ACCT 221 - EXAM
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acct_221_-_exam.pdf
Final Exam ACCT 221 – Principles of Accounting II
Fall 2013
Multiple Choice (2 pts each) 1. Cody Industries owns 35% of Macarthy Company. For the current year, Macarthy 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 Cody’s equity in Macarthy’s net income and the receipt of dividends from Macarthy? a. Dec 31 Stock Investments 87,500 Revenue from Stock Investments 87,500 Dec 31 Cash 21,000 Stock Investments 21,000
b. Dec 31 Stock Investments 87,500 Revenue from Stock Investments 87,500 Dec 31 Cash 60,000 Stock Investments 60,000
c. Dec 31 Stock Investments 66,500 Revenue from Stock Investments 66,500
d. Dec 31 Revenue from Stock Investments 87,500 Stock Investments 87,500 Dec 31 Stock Investments 21,000 Cash 21,000
2. If stock is issued for a noncash asset, the asset should be recorded on the books of the corporation at a. fair value. b. cost. c. zero. d. a nominal amount.
3. Saira, Inc. has the following income statement (in millions):
SAIRA, INC. Income Statement
For the Year Ended December 31, 2014
SAIRA, INC. Income Statement
For the Year Ended December 31, 2014
Net Sales $300
Cost of Goods Sold 180
Gross Profit 120
Operating Expenses 45
Net Income $75
Using vertical analysis, what percentage is assigned to Net Income? a. 62.5% b. 40% c. 25% d. None of these answer choices are correct.
Due Date: Sunday, Oct 6 @ 11 p.m. ET submit via WebTycho Assignment Folder
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4. If a company anticipates that other sales will be affected by the acceptance of a special order, then a. lost sales should be considered in the incremental analysis. b. lost sales should not be considered in the incremental analysis. c. the order should not be accepted. d. the order will only be accepted if the plant is below capacity.
5. 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:
A flexible budget prepared at the 190,000 machine hours level of activity would show total manufacturing overhead costs of a. $570,000 b. $760,000 c. $600,000 d. $770,000
6. A department adds raw materials to a process at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of January, there were no units in the beginning work in process inventory; 90,000 units were started into production in January; and there were 20,000 units that were 40% complete in the ending work in process inventory at the end of January. What were the equivalent units of production for materials for the month of January? a. 98,000 equivalent units. b. 82,000 equivalent units. c. 90,000 equivalent units. d. 70,000 equivalent units.
7. On January 1, 2014, Meeks Corporation issued $5,000,000, 10-year, 4% bonds at 102. Interest is payable semiannually on January 1 and July 1. The journal entry to record this transaction on January 1, 2014 is a. Cash 5,000,000 Bonds Payable 5,000,000
b. Cash 5,100,000 Bonds Payable 5,100,000
c. Cash 5,000,000 Premium on Bonds Payable 100,000 Bonds Payable 5,100,000
d. Cash 5,100,000 Bonds Payable 5,000,000 Premium on Bonds Payable 100,000
Due Date: Sunday, Oct 6 @ 11 p.m. ET submit via WebTycho Assignment Folder
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VariableVariable
Indirect materials 240,000
Indirect labor 320,000
Factory supplies 40,000
FixedFixed
Depreciation 100,000
Taxes 20,000
Supervision 80,000
8. The following information is taken from the production budget for the first quarter:
Beginning inventory in units 1,800 Sales budgeted for the quarter 678,000 Capacity in units of production facility 708,000
How many finished goods units should be produced during the quarter if the company desires 4,800 units available to start the next quarter? a. 675,000 b. 681,000 c. 711,000 d. 682,800
9. The standard number of hours that should have been worked for the output attained is 6,000 direct labor hours and the actual number of direct labor hours worked was 6,300. If the direct labor price variance was $3,150 favorable, and the standard rate of pay was $9 per direct labor hour, what was the actual rate of pay for direct labor? a. $8.50 per direct labor hour b. $7.50 per direct labor hour c. $9.50 per direct labor hour d. $9.00 per direct labor hour
10. Madaas Company manufactures customized desks. The following pertains to Job No. 987:
Direct materials used $11,450 Direct labor hours worked 360 Direct labor rate per hour $15.00 Machine hours used 300 Applied factory overhead rate per machine hour $22.00
What is the total manufacturing cost for Job No. 987? a. $21,650 b. $23,450 c. $24,950 d. $26,750
Due Date: Sunday, Oct 6 @ 11 p.m. ET submit via WebTycho Assignment Folder
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1. The comparative balance sheets for Drake Company appear below:
Additional information 1. New plant assets costing $100,000 were purchased with cash. 2. Investments were purchased with cash. 3. Old plant assets costing $25,000 and with a book value of $13,000 were sold for $10,000 cash. 4. Bonds with a face value of $40,000 were converted into $40,000 par value of common stock. 5. Common stock was issued for cash. 6. A cash dividend of $15,000 was declared and paid during the year.
