accounting 221 help


Please see below. I also attached the answer sheet.



For this exam, omit all general journal entry explanations.


Ensure to include correct dollar signs, underlines & double underlines.




Question 1: 30% points:


On December 31, 2014, Flimsy Incorporated, had the following balances (all balances are normal):




Preferred Stock, ($100 par value, 5% noncumulative, 50,000 shares authorized, 10,000 shares issued and outstanding)


Common Stock ($10 par value, 200,000 shares authorized, 100,000 shares issued and outstanding)


Paid-in Capital in Excess of par, Common


Retained Earnings



The following events occurred during 2014 and were not recorded:


            a. On January 1, Flimsy declared a 5% stock dividend on its common stock when the market value of the common stock was $15 per share. Stock dividends were distributed on January 31 to shareholders as of January 25.


            b. On February 15, Flimsy reacquired 1,000 shares of common stock for $20 each.


            c. On March 31, Flimsy reissued 250 shares of treasury stock for $25 each.


            d. On July 1, Flimsy reissued 500 shares of treasury stock for $16 each.


            e. On October 1, Flimsy declared full year dividends for preferred stock and $1.50 cash dividends for outstanding shares and paid shareholders on October 15.


            f. One December 15, Flimsy split common stock 2 shares for 1.


            g. Net Income for 2014 was $275,000.






a. Prepare journal entries for the transactions listed above.


b. Prepare a Stockholders’ section of a classified balance sheet as of December 31, 2014.




Question 2: 5% points:


On January 1, 2014, Flip Company purchased 10,000 shares of the stock of Flimsy, and did obtain significant influence.  The investment is intended as a long-term investment.  The stock was purchased for $90,000, and represents a 30% ownership stake.  Flimsy made $25,000 of net income in 2014, and paid dividends of $10,000.  The price of Flimsy’s stock increased from $10 per share at the beginning of the year, to $12 per share at the end of the year. 




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a. Prepare the January 1 & December 31 general journal entries for Flip Company.


b. How much should the Flip Company report on the balance sheet for the investment in Flimsy as the end of 2014




Question 3: 10% points:


The following is selected information from Flimsy Company for the fiscal years ended December 31, 2014: Flimsy Company had net income of $1,225,000.  Depreciation was $500,000, purchases of plant assets were $1,250,000, and disposals of plant assets for $500,000 resulted in a $50,000 gain.  Stock was issued in exchange for an outstanding note payable of $725,000.  Accounts receivable decreased by $25,000.  Accounts payable decreased by $40,000.  Dividends of $300,000 were paid to shareholders.  Flimsy Company had interest expense of $50,000. Cash balance on January 1, 2014 was $250,000. 




Requirements: Prepare Flimsy Company’s statement of cash flows for the year ended December 31, 2014 using the indirect method.




Question 4: 15% points:


Flimsy Corporation had the following bond transactions during the fiscal year 2014:


            a. On January 1: issued ten (10), $1,000 bonds at 102.  The 5-year bonds, is dated January 1, 2014. The contract interest rate is 6%.  Straight-line amortization method is used. Interest is payable semi-annual on January 1 and July 1.


            b. On July 1: Flimsy Corporation issued $500,000 of 10%, 10-year bonds.  The bonds dated January 1, 2014 were issued at 88.5, and pay interest on July 1 and January 1.  Effective interest rate method is used for these bonds is 12%.


            c. On October 1: issued 10-year bonds $10,000 face value bonds, for $10,853 cash. The bonds have a stated rate of 9%, but an effective rate of 6%.  Effective-interest method is used. Interest is payable on October 1 and April 1.




Requirements: Prepare all general journal entries for the three bonds issued and any interest accruals and payments for the fiscal year 2014. (Round all calculations to nearest whole dollar.)




Question 5: 10% points:


Flip had sales of $10,000 (100 units at $100 per).  Manufacturing costs consisted of direct labor $1,500, direct materials $1,400, variable factory overhead $1,000, and fixed factory overhead $500.  The company did not maintain any inventories, so total cost of goods sold was $4,400.  Selling expenses totaled $1,600 ($600 variable and $1,000 fixed), and administrative expenses totaled $1,500 ($500 variable and $1,000 fixed).  Operating income was $2,500. Round all final answers to nearest dollar or whole number. 










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            a. What is the breakeven point in sales dollars and in units if the fixed factory overhead increased by $1,700?


            b. What is the breakeven point in sales dollars and in units if costs remain as originally projected?


            c. What would be the operating income be if sales units increased by 25%




Question 6: 5% points:




Flip manufactures footballs.  The forecasted income statement for the year before any special orders included sales of $4,000,000 (sales price is $10 per unit.)  Manufacturing cost of goods sold is anticipated to be $3,200,000.  Selling expenses are expected to be $300,000, and operating income is projected at $500,000.  Fixed costs included in these forecasted amounts are $1,200,000 for manufacturing cost of goods sold and $100,000 for selling expenses.  Flimsy is offering a special order to buy 50,000 footballs for $7.50 each. There will be no additional selling expenses, and sufficient capacity exists to manufacture the extra footballs. 




Requirements: Prepare an incremental analysis schedule to demonstrate by what amount would operating income be increased or decreased as a result of accepting the special order.




Question 7: 5% points:




Flop Company manufactures 10,000 units of widgets for use in its annual production.  Costs are direct materials $20,000, direct labor $55,000, variable overhead $45,000, and fixed overhead $70,000.  Flimsy Company has offered to sell Flop 10,000 units of widgets for $18 per unit.  If Flop accepts the offer, some of the facilities presently used to manufacture widgets could be rented to a third party at an annual rental of $15,000.  Additionally, $4 per unit of the fixed overhead applied to widgets would be totally eliminated.




