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ACC421

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13. The following information was extracted from the accounts of Colaw Corporation at December 31, 2007:
CR(DR)
Total reported income since incorporation $750,000
Total cash dividends paid (400,000)
Cumulative effect of changes in accounting principle (60,000)
Total stock dividends distributed (100,000)
Prior period adjustment, recorded January 1, 2007 33,000
What should be the balance of retained earnings at December 31, 2007?
a. $223,000.
b. $250,000.
c. $190,000.
d. $283,000.

Use the following information for questions 14 through 16.

Falley Corp.'s trial balance of income statement accounts for the year ended December 31, 2007 included the following:
Debit Credit
Sales $280,000
Cost of sales $120,000
Administrative expenses 50,000
Loss on sale of equipment 18,000
Commissions to salespersons 20,000
Interest revenue 10,000
Freight-out 6,000
Loss due to fire damage 30,000
Bad debt expense 6,000
Totals $250,000 $290,000
Other information:

Falley's income tax rate is 30%. Finished goods inventory:
January 1, 2007 $160,000
December 31, 2007 140,000

On Falley 's multiple-step income statement for 2007,

14. Cost of goods manufactured is
a. $146,000.
b. $140,000.
c. $106,000.
d. $100,000.

15. Income before extraordinary item is
a. $70,000.
b. $40,000.
c. $49,000.
d. $28,000.

16. Extraordinary loss is
a. $21,000.
b. $30,000.
c. $33,600.
d. $48,000.
Use the following information for questions 35 through 38.

Renfro Mining Co. has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Renfro Mining Co. for 2007 and 2006 are provided below.

BALANCE SHEETS
12/31/07 12/31/06
Cash $153,000 $ 72,000
Accounts receivable 135,000 81,000
Merchandise inventory 144,000 180,000
Property, plant and equipment $228,000 $360,000
Less accumulated depreciation (120,000) 108,000 (114,000) 246,000
$540,000 $579,000

Accounts payable $ 66,000 $ 36,000
Income taxes payable 132,000 147,000
Bonds payable 135,000 225,000
Common stock 81,000 81,000
Retained earnings 126,000 90,000
$540,000 $579,000

INCOME STATEMENT
For the Year Ended December 31, 2007
Sales $3,150,000
Cost of sales 2,682,000
Gross profit 468,000
Selling expenses $225,000
Administrative expenses 72,000 297,000
Income from operations 171,000
Interest expense 27,000
Income before taxes 144,000
Income taxes 36,000
Net income $ 108,000
The following additional data were provided:
1. Dividends for the year 2007 were $72,000.
2. During the year, equipment was sold for $90,000. This equipment cost $132,000 originally and had a book value of $108,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.
3. All depreciation expense is in the selling expense category.

The following question(s) relate(s) to a statement of cash flows (direct method) for the year ended December 31, 2007, for Renfro Mining Company.

35. The net cash provided by operating activities is
a. $153,000.
b. $108,000.
c. $90,000.
d. $75,000.

36. The net cash provided (used) by investing activities is
a. $(132,000).
b. $18,000.
c. $90,000.
d. $(108,000).

37. Under the direct method, the cash received from customers is
a. $3,204,000.
b. $3,096,000.
c. $3,150,000.
d. $3,165,000.

38. The net cash provided (used) by financing activities is
a. $(90,000).
b. $18,000.
c. $(162,000).
d. $72,000.

Use the following 8% interest factors for questions 39 through 40.
Present Value of Future Value of
Ordinary Annuity Ordinary Annuity
7 periods 5.2064 8.92280
8 periods 5.7466 10.63663
9 periods 6.2469 12.48756

39. What will be the balance on September 1, 2010 in a fund which is accumulated by making $24,000 annual deposits each September 1 beginning in 2003, with the last deposit being made on September 1, 2010? The fund pays interest at 8% compounded annually.
a. $255,279
b. $214,148
c. $181,440
d. $137,918

40. What amount should be recorded as the cost of a machine purchased December 31, 2006, which is to be financed by making 8 annual payments of $8,000 each beginning December 31, 2007? The applicable interest rate is 8%.
a. $56,000
b. $49,975
c. $85,093
d. $45,973

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Solution Summary

The solution answers income statement, cash flow statement, balance sheet related questions for ACC421.

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