Question 1 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. Question 2: 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. 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 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: 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: 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. 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: 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: 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.
