ACC_401_Chapter_4 - statements serve the needs of managers...

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CHAPTER 4 ACCOUNTING FOR BRANCHES; Combined Financial Statements ANSWERS TO REVIEW QUESTIONS 1. The transactions to be accounted for by the branch generally should include only controllable expenses for which the branch manager is responsible. For example, depreciation of plant assets usually follows policies set by the home office and is not subject to control by the branch manager. This situation suggests that both the branch plant assets records and the related depreciation records should be maintained by the home office. 4. The separate financial statements prepared by individual branches and by the home office indicate the operating results and financial position of each unit of Jesse Corporation. The statements are used to evaluate the performance of branch managers and suggest the most appropriate areas for expansion or closure of branches. The combined financial
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Unformatted text preview: statements serve the needs of managers in the analysis of operating results and financial position of the enterprise as a whole. Combined financial statements also are more appropriate for use by outsiders such as stockholders and creditors. SOLUTIONS TO EXERCISES Ex. 42 a . Journal entries in accounting records of home office: 2005 Sept. 1 Investment in San Marino Branch 10,000 Cash 10,000 2 Investment in San Marino Branch 75,000 Inventories 60,000 Allowance for Overvaluation of Inventories: San Marino Branch ($60,000 x 0.25) 15,000 3 Equipment: San Marino Branch 3,000 Investment in San Marino Branch 3,000 b . Journal entries in accounting records of San Marino Branch: 2005 Sept. 1 Cash 10,000 Home Office 10,000 2 Inventories [$60,000 (1.00 0.20)] 75,000 Home Office 75,000 3 Home Office 3,000 Cash 3,000...
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This homework help was uploaded on 02/16/2008 for the course ACCT 401 taught by Professor Smith during the Spring '08 term at A.T. Still University.

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ACC_401_Chapter_4 - statements serve the needs of managers...

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