Answered: 7. The Allowance for Overvaluation…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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7. The Allowance for Overvaluation account of the home office is debited:* a. When the home office ships merchandise to the branch at a billed price that exceeds cost. b. In a journal entry to close the account at the end of an accounting period. c. When the branch’s ending inventory is recorded in the home office accounting records. d. In some other circumstances. 8. Statement 1 (S1): Freight charges incurred by the branch office on merchandise inventory shipped from the home office would be included in the branch’s cost of goods available for sale even if the wrong merchandise was shipped from the home office.Statement 2 (S2): One reason why a branch office would not have a “loading” account is that the home office usually does not want the branch personnel to know the amount of unrealized profit built in to the merchandise’s transfer price. * a. S1- True; S2- True b. S1- True; S2- False c. S1- False; S2- True d. S1- False; S2- False

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