ACCT20100



Problem #1: Inventory Costing MethodsDateUnitsUnit CostTotal Cost1-JanBeginning Inventory400 $ 14 $ 5,600 10-MarPurchase200 $ 15 $ 3,000 9-MayPurchase300 $ 16 $ 4,800 22-SepPurchase250 $ 20 $ 5,000 28-NovPurchase100 $ 21 $ 2,100 1250 $ 20,500 Assume that 600 units were sold during the year.REQUIRED: Determine the Cost of Goods Sold and the Cost of Ending Inventory assuming:FIFOLIFOWeighted AverageProblem #2: Depreciation MethodsA machine costing $320,000 with a four year life and an estimated $33,000 salvage value is installed in Luther Company’s factory on January 1. The factory manager estimates the machine will produce 512,500 units of product during its life. It actually produces the following units: year 1, 127,500; year 2, 129,000; year 3, 128,500; and year 4, 127,900. The total number of units produced by the end of year 4 exceeds its original estimate – this difference was not predicted. (The machine must not be depreciated below its estimated salvage value).REQUIRED:Calculate the amount of depreciation expense for the asset for its useful life assuming the use of the following depreciation methods:Straight-line depreciationUnits of ProductionDouble Declining BalanceProblem #3: BondsAssume Mike Company has issued a bond on January 1, 2010 with a face value of $5,000,000. The bonds have a stated rate of 5% with a three year term and pay interest annually. The bonds are issued to yield 8% (the market rate). REQUIRED:Prepare a bond amortization schedule for this bond issuance.Prepare the journal entry necessary on the date of issuance.Prepare the journal entry for the first interest payment on December 31, 2010.Prepare the journal entry which will be made at maturity of the bonds to pay them off (assume that the final interest payment has already been made).Problem #4: Stockholders’ EquityCavanaugh Company began year 2010 with the following balances in its stockholders’ equity mon Stock -- $10 par, 500,000 shares authorized, 200,000 shares issued and outstanding $ 2,000,000 Capital in Excess of Par $ 1,000,000 Retained Earnings $ 5,000,000 Total Stockholders' Equity $ 8,000,000 REQURIED:Prepare journal entries to account for the following transactions during 2010 and 2011:DateTransaction DescriptionJan 10, 2010Issued 1,000 shares of 8% $100 par value cumulative Preferred Stock at an issue price of $125.Feb 15, 2010Declared and paid a 20% stock dividend. The market value of the stock is $18 per share. (prepare one journal entry assuming this is a small stock divided and another assuming it is a large stock dividend).May 1, 2010Purchased 30,000 shares of treasury stock at $20 per share.Sept 1, 2010Sold 10,000 shares of treasury stock at $26 per share.March 15, 2011Sold 10,000 shares of treasury stock at $7 per shareDec 31, 2011The Board of Directors declared and paid a dividend totaling $50,000. Determine how much of the dividend paid on December 31, 2011 will get paid to preferred shareholders and how much gets paid to common shareholders.Prepare the Stockholders’ Equity Section for Cavanaugh Company as of December 31, 2011.Problem #5: Statement of Cash Flows (Indirect Method)Additional Information: Equipment costing $110,000 is sold at its book value in 2011. The company purchased $90,000 in equipment during 2011.All stock issued was for cash.LaFortune CompanyIncome StatementFor the year ending December 31, 2011Sales $ 976,000 Less: Cost of Goods Sold $ 628,000 ?Gross Profit $ 348,000 Less: Operating Expenses Depreciation Expense $ 16,000 Wages Expense $ 78,200 Other Expenses $ 100,000 ?Pre-tax Income $ 153,800 Less: Income tax expense $ 34,600 Net Income $ 119,200 LaFortune CompanyComparative Balance SheetAs of the year ending20112010ChangeASSETS Current Assets Cash $ 234,400 $ 48,000 $ 186,400 Accounts Receivable, net $ 82,000 $ 102,000 $ (20,000) Inventory $ 182,400 $ 200,000 $ (17,600) Total Current Assets $ 498,800 $ 350,000 Propery, Plant & Equipment Equipment $ 218,000 $ 238,000 $ (20,000) Accumulated Depreciation $ (34,000) $ (18,000) $ (16,000) Total Property, Plant & Equipment $ 184,000 $ 220,000 TOTAL ASSETS $ 682,800 $ 570,000 LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities Accounts Payable $ 20,000 $ 32,000 $ (12,000) Wages Payable $ 18,000 $ 10,000 $ 8,000 Other payables $ 10,000 $ 10,000 $ - Income Taxes Payable $ 2,800 $ 5,200 $ (2,400) Total Current Liabilities $ 50,800 $ 57,200 Notes Payable, Long-term $ 58,000 $ 138,000 $ (80,000) Stockholders' Equity Contributed Capital $ 458,000 $ 358,000 $ 100,000 Retained Earnings $ 116,000 $ 16,800 $ 99,200 Total Stockholders' Equity $ 574,000 $ 374,800 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 682,800 $ 570,000 REQUIRED:Prepare the Statement of Cash Flows using the indirect method to calculate cash flows from operating activities.Prepare the Cash flows from operating activities using the direct method. ................
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