how to download Modern Advanced Accounting, 10/e. E.

John Larsen

Choose the best answer for each of the following questions.

1

In accounting for branch transactions, it is improper for the home office to:
Credit cash received from a branch to the Investment in Branch ledger account.

A)

Maintain Common Stock and Retained Earnings ledger accounts for only the home
B)office.
Debit shipments of merchandise to the branch from the home office to the
C)Investment in Branch ledger account.

Credit shipments of merchandise to the branch to the Sales ledger account.

D)

The Home Office ledger account in the accounting records of the Tahoe Branch had a
credit balance of $12,000 at the end of April, and the Investment in Branch account in
the accounting records of the home office had a debit balance of $15,000. The most
likely reason for the discrepancy in the two ledger account balances is:
Merchandise shipped by the home office to the branch had not been recorded by the
A)branch.

B)

The home office had not recorded the branch net income for April.

The branch had just collected home office trade accounts receivable in the amount of
C)$3,000.
The branch had not yet recorded the home office net income for April.

D)

Jayhawk Company has numerous branches in the state of Kansas. The home office
purchases merchandise and makes shipments to branches from a central warehouse at
the request of branch managers. Which of the following would be an improper
accounting practice?
The Investment in Branch ledger account is debited in the accounting records of the
home office when merchandise is shipped to a branch, and the Shipments to Branch
A)
account is credited (assume use of the periodic inventory system).
The home office debits Trade Accounts Receivable and credits Sales when
B)merchandise is shipped to a branch.
Cash received from a branch is credited to the Investment in Branch ledger account
C)by the home office.
Only the home office maintains a Common Stock ledger account and a Retained
D)Earnings account.

Neither the Palmer Branch nor the home office of Rupert Company had completed any
intracompany transactions during the last half of May, yet the credit balance of the
branch's Home Office ledger account on May 31 was larger than the debit balance of the
home office's Investment in Palmer Branch account. The most likely reason for this
discrepancy is:
The home office reported a net loss for the month of May.

A)

The branch reported a net loss for the month of May.

B)

The branch returned merchandise to the home office.

C)

The branch reported a net income for the month of May.

D)

Which of the following ledger accounts is displayed in the combined financial

statements for a home office and branch?
Shipments to Branch

A)

Home Office

B)

Dividends Declared

C)

Allowance for Overvaluation of Inventories: Branch

D)

The home office of Irby Company bills merchandise to branches at 25% above home
office cost. Information taken from the accounting records of Kipp Branch is as follows:
Beginning inventories (at billed
prices)

$17,000

Shipments from home office (at

billed prices)

42,500

Ending inventories (at billed prices)

20,000

Net loss for accounting period

1,500

The net income or net loss of Kipp Branch, based on home office cost of branch
merchandise, is:
$7,900 net income
A)

$9,400 net loss

B)

$6,400 net income

C)

$7,000 net income

D)

Some other amount

E)

In a centralized accounting system for branches, the branch accounting records are
maintained by the home office.
True

A)

False

B)

Both the Home Office ledger account and the Investment in Branch account are
displayed in the combined financial statements for the home office and the branch.
True

A)

B)

False

The combined net income for the home office and branches would be the same when the
home office bills merchandise to branches at home office cost as when the home office
bills branches at amounts above home office cost.
True

A)

False

B)

1
0

In most cases, a branch is operated more as a cost center than as a profit center.
True

A)

False

B)

11

Billing at above home office cost is the simplest procedure and widely used.
True

A)

False

B)

1
2

A balance sheet for distribution to creditors, stockholders, and government agencies

must show the financial position of the business enterprise having branches as a single
entity.
True
A)

False

B)

1
3

Traditionally, a branch will have more autonomy than a division.

True

A)

False

B)

1
4

Home office and Investment in Branch are reciprocal accounts.

True

A)

B)

False