1) Shoemaker Department Store prepares monthly financial statements but only takes a
physical count of merchandise inventory at the end of the year. The following
information has been developed for the month of July:
At Cost At Retail
Beginning inventory$ 30,000$ 50,000
Merchandise purchases99,000150,000
The net sales for July amounted to $142,000.
Instructions
Use the retail inventory method to estimate the ending inventory at cost for July. Show
all computations to support your answer.
2) Farber Company has 24,000 shares of $1 par common stock issued and outstanding.
The company also has 2,000 shares of $100 par 4% cumulative preferred stock
outstanding. The company did not pay the preferred dividends in 2013 or 2014 . What
amount of dividends must the company pay the preferred shareholders in 2015 if they
wish to pay the common stockholders a dividend?
3) Towson Company prepared the tabulation below at December 31, 2014 .
Net Income$340,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense, $43,000
Increase in accounts receivable, $50,000
Decrease in inventory, $13,000
Amortization of patent, $4,000
Increase in accounts payable, $5,600
Decrease in interest receivable, $7,000
Increase in prepaid expenses, $6,000
Decrease in income taxes payable, $1,500
Gain on sale of land, $5,000
Net cash provided (used) by operating activities
Instructions
Show how each item should be reported in the statement of cash flows. Use parentheses
for deductions.
4) Prepare a partners’ capital statement for Whatito Company based on the following
information.
Whatley Hito
Beginning capital$30,000$27,000
Drawings during year15,0008,000
Net income was $45,000, and the partners share income 60% to Whatley and 40% to
Hito.
5) A periodic inventory system
requires the use of a cost of goods sold account throughout the year
allows for the determination of cost of goods sold after each sale
c.traditionally has been used with low unit-value items
d.requires that detailed inventory records be kept
6) At break-even point, a company sells 1,200 widgets. Its selling price is $6 per
widget, variable cost is $2 per widget, and its fixed cost is $4 per widget.
Instructions
If it sells 200 additional widgets, determine the companys incremental profit.
7) The comparative balance sheet for Lucas Company appears below:
LUCAS COMPANY
Comparative Balance Sheet
Dec. 31, 2014Dec. 31, 2013
Assets
Cash$54,000$12,000
Accounts receivable6,0008,000
Inventory11,0007,000
Prepaid expenses2,0003,000
Equipment20,00020,000
Accumulated depreciationEquipment (3,000) (2,000)
Total assets$90,000$48,000
Liabilities and Stockholders’ Equity
Accounts payable$ 1,000$ 4,000
Long-term note payable13,00014,000
Common stock33,00018,000
Retained earnings 43,000 12,000
Total liabilities and stockholders’ equity$90,000$48,000
The income statement for the year is as follows:
LUCAS COMPANY
Income Statement
For the Year Ended December 31, 2014
Sales (all on credit)$280,000
Expenses and losses
Cost of goods sold$184,000
Operating expenses, exclusive of depreciation42,300
Depreciation expense1,000
Interest expense1,200
Loss on disposal of land2,500
Income taxes 9,000
Total expenses and loss 240,000
Net income$ 40,000
Cash dividends of $9,000 were paid during the year. Land costing $15,000 was
acquired by the issuance of common stock. The property was subsequently sold for
$12,500 cash.
Instructions: Prepare a statement of cash flows for the year ended December 31, 2014
using the indirect method.
8) The employer incurs a payroll tax expense equal to the amount contributed by each
employee for ______________ taxes.