Posted: April 10th, 2021
On January 1, 2014, Flip Corporation had 560,000 shares of $1 par value common stock issued and outstanding. There was a $3,000,000 balance in the Retained Earnings account at the beginning of the year. During the first quarter of the year, the following transactions occurred:
Issued 40,000 shares of its own common stock for $400,000.
Declared a cash dividend of $1 per share to stockholders of record on Jan. 10.
Paid the $1 cash dividend declared on Jan. 18.
Purchased 3,000 shares of its own common stock for the treasury at $11 per share.
Sold 2,000 shares of the treasury stock purchased on Feb. 2 for $12 per share.
Declared a 2 for 1 stock split on outstanding shares.
Prepare journal entries to record the above transactions.
The following information is available for Flip Corporation for the year ended December 31, 2014:
Beginning retained earnings $ 340,000
Cost of goods sold 620,000
Declared cash dividends 50,000
Operating expenses 170,000
Other expenses and losses 40,000
Other revenues and gains 60,000
Tax rate 30%
1. Prepare a corporate income statement in good form.
2. Prepare a retained earnings statement for the year.
Question 2: 10 points:
January 1, 2014 Flip Company purchased 35,000 shares of common stock of Flop Corporation as a long-term investment for $900,000. December 31, 2014, Flop Corporation reported net income of $300,000 and paid dividends of $100,000.
a. Assuming that the 35,000 shares represent a 10% interest in Flop Corporation:
1. Prepare the journal entry to record the investment in Flop stock.
2. Prepare any entries that Flip Company should make in accounting for its investment in Flop stock during the year.
3. What is the balance of the Stock Investments account on Flip Company’s books at the end of the year?
b. Repeat requirement (a) above except assume that the 35,000 shares represent a 20% interest in Flop Corporation.
Question 3: 15 points: The following information is available for Flip Corporation for the year ended December 31, 2014:
Collection of principal on long-term loan to a supplier $15,000
Acquisition of equipment for cash 10,000
Proceeds from the sale of long-term investment at book value 20,000
Issuance of common stock for cash 27,000
Depreciation expense 28,000
Redemption of bonds payable at carrying (book) value 35,000
Payment of cash dividends 15,000
Net income 25,000
Purchase of land by issuing bonds payable 45,000
In addition, the following information is available from the comparative balance sheet for Flip at the end of 2013 and 2014:
Cash $ 66,000 $14,000
Accounts receivable (net) 20,000 16,000
Prepaid insurance 18,000 13,000
Total current assets $104,000 $43,000
Accounts payable $ 30,000 $20,000
Salaries payable 3,000 7,000
Total current liabilities $ 33,000 $27,000
Instructions: Prepare Flip’s statement of cash flows for the year ended December 31, 2012 using the indirect method.
Question 4: 10 points:
Flip Corporation prepared the following income statement for 2014:
For the Year Ended December 31, 2014
Sales (20,000 units)…………………………………………………………………………………. $600,000
Variable expenses…………………………………………………………………………………… 360,000
Contribution margin………………………………………………………………………………… 240,000
Fixed expenses……………………………………………………………………………………….. 150,000
Net income…………………………………………………………………………………………….. $ 90,000
Answer the following independent questions and show computations to support your answers.
1. What is the company’s break-even point in units?
2. How many more units would the company have had to sell to earn net income of $150,000 in 2014?
3. If the company expects a 25% increase in sales in 2015, what would be the expected net income in 2015?
4. How much sales dollars would the company have to generate in order to earn a target net income of $160,000 in 2015?
Question 5: 7 points:
Flip Inc. provided the following information:
April May June
Projected merchandise purchases $184,000 $156,000 $132,000
· Flip pays 40% of merchandise purchases in the month purchased and 60% in the following month.
· General operating expenses are budgeted to be $62,000 per month of which depreciation is $8,000 of this amount. Hoover pays operating expenses in the month incurred.
· Flip makes loan payments of $8,000 per month of which $700 is interest and the remainder is principal.
Instructions: Calculate budgeted cash disbursements for May.
Question 6: 6 points:
Flip Enterprises produces miniature parasols. Each parasol consists of $1.20 of variable costs and $.90 of fixed costs and sells for $4.50. A Dutch wholesaler offers to buy 8,000 units at $1.40 each, of which Pederson has the capacity to produce. Flip will incur extra shipping costs of $.12 per bear.
Instructions: Determine the incremental income or loss that Flip Enterprises would realize by accepting the special order.
Question 7: 6 points:
Flip Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Flip for $270 each. Flip needs 1,500 clocks annually. Flip has provided the following unit costs for its commercial clocks:
Direct materials $100
Direct labor 110
Variable overhead 30
Fixed overhead (70% avoidable) 150
Instructions: Prepare an incremental analysis which shows the effect of the make-or-buy decision.
Question 8: 6 points:
Flip Inc. relies heavily on a copier to process its paperwork. Recently, the copy clerk has not been able to process all the necessary copies within the regular workweek. Management is considering updating the current copier with a new faster model.
