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    Managerial Accounting problems

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    1. Present entries to record the following selected transactions of Belton Co.
    a. Purchased 500 shares of the 100,000 shares outstanding $10 par common shares of Denver Corp. for
    $5,100.
    b. Purchased 2,000 shares of the 10,000 shares no par common shares of Reilly Co. for $45,600. The
    investment was accounted for by the equity method.
    c. Received a cash dividend of $1 per share on the Denver corp. stock acquired in (a).
    d. Received a cash dividend of $2 per share on the Reilly Co. stock acquired in (b).
    e. Sold 100 shares of the Denver Corporation shares acquired in (a) for $2,100.
    f. Recorded the appropriate share of Reilly's Co. net income of $50,000. The stock was acquired in (b).

    2. On June 30, 2006, Athens Company issued $1,500,000 of 10-year, 8% bonds, dated June 30, for $1,540,000. the bonds were purchased by Palermo Co. on the issue date at the issue price. Present entries to record the following transactions:

    (a)

    Athens Company
    (l) Issuance of bonds.
    (2) Payment of first semiannual interest on December 31, 2006.
    (3) Amortization by straight-line method of bond premium on December 31, 2006.

    Palermo Company
    (1) Purchase of bonds.
    (2) Receipt of first semiannual interest amount on December 31, 2006.
    (3) Amortization by straight-line method of bond premium on December 31, 2006.

    3. State the section(s) of the statement of cash flows (operating activities, investing activities, financing activities) and the amount that would be reported for each of the following transactions:

    (a) Received $145,000 from the sale of land costing $70,000.
    (b) Purchased investments for $50,000.
    (c) Declared $35,000 cash dividends on stock. $5,000 dividends were payable at the beginning of the year, and
    $6,000 were payable at the end of the year.
    (d) Acquired equipment for $32,000 cash.
    (e) Declared and issued 100 shares of $20 par common stock as a stock dividend, when the market price of
    the stock was $32 a share.
    (f) Recognized by an adjusting entry depreciation for the year, $48,000.
    (g) Issued 85,000 shares of $10 par common stock for $25 a share, receiving cash.
    (h) Issued $500,000 of 20-year, 10% bonds payable at 99.
    (e) Borrowed $43,000 from Busey National Bank, issuing a 5-year, 8% note for that amount.

    4. Present entries to record the following summarized operations related to production for a company using a job order cost system:

    (a) Materials purchased on account $167,000
    (b) Prepaid expenses incurred on account 12,200
    (c) Materials requisitioned:
    For production orders 153,700
    For general factory use 2,700
    (d) Factory labor used:
    On production orders 141,300
    For general factory purposes 12,000
    (e) Depreciation of factory equipment 37,000
    (f) Expiration of prepaid expenses, chargeable to factory 6,100
    (g) Factory overhead costs incurred on account 67,000
    (h) Factory overhead applied, based on machine hours 105,300
    (i) Jobs finished 415,300
    (j) Jobs shipped to customers: cost, $412,000; selling price 638,000

    5. The inventory at June 1 and costs charged to Work in Process - Department 60 during June are as follows:

    3800 units, 80% completed $ 60,400
    Direct materials, 32,000 units 368,000
    Direct labor 244,000
    Factory Overhead 188,000
    Total costs to be accounted for $860,400

    During June, 32,000 units were placed into production and 31,200 units were completed including those in inventory on June 1. One June 30, the inventory of work in process consisted of 4,600 units which were 40% completed. Inventories are costed by the first-in-first-out method and all materials are added at the beginning of the process.

    Determine the following presenting your computations:

    (a) equivalent units of production for conversion cost
    (b) conversion cost per equivalent unit
    (c) total and unit cost of finished goods started in prior period and completed in the current period
    (d) total and unit cost of finished goods started and completed in the current period.
    (e) total cost of work in process inventory at June 30

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    Solution Preview

    Please see the attached file.

    1. Present entries to record the following selected transactions of Belton Co.

    a. Purchased 500 shares of the 100,000 shares outstanding $10 par common shares of Denver Corp. for $5,100.

    Investment in stock 5,100
    Cash 5,100

    b. Purchased 2,000 shares of the 10,000 shares no par common shares of Reilly Co. for $45,600. The investment was accounted for by the equity method.

    Investment in stock 45,600
    Cash 45,600

    c. Received a cash dividend of $1 per share on the Denver corp. stock acquired in (a).

    Cash ($1 x 500 shares) 500
    Dividend income 500

    d. Received a cash dividend of $2 per share on the Reilly Co. stock acquired in (b).

    Cash ($2 x 2,000 shares) 4,000
    Investment 4,000

    e. Sold 100 shares of the Denver Corporation shares acquired in (a) for $2,100.

    Cash 2,100
    Investment in stock 1,020
    Unrealized gain/loss 1,080

    f. Recorded the appropriate share of Reilly's Co. net income of $50,000. The stock was acquired in (b).

    Investment (20% x 50,000) 10,000
    Investment income 10,000

    2. On June 30, 2006, Athens Company issued $1,500,000 of 10-year, 8% bonds, dated June 30, for $1,540,000. The bonds were purchased by Palermo Co. on the issue date at the issue price. Present entries to record the following transactions:

    (a)

    Athens Company
    (l) Issuance of bonds.
    (2) Payment of first semiannual interest on December 31, 2006.
    (3) Amortization by straight-line method of bond premium on December 31, 2006.

    June 30, 2006 Cash 1,540,000
    Bonds Payable 1,500,000
    Premium on Bonds Payable 40,000

    Amount received at issuance 1,540,000
    Amount to be repaid at maturity 1,500,000
    Excess of cash received over cash paid (40,000)
    Cash interest payments (120,000 x 10 years) 1,200,000
    Total interest cost 1,160,000

    Dec. 31, 2006 Bond Interest Expenses 58,000
    Cash 58,000
    ($1,160,000/20 = 58,000)

    Dec. 31, 2006 Premium on Bonds Payable 2,000
    Cash 2,000
    ($40,000/20 = 2,000)

    Palermo Company
    (1) Purchase of bonds.
    (2) Receipt of first semiannual interest amount on December 31, 2006.
    (3) Amortization by straight-line method of bond premium on ...

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