both A and B
e. Choices A, B, and C
f. None of the above
a. Unrealized intercompany inventory profit
b. Deferred profit
c. Overvaluation of cost of goods sold
In preparing combined financial statements, which of the following accounts are eliminated in the combining process? Branch Income/Loss or Purchases Sent to Branch?
Branch Income/Loss is not eliminated, but Purchases Sent to Branch is eliminated.
If branch fixed assets are recorded on the home office’s books, depreciation expense will be charged to the home office books.
FALSE
Which of the following statements most correctly describes the types of information that a sales agency would have to collect for the Home Office to properly determine the sales agency’s profitability?
a. Only agency sales and operating expenses
b. Only agency sales, operating expenses, and cost of sales
c. Only agency sales, operating expenses, and the ending balance of accounts receivable
d. Only agency sales, costs of sales, operating expenses, and the actual or average amount of fixed assets located at the agency locations
Only agency sales, costs of sales, operating expenses, and the actual or average amount of fixed assets located at the agency locations
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 credit to cash.
FALSE
Branch fixed assets can be carried on the home office’s books under a decentralized accounting system
TRUE
