1. Sleep Corporation was organized on January 1, 2011. During its first year, the corporation issued 40,000 shares of $5 par value preferred stock and 400,000 shares of $1 par value common stock. At December 31, the company declared the following cash dividends:
2011 $ 8,000
2012 $30,000
2013 $70,000
Instructions
(a) Demonstrate the allocation of dividends to each class of stock, suppose preferred stock dividend is 5% and not cumulative.
(b) Demonstrate the allocation of dividends to each class of stock, suppose preferred stock dividend is 6% and cumulative.
(c) Journalize declaration of the cash dividend at December 31, 2013 using the assumption of part (b).
2. On January 1, 2012, Magnus Corporation had 60,000 shares of $1 par value common stock issued and outstanding. During the year, the following transactions occurred:
Mar. 1 Issued 25,000 shares of common stock for $550,000.
June 1 Declared a cash dividend of $2.00 per share to stockholders of record on June 15.
June 30 Paid the $2.00 cash dividend.
Dec. 1 Purchased 5,000 shares of common stock for the treasury for $22 per share.
Dec. 15 Declared a cash dividend on outstanding shares of $2.25 per share to stockholders of record on December 31.
Instructions
Prepare journal entries to record the above transactions.
3. Rosco Company purchased 35,000 shares of common stock of Paxton Corporation as a long-term investment for $900,000. During the year, Paxton Corporation reported net income of $300,000 and paid dividends of $100,000.
Instructions
(a) Supposing that 35,000 shares represent a 10% interest in Paxton Corporation:
1. Prepare journal entry to record investment in Paxton stock.
2. Prepare any entries which Rosco Company must make in accounting for its investment in Paxton stock during the year.
3. Find the balance of the Stock Investments account on Rosco Company's books at the end of the year?
(b) Repeat requirement (a) above except suppose that the 35,000 shares represent a 20% interest in Paxton Corporation.
4. Doctor Company prepared the tabulation below at December 31, 2012.
Net Income $307,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense, $32,000
Decrease in accounts receivable, $50,000
Increase in inventory, $12,000
Decrease in accounts payable, $8,600
Increase in income taxes payable, $1,500
Loss on sale of land, $5,000
Net cash provided (used) by operating activities
Instructions
Demonstrate how each item must be reported in statement of cash flows. Use parentheses for deductions.
5. A comparative balance sheet for Halpern Corporation is presented below:
HALPERN CORPORATION
Comparative Balance Sheet
2012 2011
Assets
Cash $36,000 $31,000
Accounts receivable (net) 70,000 60,000
Prepaid insurance 25,000 17,000
Land 18,000 40,000
Equipment 70,000 60,000
Accumulated depreciation (20,000) (13,000)
Total Assets $199,000 $195,000
Liabilities and Stockholders' Equity
Accounts payable $ 11,000 $ 6,000
Bonds payable 27,000 19,000
Common stock 140,000 115,000
Retained earnings 21,000 55,000
Total liabilities and $199,000 $195,000
stockholders' equity
Additional information:
1. Net loss for 2012 is $20,000.
2. Cash dividends of $14,000 were declared and paid in 2012.
3. Land was sold for cash at the loss of $4,000. This was only land transaction during the year.
4. Equipment with the cost of $15,000 and accumulated depreciation of $10,000 was sold for $5,000 cash.
5. $22,000 of bonds was retired during the year at carrying (book) value.
6. Equipment was obtained for common stock. Fair value of stock at the time of the exchange was $25,000.
Instructions
Prepare the statement of cash flows for the year ended 2012, using indirect method.
6. Selected financial statement data for Moor Company are given below.
December 31, 2013 December 31, 2012
Cash $ 40,000 $30,000
Short-term investments 25,000 18,000
Receivables (net) 100,000 80,000
Inventories 85,000 65,000
Total current liabilities 100,000 90,000
During 2013, net sales were $950,000, and cost of goods sold was $775,000.
Instructions
Calculate the following ratios at December 31, 2013 AND EXPLAIN THEM IN YOUR OWN WORDS/ANALYSIS AS TO WHAT IT MEANS:
(a) Current.
(b) Acid-test.
(c) Receivables turnover.
(d) Inventory turnover.