Accounting Homework

ACC 212 DL04 Spring 2017

EXAM #1

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1. The following information is available for Mergenthaler Corporation for the year ended December

31, 2017:

Collection of principal on long-term loan to a supplier $16,000 Acquisition of equipment for cash 10,000 Proceeds from the sale of long-term investment at book value 22,000 Issuance of common stock for cash 20,000 Depreciation expense 25,000 Redemption of bonds payable at carrying (book) value 34,000 Payment of cash dividends 6,000 Net income 30,000 Purchase of land by issuing bonds payable 40,000

In addition, the following information is available from the comparative balance sheet for

Mergenthaler at the end of 2017 and 2016: 2017 2016

Cash $148,000 $91,000 Accounts receivable (net) 25,000 15,000 Prepaid insurance 19.000 13.000 Total current assets $192.000 $119.000

Accounts payable $ 30,000 $19,000 Salaries and wages payable 6.000 7.000 Total current liabilities $ 36.000 $26.000

REQUIREMENTS:

Prepare Mergenthaler's statement of cash flows for the year ended December 31, 2017, using the indirect method. (Problem is worth 75 points)

2. Here is financial information for Valdez Express Inc.

Current assets

December 31 .2017

$11 4,000

December 31.201 6

$80,000 Plant assets (net) 414,000 360,000 Current liabilities 91,000 65,000 Long-term liabilities 134,500 90,000 Common stock, $1par 149,500 115,000 Retained earnings 153,000 170,000

REQUIREMENTS:

Prepare a schedule showing a horizontal analysis for 2017 using 2016 as the base year.

(Problem is worth 50 points)

ACC 212 DL04 Spring 2017

EXAM #1

3. Kwik Delivery Service reports the following costs and expenses in June 2016.

Indirect materials $ 8,400 Driver's salaries $17,000 Depreciation on delivery Advertising 5,100

equipment 11,200 Delivery equipment Dispatcher's salary 5,000 repairs 300 Property taxes on office Office supplies 650

building 870 Office utilities 2,490 CEO's salary 12,000 Repairs on office Gas and oil for delivery trucks 3,200 equipment 180

REQUIREMENTS: Determine the total amount of (a) delivery service (product) costs and (b) period costs. (Problem is worth 25 points)

4. Erickson, Inc. makes student book bags that sell for $20 each. For the coming year, management

expects fixed costs to be $225,000.Variable costs are $14 per unit.

REQUIREMENTS:

(a) Compute break-even sales in dollars using the mathematical equation.

(b) Compute break-even sales using the contribution margin ratio.

(c) Compute margin of safety ratio assuming actual sales are $937,500. (d) Compute the sales required to earn net income of $150,000, using the mathematical equation.

(Problem is worth 50 points)