The average stockholders’ equity for Horn Co. last year was $3,200,000 (A+ Guaranteed)

The average stockholders’ equity for Horn Co. last year was $3,200,000. Included in this figure was $320,000 of preferred stock. Preferred dividends were $28,000. If the return on common stockholders’ equity was 11.5% for the year, net income was:

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Assume Martin Guitar Company has a standard of 3 hours of direct labor (A+ Guaranteed)

Assume Martin Guitar Company has a standard of 3 hours of direct labor per unit produced and $20 per hour for the labor rate. During last period, the company used 24,000 hours of direct labor at a $456,000 total cost to produce 6,000 units. Compute the direct labor rate and efficiency variances.

Rate Variance: $120,000 unfavorable; Efficiency Variance: $24,000 unfavorable.
Rate Variance: $24,000 favorable; Efficiency Variance: $120,000 unfavorable.
Rate Variance: $24,000 unfavorable; Efficiency Variance: $120,000 favorable.
Rate Variance: $120,000 favorable; Efficiency Variance: $24,000 unfavorable.
Rate Variance: $96,000 favorable; Efficiency Variance: $96,000 unfavorable.

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Rhince and Rynelf decide to merge their proprietorships into a partnership (A+ Guaranteed)

Rhince and Rynelf decide to merge their proprietorships into a partnership called Dawn Treader Company. The balance sheet of Rynelf Co. shows:

Accounts receivable $16,200
Less: Allowance for doubtful accounts

1,215

$14,985
Equipment 15,910
Less: Accumulated depreciation

5,569

10,341

The partners agree that the net realizable value of the receivables is $13,669 and that the fair market value of the equipment is $8,751. Indicate how the four accounts should appear in the opening balance sheet of the partnership.

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Balfour Corporation acquired 100% of Tobac Inc (A+ Guaranteed)

Balfour Corporation acquired 100% of Tobac Inc., a foreign corporation, for 33,000,000 FC. The acquisition, which was accounted for as a purchase, occurred on July 1, 20×5, when Tobac’s equity, in FC, was as follows:

Common Stock                               $19,000,000 FC

Paid-in capital in excess of par        8,480,000

Retained Earnings                              2,520,000

Any excess of of cost over book value is traeable to equipment which is to be depreciated over 10 years. Balfour uses the simple equity method to account for its investment in Tobac.

On April 1, 20X7, Tobac acquired additional equipment costing 4,000,000 FC. Equipment is depreciated by the straight-line method over 10 years. No other equipment had been acquired or disposed of since 20X4. Tobac employs the LIFO inventory method. Ending inventory on December 31, 20X7, consists of the following:

Acquired in the 1st quarter of 20X4              1,000,000 FC

Acquired in the 1st quarter of 20X5                 500,000

Acquired in the 1st quarter of 20X7               6,500,000

The cost of sales is traceable to goods purchased during 20 x 7 as follows:

Acquired uniformly over the last nine months            23,400,000

Acquired in the 1st quarter                                               4,200,000

Other expenses were incurred evenly over the year.

On April 1, 20X7, Tobac borrowed $1,280,000 from parent company in order to help finance the purchase of equipment. The note is due in one year and bears interest at the rate of Various spot rates are as follows:

1 FC =                                                                                $0.60

1st Quarter, 20X4 Average                    $0.46                             December 31, 20X6                 $0.60

20X4 Average                                            0.49                            1st quarter, 20X7 Average        0.62

Janujary 1, 20×5                                        0.51     April 1, 20×7    0.64

1st quarter, 20×5 Average    0.53 20X7 Average 0.67

July 1, 20X5    0.55     Last nine months, 20X7 Average 0.66

December 31, 20×5      0.58 December 31, 2017    0.65

Last six months, 20X5    0.57

20X6 Average    0.58

The December 31, 20×7, trial balances for Tobac and Balfour are as follows:

Balfour    Tobac

Corp. Inc.

Cash                                                                                                      $4,462,200                            $3,087,385 FC

Net Accounts Receivable                                                                   15,350,000                             12,000,000

INventory    16,300,000                           8,000,000

Due from Tobac                                                                                      1,356,800

Investment in Tobac-See Note A                                                       23,712.363

Depreciable Assets                                                                             68,000,000      34,000,000

Accumulated Depreciation    (42,000,000)    ( 12,300,000)

Due to Balfour                 (2,087,385)

Other Liabilities    (27,000,000) ( 3,700,000)

Common STock                                                                                   (35,000,000)                         (19,000,000)

Paid-In Capital in Excess of Par                                                        (2,000,000)                            (8,480,000)

Retained Earnings, January 1, 2017                                                  (4,500,000)                            (7,520,000)

Sales            (98,000,000) (40,000,000)

Cost of Sales 64,000,000 27,600,000

Depreciation Expense    8,076,800 3,300,000

Interest Expense on Balfour

Loan (accrued on December 31, 20×7)-See Note B 118,154

Exchange Gain on Balfour Loan-See Note 8       (30,769)

