Final Review ACCT 221

Final Review
ACCT 221
Question 1: 30%
points:
On December 31,
2014, Frick Incorporated, had the following balances (all balances are normal):

Accounts

Amount

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

$1,000,000

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

$1,000,000

Paid-in Capital in Excess of par,
Common

150,000

Retained Earnings

700,000

The following
events occurred during 2014 and were not recorded:

a. On January 1, Frick 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, Frick reacquired 1,000 shares of common stock for $20 each.

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

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

e. On October 1, Frick 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, Frick split common stock 2 shares for 1.

g. Net Income for 2014 was $275,000.
Requirements:
a. Prepare
journal entries for the transactions listed above.
b. Prepare a
Stockholders’ section of a classified balance sheet as of December 31, 2014.

Common Stock

100,000.00

Stock Dividend

5%

Stock Dividend

5,000.00

Total No of common Stock

105,000.00

Preferred Stock

10,000.00

Par Value

100.00

Divivdend Rate

5%

Preference Dividend

50,000.00

Cash Dividends on Common Stock
@1.5(105,000*1.5)

157,500.00

Total Dividend(50,000+157,500)

207,500.00

Retained Earnings

207,500.00

To Dividend Payable

207,500.00

Dividend Payable

207,500.00

To Cash

207,500.00

Question 2: 5%
points:
On January 1,
2014, Frick Company purchased 10,000 shares of the stock of Floozy, 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. Floozy made $25,000 of net income in 2014, and paid
dividends of $10,000. The price of Floozy’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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Requirements:
a. Prepare the
January 1 & December 31 general journal entries for Frick Company.
b. How much
should the Frick Company report on the balance sheet for the investment in Floozy
as the end of 2014
Question 3: 10%
points:
The following is
selected information from Flip Company for the fiscal years ended December 31,
2014: Flip 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. Flip Company had
interest expense of $50,000. Cash balance on January 1, 2014 was
$250,000.
Requirements:
Prepare Flip Company’s statement of cash flows for the year ended December 31,
2014 using the indirect method.
Question 4: 15%
points:
Frick
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: Frick 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 8%, 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: 5%
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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Requirements:

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. Floozy 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. Floozy 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
Floozy’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:
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 9:
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 10:
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.
Question 11:
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.
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Question 12:
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 13:
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 14:
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.
Question 15:
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.
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Question 16:
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 17:
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.
Question 18:
Frick Company
uses a job order cost system and applies overhead based on estimated
rates. The overhead application rate is based on total estimated overhead
costs of $200,000 and direct labor hours of 50,000. For job 836, direct
labor hours were 800.
a.
Factory Overhead should be debited for $3,200.
b.
Factory Overhead should be credited for $3,200.
c.
Overhead Expense should be debited for $3,200.
d.
Overhead Expense should be credited for $3,200.
e.
None of these.
Question 19:
For job 1838,
there were 1,000 direct labor hours, and actual overhead was $500 for
depreciation and $1,400 for indirect labor. Overhead is applied at $2 per
direct labor hour. Which account should be debited for $1,900?
a.
Work in Process.
b.
Cost of Goods Sold.
c.
Factory Overhead.
d.
Cost of Goods Manufactured.
e.
None of these.
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Question 20:
Frick Company
had no beginning inventory and adds all materials at the very beginning of its
only process. Assume 100,000 units were started, and 80% complete at
month’s end. Total costs were $24,000 for material and $16,000 for
conversion.
a.
The cost per equivalent unit of conversion is $0.16.
b.
The cost per equivalent unit of conversion is $0.20.
c.
The cost per equivalent unit of conversion is $0.36.
d.
The cost per equivalent unit of conversion is $0.40.
e.
None of these.
Question 21:
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 conversion is:
a.
$1.00 if total conversion cost is $3,000.
b.
$1.00 if total conversion cost is $5,000.
c.
$1.00 if total conversion cost is $8,000.
d.
$1.00 if total conversion cost is $10,000.
e.
None of these.
Question 22:
Frick Company
makes units that each requires 2 pounds of material at $3 per pound. 500
and 700 units will be built in May and June, respectively. Frick keeps
material on hand at 20% of the next month’s production needs. How much is
the material cost for May’s output?
a.
$2,400
b.
$3,000
c.
$3,240
d.
$4,200
e.
None of these.
Question 23:
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.
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Question 24:
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 25:
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 26:
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.
Question 27:
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
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