Jerah Y.

Torrejos
Fill in the necessary words or amounts to complete the following statements.

1. A BRANCH is a unit of a business enterprise that sells merchandise at a location

some distance from the HOME OFFICE. A branch generally is operated as a
PROFIT CENTER of the home office; however, a DIVISION may be organized as a
subsidiary corporation.

2. The Home Office ledger account and the Investment in Branch ledger account are
RECIPROCAL ledger accounts whose balances must be ELIMINATED when
COMBINED financial statements for the home office and branch are prepared.

3. If a home office bills merchandise to branches at a price above home office cost,
the markup on the unsold merchandise is not REALIZED and is eliminated for
combined financial statements for the home office and its branches.

4. If the Dorco Branch remits cash to the home office of Shave Company and a
decentralized accounting system is used, the Dorco Branch debits the HOME
OFFICE ledger account and credits Cash; the home office debits Cash and credits
the INVESTMENT IN BRANCH account.

5. Some operating expenses incurred by the home office relate to branch operations
and are ALLOCATED to the branch by a debit to the INVESTMENT IN BRANCH
ledger account and a credit to the OPERATING EXPENSES account in the
accounting records of the home office.