1. On January 1, 2013, Daniels Corporation issued $5,000,000, 10-year, 8% bonds at 103. Interest is payable semiannually on January 1 and July 1. The journal entry to record this transaction on January 1, 2013 is
a. Cash 5,000,000
Bonds Payable 5,000,000
b. Cash 5,150,000
Bonds Payable 5,150,000
c. Premium on Bonds Payable 150,000
Cash 5,000,000
Bonds Payable 5,150,000
d. Cash 5,150,000
Bonds Payable 5,000,000
Premium on Bonds Payable 150,000
2. Levin Company issued 500 shares of no-par common stock for $5,500. Which of the following journal entries would be made if the stock has a stated value of $2 per share?
a. Cash 5,500
Common Stock 5,500
b. Cash 5,500
Common Stock 1,000 Paid-in Capital in Excess of Par 4,500
c. Cash 5,500
Common Stock 1,000
Paid-in Capital in Excess of Stated Value 4,500
d. Common Stock 5,500
Cash 5,500
3. Motes industries owns 45% of Newton Company. For the current year, Newton reports net income of $250,000 and declares and pays a $60,000 cash dividend. Which of the following correctly presents the journal entries to record Motes equity in Newton s net income and the receipt of dividends from Newton?
a. Dec. 31 Stock Investments 112,500
Revenue from Stock Investments 112,500
Dec. 31 Cash 27,000
Stock Investments 27,000
b. Dec. 31 Stock Investments 112,500
Revenue from Stock Investments 112,500
Dec. 31 Cash 60,000
Stock Investments 60,000
c. Dec. 31 Stock Investments 85,500
Revenue from Stock Investments 85,500
Dec. 31 Cash 27,000
Stock Investments 27,000
d. Dec. 31 Revenue from Stock Investments 112,500
Stock Investments 112,500
Dec. 31 Stock Investments 27,000
Cash 27,000
4. Talbot, Inc. has the following income statement (in millions):
Wilkinson, INC.
Income Statement
For the Year Ended December 31, 3
Net Sales $300
Cost of Goods Sold 120
Gross Profit 180
Operating Expenses 44
Net Income $136
Using vertical analysis, what percentage is assigned to Cost of Goods Sold?
a. 30%
b. 40%
c. 100%
d. None of the above
5. Mah, Inc. completed Job No. B14 during 2013. The job cost sheet listed the following:
Direct materials $55,000
Direct labor $30,000
Manufacturing overhead applied $20,000
Units produced 3,000 units
Units sold 1,800 units
How much is the cost of the finished goods on hand from this job?
a. $105,000
b. $63,000
c. $42,000
d. $51,000
6. In the month of June, a department had 20,000 units in beginning work in process that were 70% complete. During June, 80,000 units were transferred into production from another department. At the end of June there were 10,000 units in ending work in process that were 40% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. The equivalent units of production for materials for June were
a. 90,000 equivalent units.
b. 100,000 equivalent units.
c. 104,000 equivalent units.
d. 80,000 equivalent units.
7. A company budgeted unit sales of 204,000 units for January, 2013 and 240,000 units for February, 2013. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month’s budgeted unit sales. If there were 61,200 units of inventory on hand on December 31, 2013, how many units should be produced in January, 2013 in order for the company to meet its goals?
a. 214,800 units
b. 204,000 units
c. 193,200 units
d. 276,000 units
8. A company’s planned activity level for next year is expected to be 200,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs:
Variable Fixed
Indirect materials $280,000 Depreciation $120,000
Indirect labor 400,000 Taxes 20,000
Factory supplies 40,000 Supervision 100,000
A flexible budget prepared at the 160,000 machine hours level of activity would show total manufacturing overhead costs of
a. $576,000.
b. $720,000.
c. $768,000.
d. $816,000.
9. A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700. The direct materials price variance for last month was
a. $5,700 favorable.
b. $300 favorable.
c. $150 favorable.
d. $300 unfavorable.
10. In incremental analysis,
a. costs are not relevant if they change between alternatives.
b. all costs are relevant if they change between alternatives.
c. only fixed costs are relevant.
d. only variable costs are relevant.
Problem 1:
Here are comparative balance sheets for Hayes Company.
