Statement of Cash Flows (Indirect Method)
Use the following information regarding the Lund Corporation to (a) prepare a statement of cash flows using the indirect method and (b) compute Lund's operating-cash-flow-to-current-liabilities ratio.

a. Use negative signs with cash outflow answers.

b. Operating-cash-flow-to-current-liabilities ratio (Round answers to two decimal places.)

Answer

On January 1, 2018 Casey Corporation exchanged $3,244,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems.

At the acquisition date, Casey prepared the following fair-value allocation schedule:

Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records.

Prepare an acquisition-date consolidated balance sheet for Casey Corporation and its subsidiary Kennedy Corporation. (Negative amounts should be indicated by a minus sign.)

s a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January 1, 20Y9, the following tentative trial balance as of December 31, 20Y8, is prepared by the Accounting Department of Regina Soap Co.:

Factory output and sales for 20Y9 are expected to total 23,000 units of product, which are to be sold at $120 per unit. The quantities and costs of the inventories at December 31, 20Y9, are expected to remain unchanged from the balances at the beginning of the year.

Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows:

Balances of accounts receivable, prepaid expenses, and accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of $250,400 on 20Y9 taxable income will be paid during 20Y9. Regular quarterly cash dividends of $1 per share are expected to be declared and paid in March, June, September, and December on 35,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $125,000 cash in May.

Required:

1. Prepare a budgeted income statement for 20Y9.

Feedback

Use information from the expected sales, cost of goods manufactured and sold, and selling and administrative expenses.

Learning Objective 4, Learning Objective 5.

2. Prepare a budgeted balance sheet as of December 31, 20Y9.

Feedback

Do not forget to include inventories of finished goods, work in process, and materials as assets in the balance sheet.

Calculate the ending retained earnings balance. Include the remaining assets, liabilities, and stockholders' equity.

1.a Sheridan Inc. manufactures cycling equipment. Recently, the vice president of operations of the company has requested construction of a new plant to meet the increasing demand for the company’s bikes. After a careful evaluation of the request, the board of directors has decided to raise funds for the new plant by issuing $3,088,700 of 14% term corporate bonds on March 1, 2020, due on March 1, 2035, with interest payable each March 1 and September 1, with the first interest payment on September 1st, 2020. At the time of issuance, the market interest rate for similar financial instruments is 12%.

As the controller of the company, determine the selling price of the bonds. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.) Selling price of the bonds = ?

1.b

Shamrock Corporation, having recently issued a $20,069,100, 15-year bond issue, is committed to make annual sinking fund deposits of $616,800. The deposits are made on the last day of each year and yield a return of 10%.

Future value of an ordinary annuity = ?

1. c Under the terms of his salary agreement, president Chris Walters has an option of receiving either an immediate bonus of $55,000, or a deferred bonus of $70,000 payable in 10 years.

Ignoring tax considerations and assuming a relevant interest rate of 4%, which form of settlement should Walters accept?

Present value of deferred bonus = ?

• How does the IRS define what is a “political contribution” that cannot be deducted? Is the disallowance limited to outright gifts, or does it extend to less direct methods of providing funds to a candidate or party? If the latter, please explain the circumstances in which the disallowance applies to something that is not an outright gift.
• How does the IRS define what is “lobbying,” so that a taxpayer may determine what expenses are not deductible as lobbying expenses?
• Many not-for-profit organizations are engaged in lobbying, but still qualify to receive deductible charitable contributions. Does this activity affect an individual’s ability to claim a charitable deduction for contributions to an otherwise qualified organization? If so, in what circumstances, and how is the deduction affected?

On March 1, 2018, E Corp. issued $1,000,000 of 10% nonconvertible bonds at 103, due on February 28, 2028. Each $1,000 bond was issued with 30 detachable stock warrants, each of which entitled the holder to purchase, for $50, one share of Evan's $25 par common stock. On March 1, 2018, the market price of each warrant was $4. By what amount should the bond issue proceeds increase shareholders' equity?

Alcorn Service Company was formed on January 1, 2018.

