Question 1
The home oce ships merchandise to its branch above cost. What journal
entry should the branch make to record receipt of the shipment?
Select one:
Dr. Home oce; Cr. Shipment from home oce
Dr. Shipment from home oce; Cr. Allowance for overvaluation of inventory
Dr. Home oce; Cr. Shipment from home oce
Dr. Shipment from home oce; Cr. Home oce
Question 2
A home oce ships inventory to its branch at an amount above cost. By
year-end, 75 percent of the inventory shipped to the branch has been resold
to outsiders.
How is the realized inter–company pro*t determined?
Select one:
Billed price x 75 percent
(Billed price less cost) x 75 percent
Billed price x 25 percent
(Billed price less cost) x 25 percent
Question 3
A home oce ships inventory to its branch at an amount above cost. By
year-end, 75 percent of the inventory shipped to the branch has been resold
to outsiders.
What entry must be made by the home oce to record the inter-company
realized profit during the year?
Select one:
Dr. Branch income; Cr. Unrealized inter-company profit
Dr. Unrealized intercompany pro*t; Cr. Realized profit of branch transfers
Dr. Allowance for overvaluation of branch inventory; Cr. Branch
income
Both Dr. Unrealized intercompany pro*t; Cr. Realized profit of branch
transfers and Dr. Allowance for overvaluation of branch inventory; Cr. Branch
income
Question 4
When the home oce ships merchandise to the branch above its cost, the
cost of goods sold on the branch income statement is:
Select one:
Overstated by the Overvaluation of the branch inventory acquired
from home oce.
Understated by the overvaluation of the inventory.
Overstated by the overvaluation of the branch inventory acquired from
outsiders.
Overstated the difference between the unadjusted and post-closing balance
in the allowance for overvaluation in branch inventory account on the home
oce books
Question 5
The unadjusted balance in the Allowance for Overvaluation account at year–
end represents:
Select one:
The mark-up on merchandise shipped to the branch during the year.
The mark-up on merchandise shipped to the branch during the year
less than mark-up on the merchandise returned by the branch
during the year.
The mark-up on the cost of goods sold by the branch for the year.
The mark-up on the merchandise available for sale by the branch for the
year.
Question 6
When the home oce ships merchandise to the branch above its cost, the
net income on the income statement prepared by the branch is:
Select one:
Understated by the unadjusted balance in the Allowance for Overvaluation
account on the home oce books.
Understated by the di0erence between the unadjusted and the
post-closing balance in the Allowance for Overvaluation account on
the home oce books.
Understated by the post-closing balance in the Allowance for Overvaluation
account on the home oce books.
Overstated by the unadjusted balance in the Allowance for Overvaluation
account on the home oce books.
Question 7
The home oce ships merchandise to the branch at an amount above cost.
How should the Investment in Branch account be debited?
Select one:
At selling price
At billed price less cost
At billed price
At cost
Question 8
When a home oce ships merchandise to Branch A which is later shipped to
Branch B. The additional freight charges to ship the merchandise from
branch A to Branch B should:
Select one:
Included as part of the cost of merchandise to Branch A
Treated as an expense on the Home Oce books
Included as part of the cost of merchandise to Branch B
All of the choices are correct
Question 9
The Allowance for Overvaluation account is:
Select one:
Debited to Branch Income for the mark-up in the branch ending inventory.
Eliminated in the working paper used to combine the home oce and branch
accounts.
Credited to Branch Income account for the mark-up in the branch ending
inventory.
Credited to Branch Income account for the realized portion of the
mark-up.
Question 10
A company has several branch operations that sell merchandise transferred
from the home oce. This inventory is transferred at billed price of 20
percent more than cost.
In producing financial statements for the company as a whole, what happens
at the end of the year?
Select one:
The unrealized gain on any remaining inventory is eliminated for
7nancial reporting purposes.
Any remaining gain is reported as a contra balance to the Purchases
account.
Any remaining gain is reported as a contra balances to the Branch account.
The gain remains as reported since the amount would be immaterial.
QUIZ
Question 1
LPU Company put up an agency in Batangas City and had the following
transactions with Batangas City agency for the month of January:
What is the journal entry to record transaction letter F?
Answer:
Feedback
The correct answer is: Dr. Expenses 6,850; Cr. Cash 6,850
Question 2
The reciprocal accounts between the home oce of Balagtas Company and
its branch in Bauan were adjusted to P134,000 as of December 31, 2018. The
transactions between the home oce and the branch for 2019 were:
Dr. Working Fund 6,850; Cr. Cash 6,850
What is the entry made by Home Oce for transaction letter D?
Answer:
Feedback
The correct answer is: Dr. Cash 24,500 Discount 500; Cr. Investment in
Branch 25,000
Question 3
The reciprocal accounts between the home oce of Balagtas Company and
its branch in Bauan were adjusted to P134,000 as of December 31, 2018. The
transactions between the home oce and the branch for 2019 were:
What is the adjusting entry to be made in the books of Home oce for
transaction letter G?
Dr. Cash 25,510; Cr. Investment in Branch 25,510
Answer:
Feedback
The correct answer is: None
Question 4
The reciprocal accounts between the home oce of Balagtas Company and
its branch in Bauan were adjusted to P134,000 as of December 31, 2018. The
transactions between the home oce and the branch for 2019 were:
What is the entry made by the branch on transaction letter F?
Answer:
Feedback
The correct answer is: Dr. Cash 12,000; Cr. Home Oce Current 12,000
Question 5
The reciprocal accounts between the home oce of Balagtas Company and
its branch in Bauan were adjusted to P134,000 as of December 31, 2018. The
transactions between the home oce and the branch for 2019 were:
Dr. Shipment to Branch 10,400; Cr. Investment in Branch 10,400
No Entry
How much is the adjusted balances of the reciprocal accounts?
Answer:
Feedback
The correct answer is: P377,000
Question 6
LPU Company put up an agency in Batangas City and had the following
transactions with Batangas City agency for the month of January:
What is the journal entry to record transaction letter H?