Other Expenses                           10,000,000 5,012,615

Interest Income (76,800)

Subsidiary Income    (2,682,363)

Total $              0 0FC

Note A-Balfour’s investmentin Tobac consists of the following:

Initial investment (33,000,000 FC x $0.55)        $18,150,000

Last six months, 20X5 income (2,000,000 FC x $0.57     1,140,000

20X6 income (3,000,000 FC x $0.58) 1,740,000

20X7 income    2,682,363

Balance $23,712,363

Note B-The original loan from Balfour was 2,000,000 FC, or $1,280,000(2,000,000 FC x $0.64). On December 31, 20×7, it would require 1,969,231 FC ($1,280,000 + $0.65) to settle the loan. This represents on exchange gain of 30,769 FC (2,000,000 FC – 1,969,231 FC).

The year-end balance due to Balfour is determined as follows:

Principal Balance    $1,969,231 FC

Accrued interest ($1,280,000) x 8% x 9/12 + $0.65) 118,154

Balance    $2,087,385FC

The interest is accrued at year-end; therfore,interest expense should be translatedat the year-end rate.

   Assuming the FC is Tobac’s functional currency, translate Tobac’s trial balance, and prepare a consolidating worksheet.

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Roy’s Toys is a manufacturer of toys and children’s products (A+ Guaranteed)

Roy’s Toys is a manufacturer of toys and children’s products. The following are selected items appearing in a recent balance sheet (dollar amounts are in millions):

Cash and short-term investments     $     48.00
Receivables         153.00
Inventories         72.00
Prepaid expenses and other current assets         39.00
Total current liabilities         134.00
Total liabilities         201.00
Total stockholders’ equity         348

a(1) Using the information above, compute the amounts of Roy’s Toys quick assets.
a(2) Using the information above, compute the amounts of Roy’s Toys total current assets.
b(1) Compute for Roy’s Toys quick ratio.
b(2) Compute for Roy’s Toys current ratio.
b(3) Compute for Roy’s Toys dollar amount of working capital.

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Entries for Investment in Bonds, Interest, and Sale of Bonds Sorrey Company (A+ Guaranteed)

Entries for Investment in Bonds, Interest, and Sale of Bonds Sorrey Company acquired $75,000 of Clayton Co., 6% bonds on April 1, 2014, at their face amount. Interest is paid semiannually on April 1 and October 1. On October 1, 2014, Sorrey Company sold $25,000 of the bonds for 98. Journalize entries to record the following: For a compound transaction, if an amount box does not require an entry, leave it blank.

a. The initial acquisition of the bonds on April 1.

b. The semiannual interest received on October 1.

c. The sale of the bonds on October 1.

d. The accrual of $750 interest on December 31, 2014.

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Henry’s Corporation’s contribution margin ratio is 76% (A+ Guaranteed)

Henry’s Corporation’s contribution margin ratio is 76% and its fixed monthly expenses are $ 45,000. Assume that the company’s sales for July are expected to be $ 104,000.

Required:

Estimate the company’s net operating income for July, assuming that the fixed monthly expenses do not change.

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Ferrel Wares is a division of a major corporation (A+ Guaranteed)

Ferrel Wares is a division of a major corporation. The following data are for the latest year of operations:

Sales $10,000,000
Net operating income $950,000
Average operating assets $4,000,000
The company’s minimum required rate of return 14%

The manager of Eban Wares has an opportunity to add a project with the following characteristics:

Cost of new equipment: $1,200,000

Additional revenues: $3,000,000

Additional expenses: $2,100,000

Required:

  1. What is the division’s margin (before the new project)?
  2. What is the division’s turnover (before the new project)?
  3. What is the division’s return on investment (ROI) (before the new project)?
  4. What is the division’s residual income (before the new project)?
  5. What is the division’s margin (after the new project is added)?
  6. What is the division’s turnover (after the new project is added)?
  7. What is the division’s return on investment (ROI) ( after the new project is added)?
  8. What is the division’s residual income (after the new project is added)?

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2. Dakin’s Department Store uses a perpetual inventory system (A+)

Dakin’s Department Store uses a perpetual inventory system. Data for product E2-D2 include the following purchases.

Date Number of Units Unit Price

May 7 50 $10

July 28 30 $15

On June 1 Dakin sold 30 units, and on August 27, 33 more units. Compute the cost of goods sold using (1) FIFO, (2) LIFO, and (3) average cost. (For the average cost computation, round the per unit cost to 0 decimal places, e.g. 15.)

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2. Winnebago Industries, Inc. is a leading manufacturer of motor homes (A+)

Winnebago Industries, Inc. is a leading manufacturer of motor homes. Winnebago reported ending inventory at August 25, 2007, of $101,208,000 under the LIFO inventory method. In the notes to its financial statements, Winnebago reported a LIFO reserve of $32,705,000 at August 25, 2007. What would Winnebago Industries\’ ending inventory have been if it had used FIFO?

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