Required Prepare a statement of cash flows for the year using the indirect method.
Due Date: Sunday, Oct 6 @ 11 p.m. ET submit via WebTycho Assignment Folder
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Drake, Inc. Comparative Balance Sheets
December 31
Drake, Inc. Comparative Balance Sheets
December 31
Drake, Inc. Comparative Balance Sheets
December 31
Assets 2014 2013
Cash 41,000 35,000
Accounts Receivable 75,000 53,000
Inventories 120,000 132,000
Prepaid Expenses 19,000 25,000
Investments 100,000 75,000
Plant assets 325,000 250,000
Accumulated Depreciation (65,000) (60,000)
Total Assets 615,000 510,000
Liabilities & Equity
Accounts Payable 93,000 75,000
Accrued Expenses 29,000 24,000
Bonds Payable 120,000 160,000
Common Stock 275,000 170,000
Retained Earnings 98,000 81,000
Total Liabilities & Equity 615,000 510,000
Drake, Inc. Income Statement
For the Year Ended December 31, 2014
Drake, Inc. Income Statement
For the Year Ended December 31, 2014
Drake, Inc. Income Statement
For the Year Ended December 31, 2014
Sales 450,000
Cost of Goods Sold 300,000
Gross Margin 150,000
Less:
Operating Expenses 60,000
Depreciation Expense 17,000
Income Taxes 20,000
Interest Expense 18,000
Loss on sale of plant assets 3,000 118,000
Net Income 32,000
2. Redding Company has budgeted sales revenues as follows:
June July August
Credit sales 135,000 145,000 90,000
Cash sales 90,000 255,000 195,000
Total sales 225,000 400,000 285,000
Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are:
Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000 each month, (b) dividends of $105,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash.
The company wishes to maintain a minimum cash balance of $50,000 at the end of each month.
Instructions Prepare a cash budget for the months of July and August.
Due Date: Sunday, Oct 6 @ 11 p.m. ET submit via WebTycho Assignment Folder
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June 300,000
July 250,000
August 105,000
3. Delvin Corporation incurred the following costs while manufacturing its product.
Materials used in product 130,000 Advertising expense 49,000
Depreciation on plant 65,000 Property taxes on plant 16,000
Property taxes on administrative building 7,700 Delivery expense 20,000
Labor costs of assembly-line workers 112,000 Sales commissions 31,000
Factory supplies used 24,000 Salaries paid to sales clerks 58,000
Work-in-process inventory was $23,000 at January 1 and $15,800 at December 31. Finished goods inventory was $67,000 at January 1 and $52,600 at December 31.
Instructions Prepare a cost of goods manufactured schedule and determine the amount of cost of goods sold.
