debits Shipments in Transit to Branch and credits Investment Branch

d. The branch debits Shipments in Transit from Home Office and credits Home Office
A. The fiscal year of King Company which is located in Manila end on September 30. On
September
30,20x4, the home office of King Company shipped merchandise costing 80,000 to Rizal Branch
and prepared an appropriate entry for the shipment. The Rizal Branch did not receive the
merchandise on that same day. Both the home office and the branch use the perpetual
inventory system.
The end of period adjustments on September 30,20x4 should include:
a. A debit to Inventories and a credit to Home Office Current in the branch accounting records
b. A debit to Branch Current and a credit to Inventories in the home office accounting records
c. A debit to Home Office Current and a credit to Inventories in the branch accounting records
d. Other journal entry
B. Among the journal entries (explanation omitted) in the accounting records of the home office
of
Price Company was the following:
Office Equipment: Lang Branch 1at an amount other than cost.
The Interpretations Committee noted the requirement of paragraph 2(b) of IFRS 3 as
described above and also noted that other IFRSs include initial measurement
requirements for particular assets and liabilities, including IAS 40 for investment
property. It observed that if an entity initially considers that there might be a difference
as described in (a) above, the entity should first review the procedures it has used to
determine those individual fair values to assess whether such a difference truly exists
before allocating the transaction price.
The Interpretations Committee considered two possible ways of accounting for the
acquisition of the group. These two approaches are discussed in detail in Chapter 9 at 2.2.2.
Under the first approach an entity:
• identifies the individual identifiable assets acquired and liabilities assumed that it
recognises at the date of the acquisition;
• determines the individual transaction price for each identifiable asset and liability
by allocating the cost of the group based on the relative fair values of those assets
and liabilities at the date of the acquisition; and then
• applies the initial measurement requirements in applicable standards to each
identifiable asset acquired and liability assumed. The entity accounts for any
difference between the amount at which the asset or liability is initially measured
and its individual transaction price2,500
Investment in Lang Branch 12,500
This journal entry indicates that:
a. The home office acquired office equipment for the branch
b. The home office shipped office equipment to the branch
c. The branch acquired office equipment, which is carried in the accounting records of the home
office
d. None of the foregoing occurred
B. The Income: Branch ledger account is maintained in the accounting records of:
a. The home office only
b. The branch only
c. Both the home office and the branch
d. Neither the home office nor the branch
D.If at the end of an accounting period the balance of the Investment in Branch