Problem 1 - Based on the following income statement and balance sheet for Rashid Corporation, determine the cash flows from operating activities using the indirect method.
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Rashid Corporation Income Statement For Year Ended December 31, 2007
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Sales
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$504,000
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Cost of goods sold
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$327,600
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Depreciation expense
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42,000
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Other operating expenses
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125,500
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(495,100)
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Other gains (losses):
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Gain on sale of equipment
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7,200
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Income before taxes
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$16,100
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Income tax expense
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(4,800)
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Net income
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$11,300
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Rashid Corporation Balance Sheets At December 31
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Assets
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2007
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2006
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Cash
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$64,650
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$55,800
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Accounts receivable
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21,000
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29,000
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Inventory
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58,000
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52,100
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Equipment
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240,000
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222,000
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Accumulated depreciation
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(106,000)
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(96,000)
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Total assets
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$277,650
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$262,900
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Liabilities:
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Accounts payable
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$28,400
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$23,700
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Income taxes payable
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1,050
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1,200
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Total liabilities
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$29,450
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$24,900
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Equity:
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Common stock
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$106,000
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$106,000
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Contribution Capital in excess of par value
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18,000
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18,000
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Retained earnings
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124,200
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114,000
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Total equity
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$248,200
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$238,000
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Total liabilities and equity
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$277,650
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$262,900
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Problem 2 - On August 1, 2007, a company issues bonds with a par value of $600,000. The bonds mature in 10 years, and pay 6% annual interest, payable each February 1 and August 1. The bonds sold at $632,000. The company uses the straight-line method of amortizing bond premiums. The company's year-end is December 31. Prepare the general journal entry to record the interest accrued at December 31, 2007.
Problem 3 - In preparing a budget for the last three months of the current year, Urban Company is planning the units of merchandise it must order each month. The company's policy is to have 15% of the next month's sales in its inventory at the end of each month. Projected sales for October, November, and December are 27,000 units, 29,500 units, and 32,500 units, respectively. How many units must be ordered in November?
Problem 4 - The following information describes production activities of the Central Corp.:
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Raw material used
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16,000 lbs. at $4.05 per lb.
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Factory payroll
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5,545 hours for a total of $72,085
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30,000 units were completed during the year
Budgeted standards for each unit produced:
1/2 lb. of raw material at $4.15 per lb.
10 minutes of direct labor at $12.50 per hour
Compute the direct materials price and quantity and the direct labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.
Problem 5 - RC Corp. uses a job order cost accounting system. During the month of April, the following events occurred:
(a) Purchased raw materials on credit, $32,000.
(b) Raw materials requisitioned: $25,800 as direct materials and $10,500 indirect materials.
(c) Paid factory payroll for the month totaling $37,700 which includes $8,200 indirect labor.
(d) Assigned the factory payroll to jobs and overhead.
Make the necessary journal entries to record the above transactions and events.