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 enterpriseEfficiency in pricinginventoriesConcealment of the true profit margins from branchpersonnelAll 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 lossesUnrealized inventory profitsonlyUnrealized inventory profits and overall branch profitslossesOverall 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:YESBranch Income or Loss: NO Home Office Capital:NOBranch Income or Loss : YES Home Office Capital:YESBranch Income or Loss: YES Home Office Capital:NO

1.Internal transfer means where one independent department is transferring the goods to another…

Answered: In preparing combined financial…

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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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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