On December 31, 2014, Floozy Inc. had the following balances (all balances are normal):

Accounts	Amount
Preferred Stock, ($100 par value, 5% noncumulative, 50,000 shares authorized, 10,000 shares issued and outstanding)	$1,000,000
Common Stock ($10 par value, 200,000 shares authorized, 100,000 shares issued and outstanding)	$1,000,000
Paid-in Capital in Excess of par, Common	150,000
Retained Earnings	700,000

The following events occurred during 2014 and were not recorded:

a. On January 1, Floozy declared a 5% stock dividend on its common stock when the market value of the common stock was $15 per share. Stock dividends were distributed on January 31 to shareholders as of January 25.

b. On February 15, Floozy reacquired 1,000 shares of common stock for $20 each.

c. On March 31, Floozy reissued 250 shares of treasury stock for $25 each.

d. On July 1, Floozy reissued 500 shares of treasury stock for $16 each.

e. On October 1, Floozy declared full year dividends for preferred stock and $1.50 cash dividends for outstanding shares and paid shareholders on October 15.

f. One December 15, Floozy split common stock 2 shares for 1.

g. Net Income for 2014 was $275,000.

Requirements:

a. Prepare journal entries for the transactions listed above.

b. Prepare a Stockholders' section of a classified balance sheet as of December 31, 2014.

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Question 2: 5% points:

On January 1, 2014, Flip Company purchased 10,000 shares of the stock of Floozy, and did obtain significant influence. The investment is intended as a long-term investment. The stock was purchased for $90,000, and represents a 30% ownership stake. Floozy made $25,000 of net income in 2014, and paid dividends of $10,000. The price of Floozy's stock increased from $10 per share at the beginning of the year, to $12 per share at the end of the year.

Requirements:

a. Prepare the January 1 & December 31 general journal entries for Flip Company.

b. How much should the Flip Company report on the balance sheet for the investment in Floozy as the end of 2014

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Question 3: 10% points:

The following is selected information from Floozy Company for the fiscal years ended December 31, 2014: Floozy Company had net income of $1,225,000. Depreciation was $500,000, purchases of plant assets were $1,250,000, and disposals of plant assets for $500,000 resulted in a $50,000 gain. Stock was issued in exchange for an outstanding note payable of $725,000. Accounts receivable decreased by $25,000. Accounts payable decreased by $40,000. Dividends of $300,000 were paid to shareholders. Floozy Company had interest expense of $50,000. Cash balance on January 1, 2014 was $250,000.

Requirements: Prepare Floozy Company's statement of cash flows for the year ended December 31, 2014 using the indirect method.

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Question 4: 15% points:

Floozy Corporation had the following bond transactions during the fiscal year 2014:

a. On January 1: issued ten (10), $1,000 bonds at 102. The 5-year bonds, is dated January 1, 2014. The contract interest rate is 6%. Straight-line amortization method is used. Interest is payable semi-annual on January 1 and July 1.

b. On July 1: Floozy Corporation issued $500,000 of 10%, 10-year bonds. The bonds dated January 1, 2014 were issued at 88.5, and pay interest on July 1 and January 1. Effective interest rate method is used for these bonds is 12%.

c. On October 1: issued 10-year bonds $10,000 face value bonds, for $10,853 cash. The bonds have a stated rate of 8%, but an effective rate of 6%. Effective-interest method is used. Interest is payable on October 1 and April 1.

Requirements: Prepare all general journal entries for the three bonds issued and any interest accruals and payments for the fiscal year 2014. (Round all calculations to nearest whole dollar.)

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Question 5: 10% points:

Flip had sales of $10,000 (100 units at $100 per). Manufacturing costs consisted of direct labor $1,500, direct materials $1,400, variable factory overhead $1,000, and fixed factory overhead $500. The company did not maintain any inventories, so total cost of goods sold was $4,400. Selling expenses totaled $1,600 ($600 variable and $1,000 fixed), and administrative expenses totaled $1,500 ($500 variable and $1,000 fixed). Operating income was $2,500. Round all final answers to nearest dollar or whole number.

Requirements:

a. What is the breakeven point in sales dollars and in units if the fixed factory overhead increased by $1,700?

b. What is the breakeven point in sales dollars and in units if costs remain as originally projected?

c. What would be the operating income be if sales units increased by 25%

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Question 6: 5% points:

Flip manufactures footballs. The forecasted income statement for the year before any special orders included sales of $4,000,000 (sales price is $10 per unit.) Manufacturing cost of goods sold is anticipated to be $3,200,000. Selling expenses are expected to be $300,000, and operating income is projected at $500,000. Fixed costs included in these forecasted amounts are $1,200,000 for manufacturing cost of goods sold and $100,000 for selling expenses. Floozy is offering a special order to buy 50,000 footballs for $7.50 each. There will be no additional selling expenses, and sufficient capacity exists to manufacture the extra footballs.

Requirements: Prepare an incremental analysis schedule to demonstrate by what amount would operating income be increased or decreased as a result of accepting the special order.

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Question 7: 5% points:

Flop Company manufactures 10,000 units of widgets for use in its annual production. Costs are direct materials $20,000, direct labor $55,000, variable overhead $45,000, and fixed overhead $70,000. Floozy Company has offered to sell Flop 10,000 units of widgets for $18 per unit. If Flop accepts the offer, some of the facilities presently used to manufacture widgets could be rented to a third party at an annual rental of $15,000. Additionally, $4 per unit of the fixed overhead applied to widgets would be totally eliminated.

Requirements: Prepare an incremental analysis schedule to demonstrate if Flop should accept Floozy's offer.

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Multiple choice questions allocated 1% point each. Make your selection by recording the letter in the answer box provided.

