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ACCT 221 Final Exam

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Question;1. On January 1, 2013, Darrow Corporation issued $5,000,000, 10-year, 8% bondsat 103. Interest is payable semiannually on January 1 and July 1. The journalentry to record this transaction on January 1, 2013 isa. Cash............................................................................ 5,000,000Bonds Payable..................................................... 5,000,000b. Cash............................................................................ 5,150,000Bonds Payable..................................................... 5,150,000c. Premium on Bonds Payable........................................ 150,000Cash............................................................................ 5,000,000Bonds Payable..................................................... 5,150,000d. Cash............................................................................ 5,150,000Bonds Payable..................................................... 5,000,000Premium on Bonds Payable................................ 150,0002. Vitale Company issued 500 shares of no-par common stock for $5,500. Which ofthe following journal entries would be made if the stock has a stated value of$2 per share?a. Cash 5,500Common Stock 5,500b. Cash 5,500Common Stock 1,000Paid-in Capital in Excess of Par 4,500c. Cash 5,500Common Stock 1,000Paid-in Capital in Excess of Stated Value 4,500d. Common Stock 5,500Cash 5,500ACCT 221 Final Exam Spring 14 33. Reed industries owns 45% of Newton Company. For the current year,Newton reports net income of $250,000 and declares and pays a $60,000cash dividend. Which of the following correctly presents the journal entries torecord Reed?s equity in Newton?s net income and the receipt of dividendsfrom Newton?a. Dec. 31 Stock Investments.......................... 112,500Revenue from Stock Investments 112,500Dec. 31 Cash................................................ 27,000Stock Investments.................... 27,000b. Dec. 31 Stock Investments........................... 112,500Revenue from Stock Investments 112,500Dec. 31 Cash................................................. 60,000Stock Investments..................... 60,000c. Dec. 31 Stock Investments.......................... 85,500Revenue from Stock Investments 85,500Dec. 31 Cash................................................. 27,000Stock Investments..................... 27,000d. Dec. 31 Revenue from Stock Investments 112,500Stock Investments............................................ 112,500Dec. 31 Stock Investments........................... 27,000Cash........................................ 27,0004. Mah, Inc. has the following income statement (in millions):Mah, INC.Income StatementFor the Year Ended December 31, 3Net Sales $300Cost of Goods Sold 120Gross Profit 180Operating Expenses 44Net Income $136Using vertical analysis, what percentage is assigned to Cost of Goods Sold?a. 30%b. 40%c. 100%d. None of the aboveACCT 221 Final Exam Spring 14 45. Talbot, Inc. completed Job No. B14 during 2013. The job cost sheet listed thefollowing:Direct materials $55,000Direct labor $30,000Manufacturing overhead applied $20,000Units produced 3,000 unitsUnits sold 1,800 unitsHow much is the cost of the finished goods on hand from this job?a. $105,000b. $63,000c. $42,000d. $51,0006. In the month of June, a department had 20,000 units in beginning work inprocess that were 70% complete. During June, 80,000 units were transferredinto production from another department. At the end of June there were10,000 units in ending work in process that were 40% complete. Materialsare added at the beginning of the process, while conversion costs areincurred uniformly throughout the process. The equivalent units of productionfor materials for June werea. 90,000 equivalent units.b. 100,000 equivalent units.c. 104,000 equivalent units.d. 80,000 equivalent units.7. A company budgeted unit sales of 204,000 units for January, 2013 and 240,000units for February, 2013. The company has a policy of having an inventory ofunits on hand at the end of each month equal to 30% of next month'sbudgeted unit sales. If there were 61,200 units of inventory on hand onDecember 31, 2013, how many units should be produced in January, 2013 inorder for the company to meet its goals?a. 214,800 unitsb. 204,000 unitsc. 193,200 unitsd. 276,000 unitsACCT 221 Final Exam Spring 14 58. A company's planned activity level for next year is expected to be 200,000machine hours. At this level of activity, the company budgeted the followingmanufacturing overhead costs:Variable FixedIndirect materials $280,000 Depreciation $120,000Indirect labor 400,000 Taxes 20,000Factory supplies 40,000 Supervision 100,000A flexible budget prepared at the 160,000 machine hours level of activitywould show total manufacturing overhead costs ofa. $576,000.b. $720,000.c. $768,000.d. $816,000.9. A company developed the following per-unit standards for its product: 2 poundsof direct materials at $4 per pound. Last month, 1,500 pounds of directmaterials were purchased for $5,700. The direct materials price variance forlast month wasa. $5,700 favorable.b. $300 favorable.c. $150 favorable.d. $300 unfavorable.10. In incremental analysis,a. costs are not relevant if they change between alternatives.b. all costs are relevant if they change between alternatives.c. only fixed costs are relevant.d. only variable costs are relevant.ACCT 221 Final Exam Spring 14 6Problem 1: 15 pointsHere are