Woozie floozy company decided to discontinue its entire

Question

Question 1: 25% points: Presented below is information related to Woozie Floozy Company for 2014. (All balances are normal.)

Retained earnings balance, January 1, 2014	$ 980,000
Sales for the year	25,000,000
Cost of goods sold	17,000,000
Interest revenue	70,000
Selling and administrative expenses	4,700,000
Write-off of goodwill (not tax deductible)	820,000
Income taxes for 2014	905,000
Gain on the sale of investments (normal recurring)	110,000
Loss due to flood damage-extraordinary item (net of tax)	390,000
Loss on the disposition of the wholesale division	815,000
Loss on operations of the wholesale division	200,000
Income tax benefit from discontinued wholesale division	285,000
Dividends declared on common stock	250,000
Dividends declared on preferred stock	50,000

 

Woozie Floozy Company decided to discontinue its entire wholesale operations and to retain its manufacturing operations. On September 15, Woozie Floozy sold the wholesale operations to Flippy-Floppy Company. During 2014, there were 200,000 shares of common stock outstanding all year.

Requirement: Prepare a multistep income statement.

Question 2: 20% points:

On June 1, 2014, Flippy-Floppy purchased a manufacturing machine for $864,000. The machine has an eight-year estimated life and a $44,000 estimated salvage value. Flippy-Floppy expects to manufacture 1,800,000 units over the life of the machine.

Required: Complete the required depreciation schedules on the manufacturing machine for each method listed. (Do not provide any supporting calculations.)

The additional production information is as follows:

 

		Year		Production
		2014		110,000
		2015		300,000
		2016		350,000
		2017		350,000
		2018		500,000
		2019		450,000
		2020		375,000
Schedules		2021		400,000
		for:
a.  Straight-line.
		Year	Depreciation			Accumulated	End of Year Book
				Expense		Depreciation	Value
	2014
	2015
b.	2016
	Double-declining		balance.
		Year	Depreciation			Accumulated	End of Year Book
				Expense		Depreciation	Value
	2014
	2015
	2016
	2017
	2018
	2019
	2020
	2021
	2022

 

c.  Sum-of-the-years' digits.

	Year	Depreciation	Accumulated	End of Year Book
		Expense	Depreciation	Value
	2014
	2015
	2016
	2017
	2018
	2019
	2020
	2021
d.	2022
	Units of production.
	Year	Depreciation	Accumulated	End of Year Book
		Expense	Depreciation	Value
	2014
	2015
	2016
	2017
	2018
	2019
	2020
	2021

 

Question 3: 30% points:

Selected accounts included in the property, plant, and equipment section of Flipper Corporation's balance sheet at December 31, 2014, had the following balances:

 

Land	$ 400,000
Land improvements	130,000
Buildings	2,000,000
Machinery and	800,000

During 2015, the following transactions occurred:

 

a.    A tract of land was acquired for $200,000 as a potential future building site from Flopper Corp.

b.    A plant facility consisting of land and building was acquired from Flimsy Company in exchange for 20,000 shares of Flipper's common stock. On the acquisition date, Flipper's stock had a closing market price of $42 per share on a national stock exchange. The plant facility was carried on Flimsy's books at $178,000 for land and $520,000 for the building at the exchange date. Current appraised values for the land and the building, respectively, are $200,000 and $800,000. The building has an expected life of forty years with a $20,000 salvage value.

c.       Items of machinery and equipment were purchased from

Guess Who Equipment at a total cost of $400,000. Additional costs were incurred as follows: freight and unloading, $13,000; installation, $ 26,000. The equipment has a useful life of ten years with no salvage value.

d.     Expenditures totaling $ 120,000 were made for new parking lots, street, and sidewalks at the corporation's various plant locations. These expenditures had an estimated useful life of fifteen years.

e.       Research and development costs were $110,000 for the year.

Required: Indicate the capitalized cost of each asset acquired during 2015. Prepare the General Journal entries for any amortization and depreciation expense recorded for each of the acquired items in 2015. If no entry is necessary, write "no entry."

Question 4: 25% points:

Selected accounts included in the property, plant, and equipment section of Faulty Corporation's balance sheet at December 31, 2017, had the following balances:

Land	$ 400,000
Land improvements	130,000
Buildings	2,000,000
Machinery and equipment	800,000

During 2018, the following transactions occurred:

 

>>  A machine costing $18,000 on July 1, 2011, was scrapped on June 30, 2018. Straight-line depreciation had been recorded on the basis of a 10-year life with no salvage value.

>>  A machine was sold for $38,000 on July 1, 2018. Original cost of the machine was $74,000 on January 1, 2015, and it was depreciated on the sum-of-the-years' digits basis over an estimated useful life of eight years and a salvage value of $2,000.

Required:

a.  Calculate the gain or loss on the disposal of each asset. Place your answer in the appropriate column.

b.  Prepare the journal entries for the disposal & sale of the machine

during 2018. Year 2018 depreciation has yet been recorded.