Reference no: EM132832773

Tokyo Corporation has two branches to which merchandise is transferred at cost plus 208, plus freight charges. On November 30, 2000, Tokyo Corp. shipped merchandise that cost 5,500 to its Rio Branch, and the 200 shipping charges were paid by Tokyo Corp. On December 15, 2000, the Nairobi branch encountered an inventory shortage, and the Rio Branch shipped the merchandise to the Nairobi Branch at a freight cost of 160 paid by the Rio branch. Shipping charges from the home office to the DD Branch would have been 175.

Problem 1: Tokyo Corp. will record the 5,500 shipment to the Rio Branch, together with the 200 shipping charge, in a journal entry that includes the following:

a. Shipments from HO, 6000
b. Shipments to Rio Branch, 5,700
c. Unrealized profit - branch inventory, 1,100
d. Investment in Rio Branch

Problem 2: Rio Branch should record the transfer of merchandise to the Nairobi Branch by either a debit or credit entry that include the following:

a. Shipments from HO, 5,500
b. Nairobi branch, 6,975
c. Home Office, 6,960
d. Inventory, 5,660

Problem 3: If the merchandise is unsold at year-end, the Nairobi branch will inventory the merchandise at:

a. 6,000
b. 6,975
c. 6,760
d. 6,775

Problem 4: If the merchandise is unsold at year-end, Tokyo Corporation will include it as an asset in its Annual report to Stockholders in the amount of:

a. 5,500
b. 5,660
c. 5,675
d. 5, 875

Problem 5: The loss on excessive freight charges on the inter-branch transfer amounted to:

a. 200
b. 160
c. 175
d. 185