Question 2: 6% points:
January 1, 2014 Flip Company purchased 35,000 shares of common stock of Flop Corporation as a long-term investment for $900,000. December 31, 2014, Flop Corporation reported net income of $300,000 and paid dividends of $100,000.
Instructions:
a. Assuming that the 35,000 shares represent a 10% interest in Flop Corporation:
1. Prepare the journal entry to record the investment in Flop stock.
2. Prepare any entries that Flip Company should make in accounting for its investment in Flop stock during the year.
3. What is the balance of the Stock Investments account on Flip Company's books at the end of the year?
b. Repeat requirement (a) above except assume that the 35,000 shares represent a 20% interest in Flop Corporation.
Question 3: 15% points: The following information is available for Flip Corporation for the year ended December 31, 2014:
Collection of principal on long-term loan to a supplier $15,000
Acquisition of equipment for cash 10,000
Proceeds from the sale of long-term investment at book value 20,000
Issuance of common stock for cash 27,000
Depreciation expense 28,000
Redemption of bonds payable at carrying (book) value 35,000
Payment of cash dividends 15,000
Net income 25,000
Purchase of land by issuing bonds payable 45,000
In addition, the following information is available from the comparative balance sheet for Flip at the end of 2013 and 2014:
2014 2013
Cash $ 66,000 $14,000
Accounts receivable (net) 20,000 16,000
Prepaid insurance 18,000 13,000
Total current assets $104,000 $43,000
Accounts payable $ 30,000 $20,000
Salaries payable 3,000 7,000
Total current liabilities $ 33,000 $27,000
Instructions: Prepare Flip's statement of cash flows for the year ended December 31, 2012 using the indirect method.
Question 4: 6% points:
Determine the missing amounts.
Unit Selling Price Unit Variable Costs Contribution Margin per Unit Contribution Margin Ratio
1. $300 $195 A. B.
2. $600 C. $150 D.
3. E. F. $480 30%
Question 5: 6% points:
Flip Inc. provided the following information:
April May June
Projected merchandise purchases $184,000 $156,000 $132,000
- Flip pays 40% of merchandise purchases in the month purchased and 60% in the following month.
• General operating expenses are budgeted to be $62,000 per month of which depreciation is $8,000 of this amount. Hoover pays operating expenses in the month incurred.
- Flip makes loan payments of $8,000 per month of which $700 is interest and the remainder is principal.
Instructions: Calculate budgeted cash disbursements for May.
Question 6: 5% points:
Flip Enterprises produces miniature parasols. Each parasol consists of $1.20 of variable costs and $.90 of fixed costs and sells for $4.50. A Dutch wholesaler offers to buy 8,000 units at $1.40 each, of which Pederson has the capacity to produce. Flip will incur extra shipping costs of $.12 per bear.
Instructions: Determine the incremental income or loss that Flip Enterprises would realize by accepting the special order.
Question 7: 6% points:
Flip Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Flip for $270 each. Flip needs 1,500 clocks annually. Flip has provided the following unit costs for its commercial clocks:
Direct materials $100
Direct labor 110
Variable overhead 30
Fixed overhead (70% avoidable) 150
Instructions: Prepare an incremental analysis which shows the effect of the make-or-buy decision.
Question 8: 6% points:
Flip Company provided the following information concerning two products:
Contribution margin per unit-Product 13 $23
Contribution margin per unit-Product 44 $18
Machine hours required for one unit-Product 13 2.5 hours
Machine hours required for one unit-Product 44 1.5 hours
Instructions: Compute the contribution margin per unit of limited resource for each product. Which product should Flip tell its sales personnel to 'push' to customers?