Hayes Company
Comparative Balance Sheets
December 31, 2013
Assets 2013 2012
Cash $ 43,000 $ 10,000
Accounts receivable 18,000 14,000
Inventories 25,000 18,000
Prepaid expenses 6,000 9,000
Long-term investments 0 18,000
Equipment 60,000 32,000
Accumulated depreciation Equipment (20,000) (14,000)
Total assets $ 122,000 $ 87,000
Liabilities and Stockholder s Equity
Accounts payable $ 17,000 $ 7,000
Bonds payable 37,000 47,000
Common stock ($1 par) 40,000 23,000
Retained earnings 28,000 10,000
Total liabilities and stockholder s equity $ 122,00 $ 87,000
Additional information:
1. The 2013 Income Statement reported $6,000 in depreciation expense, a $4,000 loss on
sale of investments and Net income of $43,000.
2. Cash dividends of $15,000 were declared and paid.
3. Long-term investments that has a cost of $18,000 were sold for $14,000
4. Sales for 2013 were $120,000.
Instructions: Prepare a statement of cash flows for 2013 using the indirect method.
Hayes Company
Statement of Cash Flows
For the Year Ended December 31, 2013
Adjustments to reconcile net income to net cash provided by operating activities
Problem 2:
Doherty Corporation is projecting a cash balance of $31,785 in its December 31, 2013, balance sheet. Doherty schedule of expected collections from customers for the first quarter of 2013 shows total collections of $189,885. The schedule of expected payments for direct materials for the first quarter of 2013 shows total payments of $40,200. Other information gathered for the first quarter of 2013 is: sale of equipment $3,392; direct labor $70,178, manufacturing overhead $34,583, and purchase of securities $12,372. Selling and administrative expenses are projected to be $45,117; this figure includes $1,117 in depreciation expense on the office equipment. All costs and expenses will be paid in cash. Doherty wants to maintain a balance of at least $30,000 cash at the end of each quarter.
Instructions: Complete the cash budget for the first quarter.
Doherty Corporation
Cash Budget
For the Quarter Ending March 31, 2013
Problem 3
Delaney Corporation has the following cost records for February 2013.
Indirect factory labor $ 4,612 Factory utilities $ 601
Direct materials used 22,361 Depreciation, factory equipment 1,585
Work in process, 6/1/12 2,769 Direct labor 31,084
Work in process, 6/30/12 3,733Maintenance, factory equipment 1,792
Finished goods, 6/1/12 4,609 Indirect materials 2,268
Finished goods, 6/30/12 7,429 Factory manager’s salary 3,315
Instructions: Prepare a cost of goods manufactured schedule for February 2013.
Delaney Corporation
Cost of Goods Manufactured Schedule
For the Month Ended June 30, 2013
Manufacturing overhead:
Problem 4:
Wallace Corporation has 72,615 shares of common stock outstanding. It declares a $2.10 per share cash dividend on August 1 to stockholders of record on September 15. The dividend is paid on October 31.
Instructions: Prepare the entries on the appropriate dates to record the declaration and payment of the cash dividend.
Date Account Description Debit Credit
Problem 5:
Hawkins Manufacturing incurs unit costs of $7.90 ($6.10 variable and $1.80 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 12,000 of the assembly part at $5.75 per unit. If the offer is accepted, Hawkins will save all variable costs but no fixed costs.
Instructions: Prepare an analysis showing the total cost savings, if any, Hawkins will realize by buying the part.
Make Buy
Total annual cost
Hawkins Company should _______________ the part because total annual costs to
make are less than total costs to buy.
Problem 6
On July 1, Ketel Corporation purchases 500,000 shares of its $6 par value common stock for the treasury at a cash price of $10 per share. On September 1, it sells 275,000 shares of the treasury stock for cash at $13 per share. The balance in the retained earnings account is $6,345,000.
Instructions: Journalize the two treasury stock transactions.
Date Account Description Debit Credit
Problem 7:
Reed Company has a unit-selling price of $500, variable costs per unit of $269, and fixed costs of $265,580.
Instructions: Compute the break-even point in units using either (a) the mathematical equation or (b) contribution margin per unit. Round answer up to the next whole unit.
Problem 8:
Lopez Company has a factory machine with a book value of $89,851 and a remaining useful life of 4 years. A new machine is available at a cost of $325,275. This machine will have a 4-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $630,925 to $425,840.
Instructions: Prepare an analysis showing whether the old machine should be retained or replaced.
Retain Equipment Replace Equipment
Total costs
The equipment should be _______________ because total costs are lower than to retain the machine.
Problem 9:
For Mathers Company, variable costs are 68% of sales, and fixed costs are $215,000. Management’s net income goal is $68,610.
Instructions: Compute the required sales needed to achieve management’s target net income of $78,610.