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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:
Jan. 8
Issued 40,000 shares of its own common stock for $400,000.
Jan. 18
Declared a cash dividend of $1 per share to stockholders of record on Jan. 10.
Jan. 31
Paid the $1 cash dividend declared on Jan. 18.
Feb. 2
Purchased 3,000 shares of its own common stock for the treasury at $11 per share.
Feb. 14
Sold 2,000 shares of the treasury stock purchased on Feb. 2 for $12 per share.
March 25 Declared a 2 for 1 stock split on outstanding shares.
Instructions
Prepare journal entries to record the above transactions.
Part B.
The following information is available for Flip Corporation for the year ended December
31, 2014:
Beginning retained earnings
Cost of goods sold
Declared cash dividends
Operating expenses
Other expenses and losses
Other revenues and gains
Sales
Tax rate
Instructions:
1.
Prepare a corporate income statement in good form.
2.
Prepare a retained earnings statement for the year.
$ 340,000
620,000
50,000
170,000
40,000
60,000
1,000,000
30%
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.
Instructions:
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
Acquisition of equipment for cash
Proceeds from the sale of long-term investment at book value
Issuance of common stock for cash
Depreciation expense
Redemption of bonds payable at carrying (book) value
Payment of cash dividends
Net income
Purchase of land by issuing bonds payable
$15,000
10,000
20,000
27,000
28,000
35,000
15,000
25,000
45,000
In addition, the following information is available from the comparative balance sheet for
Flip at the end of 2013 and 2014:
Cash
Accounts receivable (net)
Prepaid insurance
Total current assets
2014
$ 66,000
20,000
18,000
$104,000
2013
$14,000
16,000
13,000
$43,000
Accounts payable
Salaries payable
Total current liabilities
$ 30,000
3,000
$ 33,000
$20,000
7,000
$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:
Flip Corporation
Income Statement
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
Instructions:
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:
Projected merchandise purchases



April
$184,000
May
$156,000
June
$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
Direct labor
Variable overhead
Fixed overhead (70% avoidable)
$100
110
30
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
Accumulated depreciation
Estimated annual operating costs
Useful life in years
Current copier
$12,000
6,000
8,000
4
New Model
$22,000
0
4,000
4
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.
b.
c.
d.
Indirect labor
Direct materials
Insurance on factory building
Indirect materials
Question 10: The product cost that is most difficult to associate with a product is
a.
b.
c.
d.
direct materials.
direct labor.
manufacturing overhead.
advertising.
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?
a.
b.
c.
d.
$5,000,000
$9,000,000
$0
Cannot be determined from the information provided
Question 12: A manufacturing company calculates cost of goods sold as follows:
a.
b.
c.
d.
Beginning FG inventory + cost of goods purchased – ending FG inventory.
Ending FG inventory – cost of goods manufactured + beginning FG inventory.
Beginning FG inventory – cost of goods manufactured – ending FG inventory.
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?
a.
b.
c.
d.
$301,000
$304,000
$316,000
$313,000
Question 14: Flip Manufacturing has the following labor costs:
Factory—Gross wages
Factory—Net wages
Employer Payroll Taxes Payable
$450,000
420,000
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
a.
b.
c.
d.
$450,000.
$490,000.
$460,000.
$420,000.
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
a.
b.
c.
d.
$45,000.
$270,000.
$54,000.
$225,000.
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?
a.
b.
c.
d.
$72,500
$69,000
$63,500
$70,500
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?
a.
b.
c.
d.
$15.
$5.
$40.
$20.
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?
a.
b.
c.
d.
$112,000.
$212,000.
$182,800.
$260,000.
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
a.
b.
c.
d.
Materials
$1.60
$1.60
$2.00
$2.40
Conversion Costs
$1.40
$1.75
$1.40
$2.13
Question 20: Which of the following is considered a difference between a job order cost
and a process cost system?
a.
b.
c.
d.
The manufacturing cost elements.
Documents used to track costs.
The accumulation of the costs of materials, labor, and overhead.
The flow of costs.
Question 21: The following information is taken from the production budget for the first
quarter:
Beginning inventory in units
Sales budgeted for the quarter
Capacity in units of production facility
1,800
678,000
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?
a.
b.
c.
d.
675,000
681,000
711,000
682,800
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?
a.
b.
c.
d.
$162,560.
$172,800.
$174,080.
$171,520.
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
a.
b.
c.
d.
mixed.
flexible.
variable.
fixed.
Question 26: A flexible budget
a.
b.
c.
d.
is prepared when management cannot agree on objectives for the company.
projects budget data for various levels of activity.
is only useful in controlling fixed costs.
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.
b.
c.
d.
only fixed costs are included.
it is necessary to relate variable cost data to the activity index chosen.
it is necessary to prepare a budget at 1,000 unit increments.
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.
b.
c.
d.
linear and upward sloping.
linear and downward sloping.
curvilinear and upward sloping.
linear to a point and then level off.