Requirements: Prepare an incremental analysis schedule to demonstrate if Flop should accept Flimsy’s offer.




















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Multiple choice questions allocated 1% point each. Make your selection by recording the letter in the answer box provided.


















Question 8:


Anticipated unit sales are January, 5,000; February, 4,000; and March 8,000.  Finished goods are consistently maintained at 80% of the following month’s sales.  If units cost $10 each to produce, how much is February’s total cost of production?




a.   $0


b.   $40,000


c.   $72,000


d.   $80,000


e.   None of these.




Question 9:


Total production of 1,000 units of finished goods required 3,900 actual hours at $12 per hour.  The standard is 4 hours per unit of finished goods, at a standard rate of $11 per hour.  Which of the following statements is true?




a.   The labor rate variance is $3,900 favorable.


b.   The labor rate variance is $4,000 unfavorable.


c.   The labor efficiency variance is $1,100 favorable.


d.   The labor efficiency variance is $1,100 unfavorable.


e.   None of these.




Question 10:


If beginning work in process was 600 units, 1,400 additional units were put into production, and ending work in process was 500 units, how many units were completed?




a.   500


b.   900


c.   1,400


d.   2,000


e.   None of these.




Question 11:


Frick Company had no beginning inventory and adds all materials at the very beginning of its only process.  Assume 10,000 units were started, and 5,000 units completed.  Ending work in process is 60% complete.  The cost per equivalent unit of material is:




a.   $1.00 if total material cost is $3,000.


b.   $1.00 if total material cost is $5,000.


c.   $1.00 if total material cost is $8,000.


d.   $1.00 if total material cost is $10,000.


e.   None of these.




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Question 12:


Assume that actual overhead consisted of $30,000 for indirect labor, $20,000 for indirect material, and $10,000 for depreciation of factory equipment.  Based on the preset rates, $65,000 of overhead was applied to work in process.




a.   Overhead is underapplied.


b.   This is viewed as an unfavorable situation.


c.   There will be a $5,000 debit balance in Factory Overhead.


d.   All of the above.


e.   None of these




Question 13:


The contract interest rate for bonds:




A.   must equal the effective interest rate.


B.   is greater than the effective interest rate when bonds are issued at a premium.


C.   has no relation to the cash flow associated with a particular bond.


D.   will fluctuate over the life of a bond.


E.   None of these.




Question 14:


Frick Corporation issued $100,000 of 7%, 15-year bonds on June 1, 2014 (dated April 1 2014) at 101 plus accrued interest, which is paid on April 1 and October 1.  The proper entry to record issuance of the bonds includes a debit to Cash for:




a.   $100,000.


b.   $101,000.


c.   $101,167.


d.   $102,167.


e.   None of these.




Question 15:


Which of the following statements about treasury stock is true?




a.   Excess of the sales price over cost should be credited to retained earnings.


b.   Gains are not recorded on treasury stock transactions but losses are.


c.   Losses on treasury stock transactions are recorded in income.


d.   Reacquiring treasury stock causes stockholders equity to decrease.


e.   None of these.










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Question 16:


Frick Company has 100,000 shares of common stock outstanding. On April 15, the board declared a $.30 dividend to be paid to stockholders of record on May 4.  The dividend was distributed on May 15.  The proper journal entry for Frick Company on May 15 does not include:




a.   a credit to Dividends Payable for $30,000.


b.   a debit to Dividends for $30,000.


c.   a credit to Cash for $30,000.


d.   Both A and B, above.


e.   None of these.




Question 17:


In an effort to concentrate its resources in more profitable areas, Frick Corporation recently sold its family pizza restaurant segment.  The disposal constitutes:




a.   an extraodinary item.


b.   a discontinued operation which should be treated as a prior period adjustment.


c.   a discontinued operation which should be disclosed net-of-tax effects.


d.   a portion of income from continuing operations.


e.   None of these.




Question 18:


Frick Corporation has 100,000, 5%, $100 par preferred shares outstanding.  The stock is callable at 102, but was originally issued at 99.  The current dividend has been fully paid.  Total stockholders’ equity is $20,000,000.  The residual common equity is:




a.   $20,000,000


b.   $10,100,000


c.   $10,000,000


d.   $9,800,000


e.   None of these.




Question 19:


Frick Company’s balance sheet included cash ($4,000,000), accounts receivable ($16,000,000), inventories ($10,000,000), prepaid expenses ($2,000,000), accounts payable ($9,000,000), and accrued expenses ($7,000,000).  These are the only current items.




a.   The quick ratio is 2:1.


b.   The quick ratio is 1.25:1.


c.   The current ratio is 1.875:1.


d.   Both A and C.


e.   None of these.




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Question 20:


Selected information for 2014 is: cost of goods sold, $5,400,000; average inventory, $1,800,000; net sales, $7,200,000; average receivables, $960,000; and net income, $720,000.  Assuming a 360-day year, what was the inventory turnover ratio for 2014?




a.   333


b.   3


c.   7.5


d.   20


e.   None of these.




Question 21:


On the schedule of cost of goods manufactured:




a.   beginning work-in-process plus direct materials used equals manufacturing costs.


b.   cost of goods manufactured is the same thing as total manufacturing costs.


c.   work-in-process will necessarily increase if total manufacturing costs increase.


d.   factory overhead plus beginning work-in-process equals manufacturing costs.


e.   None of these.




Question 22:


Which costing method seems ideally suited to the production of homogenous products in continuous throughput?




a.   Activity-based costing.


b.   Job order costing.


c.   Process costing.


d.   Absorption costing.


e.   None of these.



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