Question
1) Balance sheet and income statement data indicate the following: Bonds payable, 10% (issued 1988 due 2012) $1,000,000 Preferred 5% stock, $100 par (no change
1) Balance sheet and income statement data indicate the following:
Bonds payable, 10% (issued 1988 due 2012) | $1,000,000 |
Preferred 5% stock, $100 par (no change during year) | 300,000 |
Common stock, $50 par (no change during year) | 2,000,000 |
Income before income tax for year | 350,000 |
Income tax for year | 80,000 |
Common dividends paid | 50,000 |
Preferred dividends paid | 15,000 |
Based on the data presented above, what is the number of times bond interest charges were earned?
a. | 3.7 |
b. | 4.4 |
c. | 4.5 |
d. | 3.5 |
2) Kim Corporation has two major divisions: Northern Products and Southern Products. It provides the following information for the year 2014
| Northern Products Division | Southern Products Division |
Sales revenue | $140,000 | $1,040,000 |
Operating income | $46,400 | $220,000 |
Average total assets | $300,000 | $5,540,000 |
Target rate of return | 14.0% | 14.0% |
Calculate the residual income for the Northern division.
A) $5,500
B) $4,400
C) $2,500
D) $1,800
3) New York Inc. Inc. has a division that manufactures a component that sells for $150 and has a variable cost of $45. Another division of the company wants to purchase the component. Fixed cost per unit of component is $25. What is the minimum transfer price? Assume the division is operating at capacity?
A) $150
B) $45
C) $55
D) $140
4) New York Inc. Inc. has a division that manufactures a component that sells for $150 and has a variable cost of $45. Another division of the company wants to purchase the component. Fixed cost per unit of component is $25. What is the maximum transfer price if the division is operating below its capacity?
A) $70
B) $170
C) $150
D) $30
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