comparative balance sheets for Delaney Company.Delaney CompanyComparative Balance SheetsDecember 31, 2013Assets 2013 2012Cash $ 43,000 $ 10,000Accounts receivable 18,000 14,000Inventories 25,000 18,000Prepaid expenses 6,000 9,000Long-term investments 0 18,000Equipment 60,000 32,000Accumulated depreciation?Equipment (20,000) (14,000)Total assets $ 122,000 $ 87,000Liabilities and Stockholder?s EquityAccounts payable $ 17,000 $ 7,000Bonds payable 37,000 47,000Common stock ($1 par) 40,000 23,000Retained earnings 28,000 10,000Total liabilities and stockholder?s equity $ 122,000 $ 87,000Additional information:1. The 2013 Income Statement reported $6,000 in depreciation expense, a $4,000loss on sale of investments and Net income of $43,000.2. Cash dividends of $15,000 were declared and paid.3. Long-term investments that has a cost of $18,000 were sold for $14,000ACCT 221 Final Exam Spring 14 74. Sales for 2013 were $120,000.Instructions: Prepare a statement of cash flows for 2013 using the indirect method.Problem 2: 10 pointsHayes Corporation is projecting a cash balance of $31,785 in itsDecember 31, 2013, balance sheet. Hayes? schedule of expectedcollections from customers for the first quarter of 2013 shows totalcollections of $189,885. The schedule of expected payments for directmaterials for the first quarter of 2013 shows total payments of $40,200.Other information gathered for the first quarter of 2013 is: sale ofequipment $3,392, direct labor $70,178, manufacturing overhead$34,583, and purchase of securities $12,372. Selling andadministrative expenses are projected to be $45,117, this figureincludes $1,117 in depreciation expense on the office equipment. Allcosts and expenses will be paid in cash. Hayes wants to maintain abalance of at least $30,000 cash at the end of each quarter.Instructions: Complete the cash budget for the first quarter.Problem 3: 10 pointsDoherty Corporation has the following cost records for June 2013.Indirect factory labor $ 4,612 Factory utilities $ 601Direct materials used 22,361 Depreciation, factoryequipment 1,585Work in process, 6/1/12 2,769 Direct labor 31,084Work in process,6/30/12 3,733 Maintenance, factoryequipment 1,792Finished goods, 6/1/12 4,609 Indirect materials 2,268Finished goods, 6/30/12 7,429 Factory manager's salary 3,315Instructions: Prepare a cost of goods manufactured schedule for June2013.ACCT 221 Final Exam Spring 14 8Problem 4: 4 pointsHawkins Corporation has 72,615 shares of common stock outstanding.It declares a $2.10 per share cash dividend on August 1 to stockholdersof record on September 15. The dividend is paid on October 31.Instructions: Prepare the entries on the appropriate dates to record thedeclaration and payment of the cash dividend.Problem 5: 10 pointsArthur Manufacturing incurs unit costs of $7.90 ($6.10 variable and$1.80 fixed) in making a sub-assembly part for its finished product. Asupplier offers to make 12,000 of the assembly part at $5.75 per unit. Ifthe offer is accepted, Arthur will save all variable costs but no fixedcosts.Instructions: Prepare an analysis showing the total cost savings, if any,Arthur will realize by buying the part.Problem 6: 5 pointsOn July 1, Wagner Corporation purchases 500,000 shares of its $6 parvalue common stock for the treasury at a cash price of $10 per share.On September 1, it sells 275,000 shares of the treasury stock for cashat $13 per share. The balance in the retained earnings account is$6,345,000.Instructions: Journalize the two treasury stock transactions.Problem 7: 4 pointsKetel Company has a unit-selling price of $500, variable costs per unitof $269, and fixed costs of $265,580.Instructions: Compute the break-even point in units using either (a) themathematical equation or (b) contribution margin per unit. Roundanswer up to the next whole unit.ACCT 221 Final Exam Spring 14 9Problem 8: 10 pointsMathers Company has a factory machine with a book value of $89,851and a remaining useful life of 4 years. A new machine is available at acost of $325,275. This machine will have a 4-year useful life with nosalvage value. The new machine will lower annual variablemanufacturing costs from $630,925 to $425,840.Instructions: Prepare an analysis showing whether the old machineshould be retained or replaced.Problem 9: 6 pointsFor Lopez Company, variable costs are 68% of sales, and fixed costsare $215,000. Management's net income goal is $78,610.Instructions: Compute the required sales needed to achievemanagement's target net income of $78,610.ACCT 221 Final Exam Spring 14 10Essay Question: 6 pointsKeller Company requires its marketing managers to submit estimatedcost-volume-profit data on all requests for new products, or expansionsof a product line.Gina Lamb is a new manager. Her calculations show a fixed cost for anew project at $100,000 and a variable cost of $5. Since the sellingprice is only $15 for the proposed product, 10,000 would need to besold to break even. That is approximately twice the volume estimate forthe first year. She shares her dismay with Anne Smythe, anothermanager.Anne strongly advises her to revise her estimates. She points out thatseveral of the costs that had been classified as fixed costs could beconsidered variable, since they are step costs and mixed costs. Whenthe data has been revised classifying those costs as variable costs, theproject appears viable.Required:1. Who are the stakeholders in this decision?2. Is it ethical for Gina to revise the costs as indicated? Briefly explain.3. What should Gina do?

 

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