Balance sheet accounts for Joyner Company contained the following amounts at the end of Years 1 and 2

ACCOUNTING

PROBLEM 15–9 Prepare a Statement of Cash Flows (Indirect Method); Free Cash Flow

Balance sheet accounts for Joyner Company contained the following amounts at the end of Years 1 and 2:

Debit Balance Accounts Year 2 Year 1
Cash $4,000 $21,000
A/R $250,000 $170,000
Inventory $310,000 $260,000
Prepaid Exp $7,000 $14,000
Loan to Hymas Company $40,000 $-
Plant & Equip $510,000 $400,000
Total Debits $1,121,000 $865,000

Credit Balance Accounts
Accum Depreciation $132,000 $120,000
A/P $310,000 $250,000
Accrued Liabilities $20,000 $30,000
Bonds Payable $190,000 $70,000
Deferred Income Taxes $45,000 $42,000
Common Stock $300,000 $270,000
Retained Earnings $124,000 $83,000
Total Credits $1,121,000 $865,000

The company’s income statement for Year 2 follows:

Sales . . . . . . . . . . . . . . . . . . . $900,000
Cost of goods sold . . . . . . . . . 500,000
Gross margin . . . . . . . . . . . . . 400,000
Selling and administrative
expenses . . . . . . . . . . . . . . 328,000
Net operating income . . . . . . . 72,000
Gain on sale of equipment . . . 8,000
Income before taxes . . . . . . . . 80,000
Income taxes . . . . . . . . . . . . . 24,000
Net income . . . . . . . . . . . . . . . $ 56,000

Equipment that had cost $40,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for $18,000. Cash dividends totaling $15,000 were declared and paid during Year 2.
Required:
1. Using the indirect method, compute the net cash provided by operating activities for Year 2.
2. Prepare a statement of cash flows for Year 2.
3. Compute the free cash f ow for Year 2.
4. Briefly explain why cash declined so sharply during the year.

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Sam Strother and Shawna Tibbs are senior vice presidents of the Mutual of Seattle

Sam Strother and Shawna Tibbs are senior vice presidents of the Mutual of Seattle. They are co-directors of the company’s pension fund management division, with Strother having responsibility for fixed income securities (primarily bonds) and Tibbs being responsible for equity investments. A major new client, the Northwestern Municipal League, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation, have asked you to help them.

To illustrate the common stock valuation process, Strother and Tibbs have asked you to analyze the Temp Force Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporarily heavy workloads. You are to answer the following questions.

a. Describe briefly the legal rights and privileges of common stockholders.

AND SO ON

p. Temp Force recently issued preferred stock. It pays an annual dividend of $5, and the issue price was $50 per share. What is the expected return to an investor on this preferred stock?

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The Flying Gator Corporation and its 100%-owned subsidiary, T Corporation, have filed consolidated tax returns for many years

The Flying Gator Corporation and its 100%-owned subsidiary, T Corporation, have filed consolidated tax returns for many years. Both corporations use the hybrid method of accounting and the calendar year as their tax year. During 201 (which is the current year for this problem), they report the operating results. Note the following additional information:

• Flying Gator and T Corporations are the only members of their controlled group.
• Flying Gator’s address is 2101 W. University Ave., Gainesburg, FL 32611. Its employer identification number is 38-2345678. Flying Gator was incorporated on June 11, 2000. Its total assets are $430,000. Stephen Marks is Flying Gator’s president.
• A $50,000 consolidated NOL carryover from the preceding year is available. The NOL is wholly attributable to Flying Gator.
• Flying Gator and T use the first-in, first-out (FIFO) inventory method. T began selling inventory to Flying Gator in the preceding year, which resulted in a $40,700 deferred intercompany profit at the end of the preceding year. Flying Gator is deemed to realize this profit in the current year because it uses the FIFO method. During the current year, T sells additional inventory to Flying Gator, realizing a $300,000 profit. At the end of the current year, Flying Gator holds inventory responsible for $45,100 of this profit.
• Flying Gator receives all its dividends from T. T receives all its dividends from a 60%-owned domestic corporation. All distributions are from E&P.
• Flying Gator receives all its interest income from T. T pays Flying Gator the interest on March 31 of the current year on a loan that was outstanding from October 1 of the preceding year through March 31 of the current year. Flying Gator and T did not accrue any interest at the end of the preceding year because they use the hybrid method of accounting. T pays $5,000 of its interest expense to a third party.
• Officer’s salaries are $80,000 for Flying Gator and $65,000 for T. These amounts are included in salaries and wages in Table.
• Flying Gator’s capital losses include a $9,000 long-term loss on a sale of land to T in the current year. T holds the land at year-end.
• The corporations have no nonrecaptured net Sec. 1231 losses from prior tax years.
• Qualified production activities income for Flying Gator is $340,000 and for T is $(35,000). The applicable percentage for 2010 is 9%.
• Estimated tax payments for the current year are $150,000.