Events Affecting the 2018 Accounting Period

1. Acquired $72,000 cash from the issue of common stock.

2. Purchased $3,600 of supplies on account.

3. Purchased land that cost $42,000 cash.

4. Paid $3,600 cash to settle accounts payable created in Event 2.

5. Recognized revenue on account of $66,000.

6. Paid $33,000 cash for other operating expenses.

7. Collected $50,000 cash from accounts receivable.

Information for 2018 Adjusting Entries

8. Recognized accrued salaries of $4,400 on December 31, 2018.

9. Had $1,400 of supplies on hand at the end of the accounting period.

Events Affecting the 2019 Accounting Period

1. Acquired $32,000 cash from the issue of common stock.

2. Paid $4,400 cash to settle the salaries payable obligation.

3. Paid $7,200 cash in advance to lease office space.

4. Sold the land that cost $42,000 for $42,000 cash.

5. Received $8,400 cash in advance for services to be performed in the future.

6. Purchased $2,200 of supplies on account during the year.

7. Provided services on account of $44,000.

8. Collected $45,000 cash from accounts receivable.

9. Paid a cash dividend of $4,000 to the stockholders.

10. Paid other operating expenses of $31,500.

Information for 2019 Adjusting Entries

11. The advance payment for rental of the office space (see Event 3) was made on March 1 for a one-year term.

12. The cash advance for services to be provided in the future was collected on October 1 (see Event 5). The one-year contract started on October 1.

13. Had $1,500 of supplies remaining on hand at the end of the period.

14. Recognized accrued salaries of $5,100 at the end of the accounting period.

15. Recognized $1,600 of accrued interest revenue.

1. b-1. Prepare an income statement for 2018 and 2019.

2. b-2. Prepare the statement of changes in stockholders’ equity for 2018 and 2019.

3. b-3. Prepare the balance sheet for 2018 and 2019.

4. b-4. Prepare the statement of cash flows for 2018 and 2019, using the vertical statements model.

In 2018, Borland Semiconductors entered into the transactions described below. In 2015, Borland had issued 175 million shares of its $1 par common stock at $30 per share.

Required: Assuming that Borland retires shares it reacquires, record the appropriate journal entry for each of the following transactions: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

On January 2, 2018, Borland reacquired 9 million shares at $28.00 per share.

On March 3, 2018, Borland reacquired 9 million shares at $33 per share.

On August 13, 2018, Borland sold 1 million shares at $38 per share.

On December 15, 2018, Borland sold 2 million shares at $33 per share.

Compare the interest rate risk of Bitcoin price to the interest rate risk of prices of other assets, such as bonds, stocks or properties

You have just been hired as a new management trainee by Ace Wholesale, Inc a distributor of

brooms to various retail outlets located in shopping malls across the country. In the past, the

company has done very little in the way of budgeting and at certain times of the year has

experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare comprehensive budgets for the upcoming second quarter in order to show management the benefits that can be gained from an integrated budgeting program. To this end, you have worked with accounting and other areas to gather the information assembled below. The company sells many styles of brooms, but all are sold for the same price—$10 per unit.

Actual sales of brooms for the last three months and budgeted sales for the next six months follow (in units of brooms):

January (actual) 20,000

February (actual) 24,000

March (actual) 40,000

April (budget) 100,000

May (budget) 160,000

June (budget) 90,000

July (budget) 80,000

August (budget) 36,000

September (budget) 32,000

The concentration of sales before and during May is due to Graduation Days. Sufficient inventory should be on hand at the end of each month to supply 45% of the bracelets sold in the following month. Suppliers are paid $4 for a broom. One-half of a month’s purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 22% of a month’s sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 8% is collected in the second month following sale. Monthly operating expenses for the company are given below:

Variable:

Sales commissions 5% of Sales

Fixed:

Advertising $200,000

Rent $18,000

Salaries $106,000

Utilities $7,000

Insurance $3,000

Depreciation $14,000

Insurance is paid on an annual basis, in November of each year.

The company plans to purchase $16,000 in new equipment during May and $40,000 in new

equipment during June; both purchases will be for cash. The company declares dividends of

$15,000 each quarter, payable in the first month of the following quarter.

The company’s balance sheet at March 31 is given below:

Assets

Cash $74,000

Accounts receivable (net) 331,200

Inventory 180,000

Prepaid insurance 21,000

Property and equipment (net) 950,000

Total assets $1,556,200

Liabilities and Stockholders’ Equity

Accounts payable $134,000

Dividends payable 15,000

Common stock 800,000

Retained earnings 607,200

Total liabilities and stockholders’ equity $1,556,200

The company maintains a minimum cash balance of $50,000. All borrowing is done at the

beginning of a month; any repayments are made at the end of a month.

The company has an agreement with a bank that allows the company to borrow in increments of

$1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for

simplicity we will assume that interest is not compounded. At the end of the quarter, the

company would pay the bank all of the accumulated interest on the loan and as much of the loan

as possible (in increments of $1,000), while still retaining at least $50,000 in cash.

Required:

Prepare a master budget for the three-month period ending June 30. Include the following

detailed budgets:

* A merchandise purchases budget in units and in dollars. Show the budget by month and in total?