Question 8(1):

Stringer Corporation issued 5,000 shares of $2 par value common stock. The issue price was $7.50 per share. The entry to record this transaction includes a:

A. debit to Cash for $10,000.

B. debit to Paid-in Capital in Excess of Par for $27,500.

C. debit to Common Stock for $10,000.

D. credit to Gain on Stock $37,500.

E. None of these.

Question 9(2):

On April 1, 20X6, Ratchford Industries issued $500,000 of 12%, 10-year bonds. The bonds, which were issued at 103, pay interest on October 1 and April 1. The entry to record issuance of the bonds includes:

A. a debit to Cash of $500,000.

B. a credit to Bonds Payable of $503,000.

C. a debit to Premium on Bonds Payable of $15,000.

D. All of the above.

E. None of these.

Question 10(3):

When interest income on a bond investment is less than the cash received:

A. the Investment in Bond account is credited.

B. the bond was likely purchased at a premium.

C. Interest Income is credited.

D. All of these.

E. None of these.

Question 11(4):

The presence of goodwill in a balance sheet suggests that accounts of the subsidiary have not yet been consolidated with the parent company. (T or F)

Question 12(5):

Which formula "calculates" the return on assets ratio?

A. (Net Income + Interest Expense)/Average Assets.

B. (Net Income + Extraordinary Items)/Average Assets

C. (Net Income + Discontinued Operations)/Average Assets

D. (Net Income + Income Tax Expense)/Average Assets.

E. None of these.

Question 13(6):

In an effort to concentrate its resources in more profitable areas, Southern Steel Corporation recently sold its family pizza restaurant segment. The disposal constitutes:

A. an extraodinary item.

B. a discontinued operation which should be treated as a prior period adjustment.

C. a discontinued operation which should be disclosed net-of-tax effects.

D. a portion of income from continuing operations.

E. None of these.

Question 14(7):

Assuming use of the direct approach for preparing a statement of cash flows, which of the following would be most likely reported as a line item in the "operating activity" section?

A. Dividends paid to shareholders.

B. Cash paid for taxes.

C. Proceeds from issuing capital stock.

D. A reduction in inventory levels.

E. None of these.

Question 15(8):

Finished goods ending inventory of $10,000 is erroneously determined to be $100,000. The effect of this error will be to:

A. overstate assets by $90,000.

B. overstate income by $90,000.

C. understate income by $90,000.

D. Both A and B.

E. None of these.

Question 16(9):

On May 21, Vincent worked 6 hours on Job 657, and 2 hours on general "overhead activities." Vincent is paid $15 per hour. Overhead is applied based on $4 per direct labor hour. Job 657 also entailed $30 of direct material. On May 21, Vincent used $7 of indirect material. Indirect material is included in the overhead application rate. Of these amounts, how much total cost should be allocated to Job 657 for May 21?

Question 17(10):

Jose Company uses a job order cost system. At the end of an accounting period, Jose has a debit balance in the Factory Overhead account. This would indicate:

A. a loss for the period.

B. underapplied overhead.

C. overapplied overhead.

D. a malfunction in the job order cost system.

E. None of these.

Question 18(11):

If beginning work in process was 600 units, 1,400 additional units were put into production, and ending work in process was 500 units, how many units were completed?

A. 500

B. 900

C. 1,400

D. 2,000

E. None of these.

Question 19(12):

Which of these alternatives would decrease contribution per unit margin the most?

A. A 10 percent decrease in selling price.

B. A 10 percent increase in variable expenses.

C. A 10 percent increase in selling price.

D. A 10 percent decrease in variable expenses.

E. None of these.

Question 20(13):

Each of the following would affect the breakeven point except a change in the:

A. number of units sold.

B. variable costs per unit.

C. total fixed costs.

D. sales price per unit.

E. None of these.

Question 21(14):

Anticipated unit sales are January, 5,000; February, 4,000; and March 8,000. Finished goods are consistently maintained at 80% of the following month's sales. If units cost $10 each to produce, how much is February's total cost of production?

A. $0

B. $40,000

C. $72,000

D. $80,000

E. None of these.

Question 22(15):

Which of the following is one of the purposes of standard costs?

A. To aid in planning, controlling, and cost-volume-profit analysis.

B. To replace budgets and budgeting.

C. To use them as a basis for external-reporting purposes.

D. To eliminate having to account for underapplied or overapplied factory overhead.

E. None of these.

Question 23(16):

How is a labor rate variance computed?

A. The difference between standard and actual rate multiplied by actual hours.

B. The difference between standard and actual rate multiplied by standard hours.

C. The difference between standard and actual hours multiplied by actual rate.

D. The difference between standard and actual hours multiplied by standard rate.

E. None of these.

Question 24(17):

Which of the following decisions would necessarily result in an increase in profit or decrease in loss?

A. Eliminating the sale of all products that are priced below variable cost.

B. Eliminating the sale of all products that are priced below absorption cost.

C. Eliminating the sale of all products if the firm has a loss.

D. Not eliminating the sale of any products if the firm is profitable overall.

E. None of these.

Question 25(18):

In calculating the controllable contribution margin, fixed costs should be subtracted from the contribution margin:

A. in every case.

B. if they are controllable by the segment's management.

C. if they are directly traceable to the segment.

D. Both B and C.

E. None of these.

Question 26(19):

In considering a special order situation that will enable a company to make use of presently idle capacity, which of the following costs would be irrelevant?

A. Materials

B. Depreciation

C. Direct labor

D. Variable overhead

E. None of these.

Question 27(20):

The type of costs presented to management for an equipment replacement decision should be limited to:

A. relevant costs.

B. standard costs.

C. sunk costs.

D. controllable costs.

E. None of these.