Question

3.

Texas Inc. has 4,000 shares of 7%, $125 par value cumulative preferred stock and 95,000 shares of $1 par value common stock outstanding at December 31. What is the annual dividend on the preferred stock?

a.$6,650 in total

b.$35,000 in total

c.$0.01 per share

d.$70.00 per share

2.

Finch Company began its operations on March 31 of the current year. Finch has the following projected costs:

	April	May	June
Manufacturing costs (1)	$158,900	$198,500	$217,200
Insurance expense (2)	950	950	950
Depreciation expense	2,150	2,150	2,150
Property tax expense (3)	580	580	580

(1) Of the manufacturing costs, three-fourths are paid for in the month they are incurred and one-fourth is paid for in the following month.
(2) Insurance expense is $950 a month; however, the insurance is paid four times yearly, in the first month of the quarter (i.e., January, April, July, and October).
(3) Property tax is paid once a year in November.

The cash payments expected for Finch Company in the month of April are

a.$119,175

b.$122,025

c.$140,463

d.$158,900

1.

Use the information below for Nuthatch Corporation to answer the question that follow.

Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business—September, October, and November—are $247,000, $303,000, and $408,000, respectively. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale.

The cash collections expected in September from accounts receivable are estimated to be

a.$138,320

b.$247,000

c.$172,900

d.$296,400

Answer 1

1. Face Value of Preferred stock = No. of shares x Par Value per share = 4000 x $125 = $ 5,00,000

Rate of Preferred stock = 7 %

Dividend = Face Value of Stock x Rate = 5,00,000 x 7 % = $ 35000 in total.

Therefore , Answer = b. $ 35,000 in total

2. Calculation of Cash Payments in Month of April

Particulars                                        Amount

Manufacturing Cost (Note - i)                     $ 1,19,175

Insurance Expense (Note - ii)                        $ 2,850

Total Cash Payment                                  $ 1,22,025

Notes : (i) Manufacturing expense are paid 3/4 in month in which they incurred and rest in next month.

Hence , during April Month manufacturing expense incurred was $ 158900 , so payment made during the month in respcet of manufacturing expense = 158900 x 3/4 =$ 119,175

(ii) Insurance expense is $950 a month; however, the insurance is paid four times yearly, in the first month of the quarter . Therefore , Payment mad ein April = 950 x 3 =$ 2850 i.e for 3 months (April , May , June)

(iii) Depreciation is a non cash adjustment . Hence not considered in calculation of cash payment.

(iv) Property tax is paid once in a year in november. Hence it is not cash payment for April month.

Answer = b. $ 122,025

3. Budgeted sales for month of September = $ 2,47,000

Out of this , sales made in cash = 2,47,000 x 30% = $ 74,100

Sales made on account receivable = 2,47,000 - 74100 = $ 172900

Out of sale made on account , 80% is collected in same month.

Therefore , collections made in month of september on sale of account = $ 172900 x 80% = $ 138320

Answer = a.$ 138320