1. Villarente Company issued 5-year $200,000 face valuebonds at 95 on January 1, 2012. The stated interest rate on these bonds is 9%, and the effective interest rate is 10.33%. Use the effective interest ratemethod to complete the amortization schedule below. 2. Allen Corporation was organized on July 15, 2012. It wasauthorized to issue 150,000 shares of $25 par value common stock and 50,000 shares of 6% cumulative preferred stock. The preferred stock had a stated value of $50 per share. The following stock transactions relate to Allen Corporation. Issued55,000 shares of common stock for $33 per share.2,750 shares of the class A preferred stock for $62 per share.27,500 shares of common stock for $35 per share. Required: 1) Indicate the effect of each of these transactions on Allen’s financialstatements. Include dollar amounts in the model, below. After recording the three transactions, calculate column totals. After these transactions have been recorded, what is the total amount of stockholders’ equity? After these transactions have been recorded, how many shares of common stock are outstanding? 1. The following information applies to Barnhart Company: Additional information:NetCredit Sales = $220,000BeginningAccounts Receivable = $10,000Required: Compute Barnhart’s: a) Quick ratiob)Current ratio c) Working capital d) Accounts receivable turnovere)Average days to collect receivablesProblem 2. The Jiffy Manufacturing Company started operations in 2012when it acquired $100,000 from its owners. During the year, the company incurred the following costs: The company placed 12,000 units into production, completed 10,000 units, and sold 8,000 units. The average selling price was $17 per unit. Required: Prepare a schedule of cost of goods manufactured and sold for the year endedDecember 31, 12.Prepare an income statement for the year ended December31, 12. The following information is for a product manufactured andsold by Rivera Corporation:Salesprice per unit, $30Variablecost per unit, $20Totalfixed costs, $200,000Lastyear, Rivera earned a profit of $60,000Required: How many units did Rivera sell last year?Rivera’s managers are considering decreasing the sales price to $28 in aneffort to increase market share. Also, the company wants a profit of $80,000.How many units would it have to sell at the lower selling price to achieve this target? . The management accountant at Melrose, Inc. provided thefollowing estimated costs for producing 5,000 units of a specialty product manufacturedby the firm: The company believes that direct labor hours are the most appropriate costdriver for assigning overhead costs to its product. Required: Compute the predetermined overhead rate for this company. Compute thespecialty product’s total estimated cost per unit. Why do firms assign overhead costs using a predeterminedoverhead rate instead of assigning actual costs? 1. Ortiz Manufacturing is considering developing andmarketing one of two new products, A and B. It has accumulated the followinginformation about the two products: Required: Which of these items are relevant to Ortiz’sdecision about which of these products it will launch? . Mae Lee owns a small retail store in Cairo, Georgia. Thefollowing summary information regarding expectations for the month of Januaryis provided: As of December 31 there is $500 in the bank and the balance inaccounts receivable is $2,500. Budgeted cash and credit sales for January are $3,000and $2,000, respectively. Ninety percent of credit sales are collected in themonth of sale and the remainder is collected in the following month. Mae’ssuppliers do not extend credit. Cash payments for January are expected to be$12,000. Mae has a line of credit that enables the store to borrow funds ondemand. However, funds must be borrowed on the first day of the month andinterest paid in cash on the last day of the month. Mae desires to maintain a$500 cash balance before consideration is given to the payment of interest.Mae’s bank charges annual interest of 12% per year. Required: Compute the amount of funds that needs to be borrowed. Compute the amount of interest expense that will appearon the January 31 pro forma income statement. 1. Creighton Company’s balance sheet and income statement areprovided below: Required: Compute the margin, turnover, and return on investment for CreightonCompany.What is the advantage of expanding the ROI formula to measure margin and turnover separately? 2. Delta Company is evaluating two different capitalinvestments, Project X and Y. Either X or Y would cost $100,000, and thecompany cannot afford to do both. The company expects that Project X wouldprovide net cash inflows of $30,000 per year for 5 years. For Project Y, thenet cash inflows are expected to be as follows: Delta’s cost of capital is 12% Required: 1) Calculate the present value index for Project X and for Project Y.2) Indicate whether each of the projects is an acceptableinvestment.3) Which of the two projects should Delta implement?
