Of the following two statements, which one(s) is (are) correct, if any?

A transfer of merchandise from

the home office to one of its branches should be recorded with a (an): Statement I: Increase in the
branch's Home Office account; Statement II: Increase in the home office's Investment in Branch
account

[A] Both I and II

[B] I only

[C] II only

[D] Neither I nor II.

If all fixed assets are kept on the Home office books and the branch purchased equipment for cash,
the appropriate journal entry for the branch is a debit to:

[A] Home office account and a credit to cash.

[B] investment in branch account and a credit to cash

[C] Equipment and credit to cash

[D] Equipment and a credit to Home office account

When the home office ships merchandise to the branch above its cost, the cost of goods sold on the
branch Statement of Comprehensive Income is

[A] overstated by inventories acquired from outsiders

[B] overstated by inventories acquired from the home office

[C] understated by the inventories acquired from outsiders

[D] understated by the inventories acquired from the home office.

Which of the following is the only reason why a home office cannot report inventory shipments to a
branch as sales?

A] The inventory transfer is a transaction with a related party

[B] There is no practicable means of determining whether the transfer prices approximate those that
would occur in an arms-length transaction between independent parties

[C] Only inventory transactions between the company and outside third parties can be considered as
sales

[D] The principle of conservatism.