Determine the consolidated group’s 2012 tax liability. Prepare the front page of the consolidated group’s current year corporate income tax return (Form 1120).

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Marilyn Crone owns and operates a public relations firm called Best Foot forward, Inc (A+ Guaranteed)

Marilyn Crone owns and operates a public relations firm called Best Foot forward, Inc. The following amounts summarize her business on August 31, 20XX.

Assets:

Cash 2,200

Accounts receivable          1,500

Land 12,000

Liabilities:

Accounts Payable 8,000

Stockholders’ Equity:

Common Stock              5,000

Retained Earnings 2,700

During September the business completed these transactions:

Issued common stock and received cash of $20,000

Performed service for a client and received cash of $700.

Paid off the beginning balance of accounts payable.

Purchased supplies on account, $1,000.

Collected cash from a customer on account, $1,000.

Received cash of $1,000 and issued common stock.

Consulted for a Senate candidate and billed the client for services rendered, $3,000.

Paid the following business expenses for the month:

Paid office rent, $900.

Paid advertising, $100.

Sold supplies to another business for $100 cash which was the cost of the supplies.

Paid cash dividends of $1,500.

Requirements:

Prepare journal entries for the September transactions.

Prepare the income statement of Best Foot Forward, Inc., for the month ended September 20XX.

Prepare the entity’s statement of retained earnings for the month ended September 30, 20XX.

Prepare the balance sheet at September 30, 20XX

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Norwel company manufactures miniature circuit boards used in wireless phones (A+ Guaranteed)

Norwel company manufactures miniature circuit boards used in wireless phones and personal organizers. On January 2, 2014, Norwel purchased a circuit board stamping machine at a retail price of $12,000. Norwel paid 5% sales tax on this purchase. Norwel paid a contractor $1,400 for a specially wired platform for the machine, to ensure non-interrupted power to the machine. Norwel estimates the machine will have a 4-year useful life, with a residual value of $2,000 at the end of 4 years. Norwel uses straight-line depreciation and employs the half-year convention in accounting for partial-year depreciation (that is, it takes a half year of depreciation in the first year of an asset’s useful life). Norwel’s fiscal year ends on December 31.

1) At what amount should Norwel record the acquisition cost of the machine?

2) What journal entry should Norwel record in 2014?

3) At what amount will the machine be reported in Norwel’s balance sheet at December 31, 2014?

4) On July 1, 2015, Norwel decides to outsource its circuit board operations to Boards-R-Us Inc. As part of his plan, Norwel sells the machine (and the platform) to Boards-R-Us for $7,000. What is the impact of this disposal on Norwel’s 2015 income before taxes?

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On January 1, Klosterman Company issued $426,000, 11%, 10-year bonds at face value (A+ Guaranteed)

On January 1, Klosterman Company issued $426,000, 11%, 10-year bonds at face value. Interest is payable semiannually on July 1 and January 1.

Prepare the journal entry to record the issuance of the bonds.

Prepare the journal entry to record the payment of interest on July 1, assuming that interest was not accrued on June 30.

Prepare the journal entry to record the accrual of interest on December 31

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Heidebrecht Design acquired 30% of the outstanding common stock of Quayle Company (A+ Guaranteed)

Heidebrecht Design acquired 30% of the outstanding common stock of Quayle Company on January 1, 2014, by paying $729,000 for the 40,500 shares. Quayle declared and paid $0.50 per share cash dividends on March 15, June 15, September 15, and December 15, 2014. Quayle reported net income of $356,300 for the year. At December 31, 2014, the market price of Quayle common stock was $25 per share.

Prepare the journal entries for Heidebrecht Design for 2014 assuming Heidebrecht Design cannot exercise significant influence over Quayle. (Use the cost method and assume that Quayle common stock should be classified as a trading security.)

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The following table presents Generic Motors Company’s production budget (A+ Guaranteed)

The following table presents Generic Motors Company’s production budget. GM’s inventory policy is to have ending inventory equal to 20% of next month’s sales.

