Acct 221.Fa.14 Question 1 20 pointsa. General.docx

Acct 221.Fa.14
Question 1: 20 points
a. General Journal Entries:
Date
Account
Debit
Credit

Answer Sheet Page 1 of 10 .Fa.14
Final Exam
Answer Sheet Page 2 of 10 .Fa.14

Final Exam
b. Income Statement:

.14
Final Exam
Question 2. 10 points
a1 & a2: General Journal Entries:
(Cost Method):
Date
Account
Debit
Credit

a3. Stock Investments Accounts Balance
b1 & b2: : General Journal Entries: (Equity Method):
Date
Account
Debit
Credit

b3. Stock Investments Accounts Balance
Final Exam
Question 3. 15 points:

Fa.14
Final Exam
Question 4. 10 points
Flip Inc.
Cash Disbursements Budget

For the Month of May
Flip Enterprises
Incremental Analysis
Special Order
a.14

Final Exam
Flip Inc.
To Make
Incremental Effect

Flip Company
Retain or Replace
Incremental Effect
.Fa.14
Final Exam
Multiple choice questions allocated 1 point each: Make your
selection by indicating the letter corresponding to your answer.
Question Number
Answer
Question Number
Answer
9:
19:
10:
20:

11:
21:
12:
22:
13:
23:
14:
24:
15:
25:
16:
26:
17:
27:
18:
28:
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
$ 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
Sales
1,000,000
Tax rate
30%
Instructions:
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.
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
$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:
2014
2013
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.
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?

Flip Inc. provided the following information:
AprilMayJune
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.
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.
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.
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.
Current copier
New Model
Original purchase cost
$12,000
$22,000
Accumulated depreciation
6,000
0
Estimated annual operating costs

8,000
4,000
Useful life in years
4
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.
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.
d.
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.
$5,000,000
b.
$9,000,000
c.
$0
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?
a.
$301,000
b.
$304,000
c.
$316,000
d.
$313,000
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
a.

$450,000.
b.
$490,000.
c.
$460,000.
d.
$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.
$45,000.
b.
$270,000.
c.
$54,000.
d.
$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.
$72,500
b.
$69,000

c.
$63,500
d.
$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.
$15.
b.
$5.
c.
$40.
d.
$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.
$112,000.
b.
$212,000.
c.
$182,800.

d.
$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
MaterialsConversion 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?
a.
675,000
b.
681,000
c.
711,000
d.
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.
$162,560.
b.
$172,800.
c.
$174,080.
d.
$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.
mixed.
b.
flexible.
c.
variable.
d.
fixed.
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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