Original purchase cost
Estimated annual operating costs
Useful life in years
If sold now, the current copier would have a sales value of $1,000. If operated for the remainder of its useful life, the current copier would have $0 salvage value. The new copier is expected to have $1,200 salvage value after 4 years. Prepare an analysis to show whether the company should retain or replace the copier.
Multiple choice questions allocated 1 point each. Make your selection by recording the letter in the answer box provided.
Question 9: Which one of the following would not be classified as manufacturing overhead?
a. Indirect labor
b. Direct materials
c. Insurance on factory building
d. Indirect materials
Question 10: The product cost that is most difficult to associate with a product is
a. direct materials.
b. direct labor.
c. manufacturing overhead.
Question 11: Direct materials and direct labor of a company total $9,000,000. If manufacturing overhead is $4,000,000, what is direct labor cost?
d. Cannot be determined from the information provided
Question 12: A manufacturing company calculates cost of goods sold as follows:
a. Beginning FG inventory + cost of goods purchased – ending FG inventory.
b. Ending FG inventory – cost of goods manufactured + beginning FG inventory.
c. Beginning FG inventory – cost of goods manufactured – ending FG inventory.
d. Beginning FG inventory + cost of goods manufactured – ending FG inventory.
Question 13: As of December 31, 2014, Flip Industries had $3,500 of raw materials inventory. At the beginning of 2014, there was $2,000 of materials on hand. During the year, the company purchased $314,500 of materials; however, it paid for only $302,500. How much inventory was requisitioned for use on jobs during 2014?
Question 14: Flip Manufacturing has the following labor costs:
Factory—Gross wages $450,000
Factory—Net wages 420,000
Employer Payroll Taxes Payable 40,000
The entry to record the cost of factory labor and the associated payroll tax expense will include a debit to Factory Labor for
Question 15: The following information is available for completed Job No. 404: Direct materials, $60,000; direct labor, $90,000; manufacturing overhead applied, $120,000; units produced, 6,000 units; units sold, 5,000 units. The cost of the finished goods on hand from this job is
Question 16: Cost of goods manufactured equals $67,000 for 2014. Finished goods inventory is $5,500 at the beginning of the year and $2,000 at the end of the year. Beginning and ending work in process for 2014 are $5,000 and $4,000, respectively. How much is cost of goods sold for the year?
Question 17: Flip Industries has equivalent units of 8,000 for materials and for conversion costs. Total manufacturing costs are $160,000. Total materials costs are $120,000. How much is the conversion cost per unit?
Question 18: Flip Company’s Assembly Department has materials cost at $5 per unit and conversion cost at $8 per unit. There are 20,000 units in ending work in process, all of which are 70% complete as to conversion costs. How much are total costs to be assigned to inventory?
Question 19: A department adds materials at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of July, there was no beginning work in process; 40,000 units were completed and transferred out; and there were 20,000 units in the ending work in process that were 40% complete. During July, $96,000 materials costs and $84,000 conversion costs were charged to the department.
The unit production costs for materials and conversion costs for July was
Materials Conversion Costs
a. $1.60 $1.40
b. $1.60 $1.75
c. $2.00 $1.40
d. $2.40 $2.13
Question 20: Which of the following is considered a difference between a job order cost and a process cost system?
a. The manufacturing cost elements.
b. Documents used to track costs.
c. The accumulation of the costs of materials, labor, and overhead.
d. The flow of costs.
Question 21: The following information is taken from the production budget for the first quarter:
Beginning inventory in units 1,800
Sales budgeted for the quarter 678,000
Capacity in units of production facility 708,000
How many finished goods units should be produced during the quarter if the company desires 4,800 units available to start the next quarter?
Question 22: Flip, Inc. determines that 54,000 pounds of direct materials are needed for production in July. There are 3,200 pounds of direct materials on hand at July 1 and the desired ending inventory is 2,800 pounds. If the cost per unit of direct materials is $3.20, what is the budgeted total cost of direct materials purchases?
Question 23: Which of the following statements about a budgeted income statement is not true?
a. The budgeted income statement is prepared after the financial budgets are prepared.
b. The budgeted income statement is prepared on the accrual basis of accounting.
c. The budgeted income statement can be prepared in a multiple-step format.
d. The budgeted income statement is prepared using the individual operating budgets.
Question 24: The cash budget reflects
a. all revenues and all expenses for a period.
b. expected cash receipts and cash disbursements from all sources.
c. all the items that appear on a budgeted income statement.
d. all the items that appear on a budgeted balance sheet.
Question 25: If costs are not responsive to changes in activity level, then these costs can be best described as
Question 26: A flexible budget
a. is prepared when management cannot agree on objectives for the company.
b. projects budget data for various levels of activity.
c. is only useful in controlling fixed costs.
d. cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results.
Question 27: In developing a flexible budget within a relevant range of activity,
a. only fixed costs are included.
b. it is necessary to relate variable cost data to the activity index chosen.
c. it is necessary to prepare a budget at 1,000 unit increments.
d. variable and fixed costs are combined and are reported as a total cost.
Question 28: Within the relevant range of activity, the behavior of total costs is assumed to be
a. linear and upward sloping.
b. linear and downward sloping.
c. curvilinear and upward sloping.
d. linear to a point and then level off.
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