Final
Review ACCT 221
Question
1: 30% points:
On
December 31, 2014, Frick Incorporated, had the following balances (all balances
are normal):
|
Accounts |
Amount |
|
Preferred Stock, ($100 par value, 5% noncumulative, 50,000 shares |
$1,000,000 |
|
Common Stock ($10 par value, 200,000 shares authorized, 100,000 shares |
$1,000,000 |
|
Paid-in Capital in Excess of par, Common |
150,000 |
|
Retained Earnings |
700,000 |
The
following events occurred during 2014 and were not recorded:
a. On January 1, Frick declared a 5% stock dividend on its common stock when
the market value of the common stock was $15 per share. Stock dividends were
distributed on January 31 to shareholders as of January 25.
b. On February 15, Frick reacquired 1,000 shares of common stock for $20 each.
c. On March 31, Frick reissued 250 shares of treasury stock for $25 each.
d. On July 1, Frick reissued 500 shares of treasury stock for $16 each.
e. On October 1, Frick declared full year dividends for preferred stock and
$1.50 cash dividends for outstanding shares and paid shareholders on October
15.
f. One December 15, Frick split common stock 2 shares for 1.
g. Net Income for 2014 was $275,000.
Requirements:
a.
Prepare journal entries for the transactions listed above.
b.
Prepare a Stockholders’ section of a classified balance sheet as of December
31, 2014.
|
Common Stock |
100,000.00 |
|
Stock Dividend |
5% |
|
Stock Dividend |
5,000.00 |
|
Total No of common Stock |
105,000.00 |
|
Preferred Stock |
10,000.00 |
|
Par Value |
100.00 |
|
Divivdend Rate |
5% |
|
Preference Dividend |
50,000.00 |
|
Cash Dividends on Common Stock @1.5(105,000*1.5) |
157,500.00 |
|
Total Dividend(50,000+157,500) |
207,500.00 |
|
Retained Earnings |
207,500.00 |
|
To Dividend Payable |
207,500.00 |
|
Dividend Payable |
207,500.00 |
|
To Cash |
207,500.00 |
Question
2: 5% points:
On
January 1, 2014, Frick Company purchased 10,000 shares of the stock of Floozy,
and did obtain significant influence. The investment is intended as a
long-term investment. The stock was purchased for $90,000, and represents
a 30% ownership stake. Floozy made $25,000 of net income in 2014, and
paid dividends of $10,000. The price of Floozy’s stock increased from $10
per share at the beginning of the year, to $12 per share at the end of the
year.
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Requirements:
a.
Prepare the January 1 & December 31 general journal entries for Frick
Company.
b. How
much should the Frick Company report on the balance sheet for the investment in
Floozy as the end of 2014
Question
3: 10% points:
The
following is selected information from Flip Company for the fiscal years ended
December 31, 2014: Flip Company had net income of $1,225,000.
Depreciation was $500,000, purchases of plant assets were $1,250,000, and
disposals of plant assets for $500,000 resulted in a $50,000 gain. Stock
was issued in exchange for an outstanding note payable of $725,000.
Accounts receivable decreased by $25,000. Accounts payable decreased by
$40,000. Dividends of $300,000 were paid to shareholders. Flip
Company had interest expense of $50,000. Cash balance on January 1, 2014 was
$250,000.
Requirements:
Prepare Flip Company’s statement of cash flows for the year ended December 31,
2014 using the indirect method.
Question
4: 15% points:
Frick
Corporation had the following bond transactions during the fiscal year 2014:
a. On January 1: issued ten (10), $1,000 bonds at 102. The 5-year bonds,
is dated January 1, 2014. The contract interest rate is 6%. Straight-line
amortization method is used. Interest is payable semi-annual on January 1 and
July 1.
b. On July 1: Frick Corporation issued $500,000 of 10%, 10-year bonds.
The bonds dated January 1, 2014 were issued at 88.5, and pay interest on July 1
and January 1. Effective interest rate method is used for these bonds is
12%.
c. On October 1: issued 10-year bonds $10,000 face value bonds, for $10,853
cash. The bonds have a stated rate of 8%, but an effective rate of 6%.
Effective-interest method is used. Interest is payable on October 1 and April
1.
Requirements:
Prepare all general journal entries for the three bonds issued and any interest
accruals and payments for the fiscal year 2014. (Round all calculations to
nearest whole dollar.)
Question
5: 5% points:
Flip
had sales of $10,000 (100 units at $100 per). Manufacturing costs
consisted of direct labor $1,500, direct materials $1,400, variable factory
overhead $1,000, and fixed factory overhead $500. The company did not
maintain any inventories, so total cost of goods sold was $4,400. Selling
expenses totaled $1,600 ($600 variable and $1,000 fixed), and administrative
expenses totaled $1,500 ($500 variable and $1,000 fixed). Operating
income was $2,500. Round all final answers to nearest dollar or whole
number.
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Requirements:
a. What is the breakeven point in sales dollars and in units if the fixed
factory overhead increased by $1,700?
b. What is the breakeven point in sales dollars and in units if costs remain as
originally projected?
c. What would be the operating income be if sales units increased by 25%
Question
6: 5% points:
Flip
manufactures footballs. The forecasted income statement for the year
before any special orders included sales of $4,000,000 (sales price is $10 per
unit.) Manufacturing cost of goods sold is anticipated to be
$3,200,000. Selling expenses are expected to be $300,000, and operating
income is projected at $500,000. Fixed costs included in these forecasted
amounts are $1,200,000 for manufacturing cost of goods sold and $100,000 for
selling expenses. Floozy is offering a special order to buy 50,000
footballs for $7.50 each. There will be no additional selling expenses, and
sufficient capacity exists to manufacture the extra footballs.
Requirements:
Prepare an incremental analysis schedule to demonstrate by what amount would
operating income be increased or decreased as a result of accepting the special
order.
Question
7: 5% points:
Flop
Company manufactures 10,000 units of widgets for use in its annual
production. Costs are direct materials $20,000, direct labor $55,000,
variable overhead $45,000, and fixed overhead $70,000. Floozy Company has
offered to sell Flop 10,000 units of widgets for $18 per unit. If Flop accepts
the offer, some of the facilities presently used to manufacture widgets could
be rented to a third party at an annual rental of $15,000. Additionally,
$4 per unit of the fixed overhead applied to widgets would be totally
eliminated.
Requirements:
Prepare an incremental analysis schedule to demonstrate if Flop should accept
Floozy’s offer.
