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Question 1
The following information is available
for Mergenthaler Corporation for the year ended December 31, 2017:
Collection
of principal on long-term loan to a supplier $16,000
Acquisition
of equipment for cash 10,000
Proceeds
from the sale of long-term investment at book value 22,000
Issuance
of common stock for cash 20,000
Depreciation
expense 25,000
Redemption
of bonds payable at carrying (book) value 34,000
Payment
of cash dividends 6,000
Net
income 30,000
Purchase
of land by issuing bonds payable 40,000
In addition, the following information
is available from the comparative balance sheet for Mergenthaler at the end of
2017 and 2016:
2017 2016
Cash $148,000 $91,000
Accounts
receivable (net) 25,000 15,000
Prepaid
insurance 19,000 13,000
Total
current assets $192,000 $119,000
Accounts
payable $ 30,000 $19,000
Salaries
and wages payable 6,000 7,000
Total
current liabilities $ 36,000 $26,000
Instructions
Prepare Mergenthaler's statement of
cash flows for the year ended December 31, 2017, using the indirect method.
Question 2
Here is financial
information for Valdez Express Inc.
December
31, 2017 December
31, 2016
Current assets $114,000 $80,000
Plant assets
(net) 414,000 360,000
Current
liabilities 91,000 65,000
Long-term
liabilities 134,500 90,000
Common stock, $1
par 149,500 115,000
Retained earnings 153,000 170,000
Instructions
Prepare a
schedule showing a horizontal analysis for 2017 using 2016 as the base year.
Question 3
Kwik
Delivery Service reports the following costs and expenses in June 2016.
Indirect materials $ 8,400 Driver's
salaries $17,000
Depreciation on delivery Advertising 5,100
equipment 11,200 Delivery equipment
Dispatcher's salary 5,000 repairs 300
Property taxes on office Office
supplies 650
building 870 Office utilities 2,490
CEO's salary 12,000 Repairs on office
Gas and oil for delivery trucks 3,200 equipment 180
Instructions
Determine the
total amount of (a) delivery service (product) costs and (b) period costs.
Question 4
Erickson,
Inc. makes student book bags that sell for $20 each. For the coming year,
management expects fixed costs to be $225,000. Variable costs are $14 per unit.
Instructions
(a) Compute break-even sales in dollars using the
mathematical equation.
(b) Compute
break-even sales using the contribution margin ratio.
(c) Compute
margin of safety ratio assuming actual sales are $937,500.
(d) Compute the
sales required to earn net income of $150,000, using the mathematical equation.
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