* A schedule of expected cash disbursements for merchandise purchases, by month and in total?

* A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000?

The following is a series of related transactions between Siogo Shoes, a shoe wholesaler, and Sole Mates, a chain of retail shoe stores. Feb. 9 Siogo Shoes sold Sole Mates 195 pairs of hiking boots on account, terms 2/10, n/30. The cost of these boots to Siogo Shoes was $120 per pair, and the sales price was $150 per pair. Feb. 12 United Express charged $90 for delivering this merchandise to Sole Mates. These charges were split evenly between the buyer and seller and were paid immediately in cash. Feb. 13 Sole Mates returned 10 pairs of boots to Siogo Shoes because they were the wrong size. Siogo Shoes allowed Sole Mates full credit for this return. Feb. 19 Sole Mates paid the remaining balance due to Siogo Shoes within the discount period. Both companies use a perpetual inventory system. Required: a. Record this series of transactions in the general journal of Siogo Shoes. (The company records sales at gross sales price.) b. Record this series of transactions in the general journal of Sole Mates. (The company records purchases of merchandise at net cost and uses a Transportation-in account to record transportation charges on inbound shipments.)

Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company’s products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements:

1. The finished goods inventory on hand at the end of each month must equal 2,000 units of Supermix plus 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 10,600 units.

2. The raw materials inventory on hand at the end of each month must equal one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 66,000 cc of solvent H300.

3. The company maintains no work in process inventories.

A monthly sales budget for Supermix for the third and fourth quarters of the year follows.

Required:

1. Prepare a production budget for Supermix for the months July, August, September, and October.

3. Prepare a direct materials budget showing the quantity of solvent H300 to be purchased for July, August, and September, and for the quarter in total.

2. Financial statements for Kinder Corporation are presented below.

KINDER CORPORATION

Comparative Balance Sheet

December 31

                                                                                                                      2015                  2014  

Assets

Cash...................................................................................................       $    4,000           $ 6,000

Accounts receivable (net)..................................................................           16,000             12,000

Inventory............................................................................................           20,000             18,000

Land...................................................................................................           28,000               8,000

Equipment..........................................................................................           62,000             60,000

Accumulated depreciation—equipment............................................          (20,000)          (14,000)

      Total assets..................................................................................       $110,000           $90,000

Liabilities and Stockholders' Equity

Accounts payable..............................................................................       $ 10,000           $16,000

Long-term notes payable...................................................................           34,000             19,000

Common stock ($10 par value).........................................................           50,000             50,000

Retained earnings..............................................................................           16,000               5,000

      Total liabilities and stockholders' equity......................................       $110,000           $90,000

KINDER CORPORATION

Income Statement

For the year ended December 31, 2015

Sales revenue .....................................................................................................             $370,000

Less: Sales returns and allowances ...................................................................                 10,000

Net sales .............................................................................................................             $360,000

Cost of goods sold ..............................................................................................               275,000

Gross profit .........................................................................................................                 85,000

Operating expenses ...........................................................................................                 40,000

Income before income taxes ..............................................................................                 45,000

Income tax expense ...........................................................................................                 18,000

Net income ..........................................................................................................             $ 27,000

Additional Information: All sales were on account. The market price of Kinder's common stock was $42 on December 31, 2015, 5000 shares of common stock issued and outstanding.

1. Compute the indicated ratios at December 31, 2015, or for the year ended December 31, 2015, as appropriate. Report answers to two decimal places.

      1.   Return on assets is ______________________________________________________.

      2.   Acid-test ratio is ________________________________________________________.

      3.   Profit margin ___________________________________________________________.

      4.   Payout ratio is __________________________________________________________.

      5.   Debt to assets ratio is ____________________________________________________.

      6.   Asset turnover is ________________________________________________________.

      7.   Accounts receivable turnover is ____________________________________________.

      8.   Price-earnings ratio is ____________________________________________________.

      9.   Current ratio is __________________________________________________________.

      10. Debit to Equity___________________________________________________________

      11. Inventory Turnover and Days in Inventory _____________________________________

      12. Earnings per share ______________________________________________________

      13. Accounts Receivable Turnover and Days in Sales ______________________________

The Kaumajet Factory produces two products - table lamps and desk lamps. It has two separate departments - Finishing and Production. The overhead budget for the Finishing Department is $492,298, using 375,800 direct labor hours. The overhead budget for the Production Department is $406,351 using 69,700 direct labor hours. If the budget estimates that a desk lamp will require 5 hours of finishing and 8 hours of production, what is the total amount of factory overhead the Kaumajet Factory will allocate to desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours, if 10,700 units are produced?