Essay Questions
25.
Net sales for the year were $300,000 and cost of goods sold was $174,000 for the
company’s existing products. A new product is presently under development and has an
expected selling price of not more than $55 per unit in order to remain competitive with
similar products in the marketplace.
Required:
(a.) Calculate gross profit and the gross profit ratio for the year.
(b.) What is the maximum cost per unit that can be incurred to manufacture the new
product so that the product can be priced competitively and will not result in a reduction
to the company’s gross profit ratio?
26.
Sparkle Cleaners, Inc., had net income of $258,025 for its fiscal year ended September 30,
2017. During the year, the company had outstanding 12,000 shares of 8%, $50 par value
preferred stock, and 135,500 shares of common stock. Calculate the basic earnings per
share of common stock for the 2017 fiscal year.
27.
Norman’s Cabinet, Inc., had net income of $213,400 for its fiscal year ended October 31,
2017. During the year, the company had outstanding 26,500 shares of 9%, $60 par value
preferred stock, and 37,000 shares of common stock. Calculate the basic earnings per
share of common stock for the 2017 fiscal year.
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28
.
Gwinnett Park Co. reported net income of $253,300 for its fiscal year ended September 30,
2017. At the beginning of that year, 150,000 shares of common stock were outstanding. On
February 1, 2017, an additional 30,000 shares were issues. On September 1, 2017, 12,000
shares were purchased as treasury stock. During the year, the company paid the annual
dividend on 7,000 shares of its 8%, $60 par value preferred stock that were outstanding during
the entire fiscal year. Calculate the basic earnings per share of common stock for the year
ended September 30, 2017.
Weighted-average number of shares of common stock outstanding during the fiscal year ended
September 30, 2017:
150,000 shares * 4/12 =
50,000
180,000 shares * 7/12 =
105,000
168,000 shares * 1/12 =
14,000
Weighted-Average Shares Outstanding
169,000
Preferred stock dividends requirement for the fiscal year ended September 30, 2017:
7,000 shares outstanding during entire year * .08 * $60 par value = $33,600
29.
Use the appropriate information from the data provided below to calculate operating
income for the year ended December 31, 2017.
Research and development expenses
$22,000
Loss from discontinued operations
8,000
Provision for income taxes
17,000
Net sales
255,000
Interest expense
18,000
Net cash provided by operations
38,000
Gross profit
73,000
Selling, general and administrative
expenses
15,000
Accounts receivable
34,000
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative
expenses
Research and development expenses
Operating income
30.
Use the appropriate information from the data provided below to calculate operating
income for the year ended December 31, 2017.
Cost of goods sold
$234,000
General and administrative expenses
96,000
Net cash provided by financing
activities
138,000
Dividends paid
32,000
Income tax expense
22,000
Other selling expenses
52,000
Net sales
556,000
Advertising expense
78,000
Accounts payable
66,000
Net sales
Cost of goods sold
Gross profit
Advertising expense
Other selling expenses
General and administrative expenses
Operating income
31.
Use the appropriate information from the data provided below to calculate the net cash
provided (used) by operating activities for the period.
Net income
$113,000
Accounts receivable increase (for the
period)
24,000
Inventory decrease (for the period)
19,000
Proceeds from the issuance of long-
term debt
260,000
Accounts payable decrease (for the
period)
11,000
Purchases of equipment
175,000
Depreciation and amortization
expense
42,000
expense
Accounts receivable increase
Inventory decrease
Accounts payable decrease
Net cash provided by operating
activities
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32.
Presented below is a partially completed balance sheet for Baldin, Inc., at December 31,
2017, together with comparative data for the year ended December 31, 2016. From the
Statement of Cash Flows for the year ended December 31, 2017, you determine that:
• Net income for the year ended December 31, 2017, was $106,000.
• Dividends paid during the year ended December 31, 2017, were $42,000.
• Accounts receivable increased $14,000 during the year ended December 31, 2017.
• The cost of new buildings acquired during 2017, was $85,000.
• No buildings were disposed of during 2017.
• The land account was not affected by any transactions during the year, but the fair value
of the land at December 31, 2017, is $210,000.
BALDIN, INC.
Balance Sheets
December 31, 2017, and 2016
Assets
2017
2016
Current assets:
Cash
$29,000
$33,000
Accounts receivable
112,000
Inventory
167,000
184,000
Total current assets
$
$329,000
Land
145,000
Buildings
340,000
Less: Accumulated
depreciation
(185,000)
(165,000)
Total land and
buildings
320,000
Total assets
$
$649,000
Liabilities
Current liabilities:
Note payable
$135,000
$119,000
Accounts payable
207,000
Total current
liabilities
$309,000
$326,000
Long-term debt
86,000
Stockholders’ Equity
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Common stock
$80,000
70,000
Retained earnings
167,000
Total stockholders’
equity
$
$237,000
Total liabilities and
stockholders’ equity
$
$649,000
Required:
(a.) Complete the December 31, 2017, balance sheet.
(b.) Prepare a statement of cash flows for the year ended December 31, 2017.
Current assets:
$33,000
112,000
Land
Buildings
Total land and
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