*Agency = maintains samples of inventory
= any cash receipt/disbursement accounted for like Petty Cash Fund
= does not maintain books
*Branch = have their own books
= capital accounts in books is called "Home Office - Current"
= Inventory includes Shipment from Home Office and Inventory from Outside Suppliers
*Home Office = accounts an "Investment in Branch" account using the equity method
*Investment in Branch = Home Office - Current
*Consolidation of Home Office and Branch Financial Statements:
Remove "home office - branch" transactions.
a. Cost of Shipment to Branch (like Cost of Sales to Branch)
b. Billings of Shipment to Branch (like Sales to Branch)
Billed Price = Cost of shipment to branch + Allowance for overvaluation of branch inventory
*Allowance for overvaluation of branch inventory (like Unrealized Gross Profit)
= mark-up of home office on inventory sent to branch.
= adjusted to match ending inventory of Shipments to branch/from home office
(adjustment is like the Realized Gross Profit)
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