1. Villarente Company issued 5-year $200,000 face value
bonds at 95 on January 1, 2012. The stated interest rate on these bonds is 9%, and the effective interest rate is 10.33%. Use the effective interest rate
method to complete the amortization schedule below.
2. Allen Corporation was organized on July 15, 2012. It was
authorized to issue 150,000 shares of $25 par value common stock and 50,000 shares of 6% cumulative
Issued
55,000 shares of common stock for $33 per share.
2,750 shares of the class A preferred stock for $62 per share.
27,500 shares of common stock for $35 per share.
Required:
1) Indicate the effect of each of these transactions on Allen’s financial
statements. Include dollar amounts in the model, below. After recording the three transactions, calculate column totals.
After these transactions have been recorded, what is the total amount of
After these transactions have been recorded, how many shares of common stock are outstanding?
1. The following information applies to Barnhart Company:
Additional information:
Net
Credit Sales = $220,000Beginning
Required:
Compute Barnhart’s:
a) Quick ratio
b)
c)
d) Accounts receivable turnover
e)
Average days to collect receivables
Problem 2. The Jiffy Manufacturing Company started operations in 2012
when it acquired $100,000 from its owners. During the year, the company incurred the following costs:
The company placed 12,000 units into production, completed 10,000 units, and sold 8,000 units. The average selling price was $17 per unit.
Required:
Prepare a schedule of cost of goods manufactured and sold for the year ended
December 31, 12.
Prepare an income statement for the year ended December
31, 12.
The following information is for a product manufactured and
sold by Rivera Corporation:
Sales
price per unit, $30Variable
cost per unit, $20Total
fixed costs, $200,000Last
year, Rivera earned a profit of $60,000
Required:
How many units did Rivera sell last year?
Rivera’s managers are considering decreasing the sales price to $28 in an
effort to increase market share. Also, the company wants a profit of $80,000.
How many units would it have to sell at the lower selling price to achieve this target?
. The
following estimated costs for producing 5,000 units of a specialty product manufactured
by the firm:
The company believes that direct labor hours are the most appropriate cost
driver for assigning overhead costs to its product.
Required:
Compute the predetermined overhead rate for this company.
Compute the
specialty product’s total estimated cost per unit.
Why do firms assign overhead costs using a predetermined
overhead rate instead of assigning actual costs?
1. Ortiz Manufacturing is considering developing and
marketing one of two new products, A and B. It has accumulated the following
information about the two products:
Required:
Which of these items are relevant to Ortiz’s
decision about which of these products it will launch?
. Mae Lee owns a small retail store in Cairo, Georgia. The
following summary information regarding expectations for the month of January
is provided: As of December 31 there is $500 in the bank and the balance in
accounts receivable is $2,500. Budgeted cash and credit sales for January are $3,000
and $2,000, respectively. Ninety percent of credit sales are collected in the
month of sale and the remainder is collected in the following month. Mae’s
suppliers do not extend credit. Cash payments for January are expected to be
$12,000. Mae has a line of credit that enables the store to borrow funds on
demand. However, funds must be borrowed on the first day of the month and
interest paid in cash on the last day of the month. Mae desires to maintain a
$500 cash balance before consideration is given to the payment of interest.
Mae’s bank charges annual interest of 12% per year.
Required:
Compute the amount of funds that needs to be borrowed.
Compute the amount of interest expense that will appear
on the January 31 pro forma income statement.
1. Creighton Company’s
provided below:
Required:
Compute the margin, turnover, and
Company.
What is the advantage of expanding the ROI formula to measure margin and turnover separately?
2. Delta Company is evaluating two different capital
investments, Project X and Y. Either X or Y would cost $100,000, and the
company cannot afford to do both. The company expects that Project X would
provide net cash inflows of $30,000 per year for 5 years. For Project Y, the
net cash inflows are expected to be as follows:
Delta’s cost of capital is 12%
Required:
1) Calculate the present value index for Project X and for Project Y.
2) Indicate whether each of the projects is an acceptable
investment.
3) Which of the two projects should Delta implement?
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