In preparing combined financial statements, which of the following accounts are eliminated in the combiningprocess? Branch Income o
In preparing combined financial statements, which of the following accounts are eliminated in the combiningprocess? Branch Income o
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
- Among the various reasons given for the internal transfer of merchandise inventory of a price above its cost are:
- Theequitable allocation of income amongst the various units of the business enterprise
- Efficiency in pricinginventories
- Concealment of the true profit margins from branchpersonnel
- All of the above are considered validreasons
2. A branch office allowed to make sales, carry inventory for resale to customers, and incur normal operating expenses. The home office ships merchandise to the branch office at cost plus a 20% markup. The home office account is used in its customary fashion, it will track:
- Unrealized inventory profits and overall branch
profits but notbranch losses - Unrealized inventory profitsonly
- Unrealized inventory profits and overall branch profitslosses
- Overall branch profits and losses but notunrealized inventory profits.
3. In preparing combined financial statements, which of the following accounts are eliminated in the combiningprocess?
- Branch Income or Loss: NO Home Office Capital:YES
- Branch Income or Loss: NO Home Office Capital:NO
- Branch Income or Loss : YES Home Office Capital:YES
- Branch Income or Loss: YES Home Office Capital:NO
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