February March April
Ending inventory 2,000
Beginning inventory 2,500
Budgeted sales 9,000 14,000 15,000
Budgeted production

Required:
(a) Fill in the missing numbers in the table above.
(Hint if you get stuck: What is the relation between ending inventory for one month and beginning inventory for the following month?)

b) Why do firms want to hold inventory of finished goods? (an alternative could be to produce exactly the amount they are going to sell, and hold zero inventories)

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Badgersize Company has the following information for its Forming Department (A+ Guaranteed)

Badgersize Company has the following information for its Forming Department for the month of August:

Work in Process Inventory, August 1: 20,000 units
       Direct materials: 100% complete $ 80,000
       Conversion: 20% complete 24,000
       Balance in work in process, August 1 $ 104,000
  Units started during August 48,000
  Units completed and transferred in August 57,000
  Work in process (70% complete), August 31 ?
  Costs charged to Work in Process in August
       Direct materials $ 141,000
       Conversion costs:
       Direct labor $ 119,000
       Overhead applied 142,000
  Total conversion $ 261,000

 

Assume materials are added at the start of processing.

Instructions


a.
Calculate the equivalent units for the Forming Department for the month of August.

Equivalent Units Direct Materials I got 48,000

Equivalent Unites Conversion ?

b.Find the cost per equivalent unit of input resource. (Round your answers to 2 decimal places.)

Cost per equivalent unit Direct materials I got 2.94

Cost per equivalent unit Conversion ?

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Bo Vonderweidt, the production manager for Sportway Corporation (A+ Guaranteed)

Bo Vonderweidt, the production manager for Sportway Corporation, had requested to have lunch with the company president. Vonderweidt wanted to put forward his suggestion to add a new product line. As they finished lunch, Meg Thomas, the company president, said, “I’ll give your proposal some serious thought, Bo. I think you’re right about the increasing demand for skateboards. What I’m not sure about is whether the skateboard line will be better for us than our tackle boxes. Those have been our bread and butter the past few years.”

Vonderweidt responded with, “Let me get together with one of the controller’s people. We’ll run a few numbers on this skateboard idea that I think will demonstrate the line’s potential.”

Sportway is a wholesale distributor supplying a wide range of moderately priced sports equipment to large chain stores. About 60 percent of Sportway’s products are purchased from other companies while the remainder of the products is manufactured by Sportway. The company has a Plastics Department that is currently manufacturing molded fishing tackle boxes. Sportway is able to manufacture and sell 8,000 tackle boxes annually, making full use of its direct-labor capacity at available work stations. The selling price and costs associated with Sportway’s tackle boxes are as follows:

Selling price per boor ……………………………………                             $86.00

Costs per box:

Molded plastic ………………………………….      $ 8.00

Hinges, latches, handle …………………………         9.00

Direct labor ($15.00 per hour) ………………….        18.75

Manufacturing overhead ……………………….         12.50

Selling and administrative cost …………………        17.00               65.52

Profit per box …………………………………………..                               $20.75

Because Sportway’s sales manager believes the firm could sell 12,000 tackle boxes if it had sufficient manufacturing capacity, the company has looked into the possibility of purchasing the tackle boxes for distribution. Maple Products, a steady supplier of quality products, would be able to provide up to 9,000 tackle boxes per year at a price of $68.00 per box delivered to Sportway’s facility.

Bo Vonderweidt, Sportway’s production manager, has come to the conclusion that the company could make better use of its Plastics Department by manufacturing skateboards. Vonderweidt has a market study that indicates an expanding market for skateboards and a need for additional suppliers. Vonderweidt believes that Sportway could expect to sell 17,500 skateboards annually at a price of $45.00 per skateboard.

After his lunch with the company president, Vonderweidt worked out the following estimates with the assistant controller.

Selling price per skateboard …………………………..                     $45.00

Costs per skateboard:

Molded plastic ……………………………………   $5.50

Wheels, hardware 7.00

Direct labor ($15.00 per hour) ……………………     7.50

Manufacturing overhead ………………………….     5.00

Selling and administrative cost ……………………    9.00      34.00

Profit p& skateboard ……………………………….            ……..              $11.00

In the Plastics Department, Sportway uses direct-labor hours as the application base for manufacturing overhead. Included in the manufacturing overhead for the current year is $50,000 of factory wide, fixed manufacturing overhead that has been allocated to the Plastics Department. For each unit of product that Sportway sells. regardless of whether the product has been purchased or is manufactured by Sportway, there is an allocated $6.00 fixed overhead cost per unit lot distribution that is included in the selling and administrative cost for all products. Total selling and administrative costs for the purchased tackle boxes would be $10.00 per unit.

Required:

In order to maximize the company’s profitability, prepare an analysis that will show which product or products Sportway Corporation should manufacture or purchase.

1. First determine which of Sportway’s options makes the best use of its scarce resources. How many skateboards and tackle boxes should be manufactured? How many tackle boxes should be purchased?

2. Calculate the improvement in Sportway’s total contribution margin if it adopts the optimal strategy rather than continuing with the status quo.

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