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34.     For the fiscal year ended August 31, 2006, the South Bay Branch of Torrance Company reported a net income of $60,000. Inventories of South Bay Branch on August 31, 2006, in the amount of $125,000 had been billed to the branch by the home office of Torrance Company at a markup of 25% above home office cost. On August 31, 2006, prior to adjustment, the Allowance for Overvaluation of Inventories: South Bay Branch ledger account had a credit balance of $75,000 in the accounting records of the home office.
          
          Prepare August 31, 2006, journal entries for the home office of Torrance Company to record the South Bay Branch's operating results for the year ended that date.

     35.     Newfoundland, Inc., has a branch in Boston. On April 1, 2006, the accounting records of the home office of Newfoundland had a ledger account, Allowance for Overvaluation of Inventories: Boston Branch, with a credit balance of $36,600. During April, merchandise costing $110,000 was shipped to the Boston Branch and billed at 20% above home office cost. The branch reported a net income of $9,600 for April, and branch inventories on April 30 were $162,000 at billed prices.
          a.      Prepare a working paper to compute the cost of the branch inventories on April 1, 2006, assuming a uniform markup on all shipments of merchandise to the branch.
          b.      Prepare a home office journal entry to adjust the Allowance for Overvaluation of Inventories: Boston Branch ledger account on April 30, 2006.

     36.     The home office of Carnival Company bills its only branch at 30% above home office cost for all merchandise shipped to the branch. During 2006, the home office shipped merchandise to the branch at billed prices of $104,000. Branch inventories for 2006 were as follows:

Jan. 1

Dec. 31

 

 

From home office (at billed prices)

$32,500

$44,200

 

 

From outside suppliers

34,000

41,200

 

 

The home office uses the perpetual inventory system.

 

 

Prepare journal entries (including adjusting entries) for the home office of Carnival Company for 2006 to reflect the foregoing information.

     37.     The following ledger account was in the accounting records of the County Branch of City Company on December 31, 2006:

Home Office

Date

Explanation

Debit

Credit

Balance

2006

 

 

 

 

Jan.

1

Balance

 

 

40,000 cr

Mar.

10

Cash remitted to home office

10,000

 

30,000 cr

 

31

Merchandise returned to home office

2,650

 

27,350 cr

June

6

Merchandise received from home office

 

14,400

41,750 cr

Oct.

10

Supplies received from home office

 

2,600

44,350 cr

Dec.

20

Acquisition of fixtures

9,250

 

35,100 cr

 

31

Net income

 

7,770

42,870 cr

          The home office of City Company used the perpetual inventory system, and billed the branch for merchandise shipments at 25% above home office cost.

          Prepare journal entries to record the above indicated transactions and events in the accounting records of the home office of City Company. Adjusting entries are not required.

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