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.