4. Winston Company manufactured 5,000 units of a component part that is used in its product and incurred the following costs:
Direct materials 35,000
Direct labor 25,000
Variable manufacturing overhead 20,000
Fixed manufacturing overhead 18,000
98,000
Another company has offered to sell the same component to the company for $17.50 per unit. The fixed manufacturing overhead consists mainly of depreciation on equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Winston Company has the opportunity to use the factory equipment to produce another product that is estimated to have a contribution margin of $19,000
Instructions Prepare an incremental analysis for this make or buy decision. Should the component be made or purchased?
Due Date: Sunday, Oct 6 @ 11 p.m. ET submit via WebTycho Assignment Folder
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5. The income statement for Hyland Company for 2014 appears below:
Hyland Company Income Statement
For the Year Ended December 31, 2014
Hyland Company Income Statement
For the Year Ended December 31, 2014
Sales revenue (40,000 units) 1,000,000
Variable expenses 700,000
Contribution margin 300,000
Fixed expenses 345,000
Net income (loss) (45,000)
Instructions Answer the following independent questions and show computations to support your answers: 1. What was the company’s break-even point in sales dollars in 2014? 2. How many additional units would the company have to sell in 2015 (compared to 2014) in order to
earn net income of $45,000? 3. If the company is able to reduce variable costs by $4.50 per unit in 2015 and other costs and unit
revenues remain unchanged, how many units will the company have to sell in order to earn a net income of $45,000?
6. Mountain Lumber Corporation uses a machine that removes the bark from cut timber. The machine is unreliable, resulting in significant downtime and wasted labor costs. Management is considering replacing the machine with a more efficient one that will minimize downtime and excessive labor costs. Data are presented below for the two machines:
Old Machine New Machine
Original purchase cost 325,000 405,000
Accumulated depreciation 230,000 0
Estimated life 4 years 4 years
It is estimated that the new machine will produce annual cost savings of $107,000. The old machine can be sold to a scrap dealer for $12,000. Both machines will have a salvage value of zero if operated for the remainder of their useful lives.
Instructions Determine whether the company should purchase the new machine and show your computations to support your answer.
Due Date: Sunday, Oct 6 @ 11 p.m. ET submit via WebTycho Assignment Folder
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7. Prytania Corporation is authorized to issue 1,000,000 shares of $5 par value common stock. During 2014, its first year of operation, the company has the following stock transactions.
Jan 1 Paid the state $5,000 for incorporation fees. Jan 15 Issued 500,000 shares of stock at $6 per share. Jan 30 Attorneys for the company accepted 500 shares of common stock as payment for legal services
rendered in helping the company incorporate. The legal services are estimated to have a value of $7,000.
July 2 Purchased 15,000 shares of common stock for the treasury at $9 per share. Sept 5 Sold 11,000 shares of the treasury stock at $11 per share. Oct 30 Declared a $0.15 per share cash dividend payable to common shareholders on December 15. Dec 15 Paid cash dividend to common shareholders.
Instructions Journalize the transactions for Prytania Corporation
8. Chetola Corporation has 120,000 shares of $5 par value common stock outstanding. It declared a 15% stock dividend on June 1 when the market price per share was $13. The shares were issued on June 30.
Instructions Prepare the necessary entries for the date of declaration and date of payment of the stock dividend.
9. Zeller Company requires its marketing managers to submit estimated cost-volume-profit data on all requests for new products, or expansions of a product line.
Jean Lamb is a new manager. Her calculations show a fixed cost for a new project at $100,000 and a variable cost of $5. Since the selling price is only $15 for the proposed product, 10,000 would need to be sold to break even. That is approximately twice the volume estimate for the first year. She shares her dismay with Anne Smythe, another manager.
Anne strongly advises her to revise her estimates. She points out that several of the costs that had been classified as fixed costs could be considered variable, since they are step costs and mixed costs. When the data has been revised classifying those costs as variable costs, the project appears viable.
Required 1. Who are the stakeholders in this decision? 2. Is it ethical for Jean to revise the costs? Explain. 3. What should Jean do?
Due Date: Sunday, Oct 6 @ 11 p.m. ET submit via WebTycho Assignment Folder
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