THREE: (6 marks) (A3, D1)

As a CPA and audit manager of Fatima and Ahmed, LLP, you have been requested by Ahlam Hussain, president of Ahlam Company, a nonpublic enterprise, to write a memo to Ahlam Company's accounting staff explaining the purpose of the Allowance for Overvaluation of Inventories: Manama Branch ledger account and the typical journal entries in the account. Ahlam Company has just established Manama Branch, its first branch, and is planning for the home office to ship merchandise to the branch at a markup of 20% above home office cost.

Instructions:

Write the memo requested by Ahlam Hussain.