1. On April 1 of the current year, a company paid $150,000 cash to purchase 7%, 10-year bonds that had a par value of $150,000 and paid interest semiannually each April 1 and October 1. The company intends to hold these bonds until they mature. Prepare the journal entry to record the bond purchase, the receipt of the first semiannual interest payment on October 1 of the current year, and the accrual of interest for the year-end December 31.
2. BC Company 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.
3. Based on the following income statement and balance sheet for
Rashid Corporation
, determine the cash flows from operating activities using the indirect method.
Rashid Corporation
Income Statement
For Year Ended December 31, 2007
Sales…………………………………………………………………………………..$504,000
Cost of goods sold………………………………$327,600
Depreciation expense………………………… 42,000
Other operating expenses………………….. 125,500 (495,100)
Other gains (losses):
Gain on sale of equipment………………………………………………….. 7,200
Income before taxes…………………………………………………………….$ 16,100
Income tax expense…………………………………………………………….. (4,800)
Net income………………………………………………………………………….$ 11,300
Rashid Corporation
Balance Sheet
At December 31
Assets: 2007 2006
Cash $ 64,650 $ 55,800
Accts. Receivable 21,000 29,000
Inventory 58,000 52,100
Equipment 240,000 222,000
Accum. Depreciation (106,000) ( 96,000)
Total assets $277,650 $262,900
Liabilities:
Accts. Payable $ 28,400 $ 23,700
Income taxes payable 1,050 1,200
Total liabilities $ 29,450 $ 24,900
Equity:
Common stock $106,000 $106,000
Contributed capital in excess
of par value 18,000 18,000
Retained earnings 124,000 114,000
Total equity $248,200 $238,000
Total liabilities and equity $277,650 $262,900
4. The following information describes production activities of the Central Corp.:
Raw materials used …………………………………………….. 16,000 lbs. at $4.05 per lb.
Factory payroll ……………………………………………………. 5,545 hours for a total of $72,085
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.
Direct materials:
Price variance __________________
Quantity variance __________________
Direct labor:
Rate variance ___________________
Efficiency variance ____________________
