Problem: 1) Indicate the section (operating activities, investing activities, financing activities, or none) in which each of the following would be reported on the statement of cash flows prepared by the indirect method:
(a) Gain on sale of fixed assets
(b) Operating income
(c) Retirement of long-term debt
(d) Sale of capital stock
(e) Distribution of stock dividends
(f) Payment of cash dividends
(g) Purchase of fixed assets
(h) Sale of fixed assets
(i) Receipt of interest revenue
(j) Payment of interest expense
Problem 2) Indicate whether each of the following would be added to or deducted from net income in determining net cash flow from operating activities by the indirect method:
(a) Increase in prepaid expenses
(b) Amortization of patents
(c) Increase in salaries payable
(d) Gain on sale of fixed assets
(e) Decrease in accounts receivable
(f) Increase in notes receivable due in 60 days
(g) Amortization of discount on bonds payable
(h) Decrease in merchandise inventory
(i) Depreciation of fixed assets
(j) Loss on retirement of long-term debt
(k) Decrease in accounts payable
(l) Increase in notes payable due in 30 days
(m) Amortization of premium on bonds payable
Problem 3) The following data are taken from the financial statements:
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Current
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Preceding
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Year
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Year
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Average accounts receivable (net)
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$123,000
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$ 95,000
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Accounts receivable (net), end of year
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129,012
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87,516
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Net sales on account
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950,000
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825,000
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(a) Assuming that credit terms on all sales are n/45, determine for each year (1) the accounts receivable turnover and (2) the number of days' sales in receivables.
(b) Comment on any significant trends revealed by the data.
Problem 4) A summary of the time tickets for August follows:
Description Amount Description Amount
Job No. 321 $11,000 Job No. 342 $8,300
Job No. 329 8,200 Job No. 346 5,700
Job No. 336 2,000 Indirect labor 5,000
Present the journal entries to record (a) the labor cost incurred and (b) the application of factory overhead to production for August. The factory overhead rate is 70% of direct labor cost.
Problem 5) Prepare the journal entry for materials and labor, based on the following:
Raw materials issued: $750 for Job 609
300 for general use in the factory
Labor time tickets: $800 for Job 609
325 for supervision
Problem 6) The estimated total factory overhead cost and total machine hours for Department 40 for the current year are $225,000 and 56,250 respectively. During January, the first month of the current year, actual machine hours used totaled 5,100 and factory overhead cost incurred totaled $19,800.
(a) Determine the factory overhead rate based on machine hours.
(b) Present the entry to apply factory overhead to production in Department 40 for January.
(c) What is the balance of Factory Overhead - Department 40 at January 31?
(d) Does the balance of Factory Overhead - Department 40 at January 31 represent overapplied or underapplied factory overhead?
Problem 7) A company has a margin of safety of 25%, a contribution margin ratio of 30%, and sales of $1,000,000.
(a) What was the break-even point?
(b) What was the operating income?
(c) If neither the relationship between variable costs and sales nor the amount of fixed costs is expected to change in the next year, how much additional operating income can be earned by increasing sales by $110,000?