Assignment
Question 1
On December 31, 2015, Raleigh Corp. had the following balances (all balances are normal):
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Accounts
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Amount
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Preferred Stock, ($100 par value, 5% noncumulative, 50,000 shares authorized, 10,000 shares issued and outstanding)
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$1,000,000
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Common Stock ($10 par value, 200,000 shares authorized, 100,000 shares issued and outstanding)
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$1,000,000
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Paid-in Capital in Excess of par, Common
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150,000
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Retained Earnings
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700,000
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The following events occurred during 2015 and were not recorded:
a. On January 1, Raleigh Corp. 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, Raleigh Corp. reacquired 1,000 shares of common stock for $20 each.
c. On March 31, Raleigh Corp. reissued 250 shares of treasury stock for $25 each.
d. On July 1, Raleigh Corp. reissued 500 shares of treasury stock for $16 each.
e. On October 1, Raleigh Corp. declared full year dividends for preferred stock and $1.50 cash dividends for outstanding shares and paid shareholders on October 15.
f.On December 15, Raleigh Corp. split common stock 2 shares for 1.
g. Net Income for 2015 was $275,000.
Requirements:
Prepare a Stockholders' section of a classified balance sheet as of December 31, 2015.
Question 2
On January 1, 2016, XYZ Company purchased 10,000 shares of the stock of Rayco, 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. Rayco made $25,000 of net income in 2014, and paid dividends of $10,000. The price of Rayco'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. How much should the XYZ Company report on the balance sheet for the investment in Rayco at the end of 2016?
Question 3
The following is selected information from Reliant Company for the fiscal years ended December 31, 2016: Reliant 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. Reliant Company had interest expense of $50,000. Cash balance on January 1, 2016 was $250,000.
Requirements: Prepare Reliant Company's statement of cash flows for the year ended December 31, 2016 using the indirect method.
Question 4
Rayco Corporation had the following bond transactions during the fiscal year 2016:
a. On January 1: issued ten $1,000 bonds at 102. The 5-year bonds is dated January 1, 2016. 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: Rayco Corporation issued $500,000 of 10%, 10-year bonds. The bonds dated January 1, 2016 were issued at 88.5, and pay interest on July 1 and January 1. Effective interest rate for these bonds is 12%. Straight-line amortization method is used.
c. On October 1: issued 10-year bonds $10,000 face value bonds, for $10,853 cash. The bonds have a stated rate of 9%, but an effective rate of 6%. Straight-line amortization 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 2016. (Round all calculations to nearest whole dollar.)
Question 5
XYZ 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 break-even point in sales dollars and in units if the fixed factory overhead increased by $1,700?
b. What is the break-even point in sales dollars and in units if costs remain as originally projected?
c. What would be the operating income if sales units increased by 25%?
Question 6
XYZ manufactures tote bags. 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. Rayco is offering a special order to buy 50,000 tote bags for $7.50 each. There will be no additional selling expenses, and sufficient capacity exists to manufacture the extra tote bags.
Requirements: Prepare an incremental analysis schedule to demonstrate what amount operating income would increase or decrease as a result of accepting the special order.
Question 7
RSW Company manufactures 10,000 units of wheel sets for use in its annual production. Costs are as follows: direct materials are $20,000; direct labor is $55,000; variable overhead is $45,000; and fixed overhead is $70,000. Rayco Company has offered to sell RSW 10,000 units of wheel sets for $18 per unit. If RSW accepts the offer, some of the facilities presently used to manufacture wheel sets could be rented to a third party at an annual rental of $15,000. Additionally, $4 per unit of the fixed overhead applied to wheel sets would be totally eliminated.
Requirements: Prepare an incremental analysis schedule to demonstrate if RSW should accept Rayco's offer.
Question 8
Train 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. The cost per equivalent unit of conversion is _____________.