In accounting

for branch
transactions, it
is improper for
the home office
to:

Credit cash received from a branch to the Investment in Branch

A) ledger account.

Maintain Common Stock and Retained Earnings ledger accounts for

B) only the home office.

Debit shipments of merchandise to the branch from the home office

C) to the Investment in Branch ledger account.

Credit shipments of merchandise to the branch to the Sales ledger

D) account.

2 INCORRECT
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

A) been recorded by the branch.

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

The branch had just collected home office trade accounts receivable
C) in the amount of $3,000.

The branch had not yet recorded the home office net income for
D) April.
3 CORRECT
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

A) accounting records of the home office when merchandise is shipped
to a branch, and the Shipments to Branch account is credited
(assume use of the periodic inventory system).

The home office debits Trade Accounts Receivable and credits Sales
B) when merchandise is shipped to a branch.

Cash received from a branch is credited to the Investment in Branch

C) ledger account by the home office.

Only the home office maintains a Common Stock ledger account and
D) a Retained Earnings account.

4 INCORRECT
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)
5 CORRECT
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)

6 CORRECT
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)

Feedback: ($42,500 x 0.20) - $1,500 = $7,000

[($39,500 x 0.20) – $1,500 = $6,400]

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

True
A)

False
B)

8 INCORRECT
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)

False
B)

9 CORRECT
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)

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

True
A)

False
B)

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

True
A)

False
B)

12 CORRECT
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)
13 INCORRECT
Traditionally, a branch will have more autonomy than a division.

True
A)

False
B)

14 INCORRECT
Home office and Investment in Branch are reciprocal accounts.

True
A)

False
B)