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1. Sleep Corporation was organized on January 1, 2011. During its first year, the corporation issued 40,000 shares of $5 par value preferred stock and 400,000 shares of $1 par value common stock. At December 31, the company declared the following cash dividends:
2011 - $8,000
2012 - $30,000
2013 - $70,000
(a) Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 5% and not cumulative.
(b) Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 6% and cumulative.
(c) Journalize the declaration of the cash dividend at December 31, 2013 using the assumption of part (b).
2. On January 1, 2012, Magnus Corporation had 60,000 shares of $1 par value common stock issued and outstanding. During the year, the following transactions occurred:
Mar. 1 Issued 25,000 shares of common stock for $550,000.
June 1 Declared a cash dividend of $2.00 per share to stockholders of record on
June 30 Paid the $2.00 cash dividend.
Dec 1 Purchased 5,000 shares of common stock for the treasury for $22 per shares
Dec 15 Declared a cash dividend on outstanding shares of $2.25 per share to stockholders of record on December 31
Prepare journal entries to record the above transactions.
3. Rosco Company purchased 35,000 shares of common stock of Paxton Corporation as a long-term investment for $900,000. During the year, Paxton Corporation reported net income of $300,000 and paid dividends of $100,000.
(a) Assuming that the 35,000 shares represent a 10% interest in Paxton Corporation:
1. Prepare the journal entry to record the investment in Paxton stock.
2. Prepare any entries that Rosco Company should make in accounting for its investment in Paxton stock during the year.
3. What is the balance of the Stock Investments account on Rosco Company's books at the end of the year?
(b) Repeat requirement (a) above except assume that the 35,000 shares represent a 20% interest in Paxton Corporation?
4. Doctor Company prepared the tabulation below at December 31, 2012.
Net income $307,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense, $32,000
Decrease in accounts receivable, $50,000
Increase in inventory, $12,000
Decrease in accounts payable, $8,600
Increase in income taxes payable, $1,500
Loss on sale of land, $5,000
Net cash provided (used) by operating activities
Show how each item should be reported in the statement of cash flows. Use parentheses for deductions.
5. A comparative balance sheet for Halpern Corporation is presented below:
1. Net loss for 2012 is $20,000.
2. Cash dividends of $14,000 were declared and paid in 2012.
3. Land was sold for cash at a loss of $4,000. This was the only land transaction during the year.
4. Equipment with a cost of $15,000 and accumulated depreciation of $10,000 was sold for $5,000 cash.
5. $22,000 of bonds were retired during the year at carrying (book) value.
6. Equipment was acquired for common stock. The fair value of the stock at the time of the exchange was $25,000.
Prepare a statement of cash flows for the year ended 2012, using the indirect method.
6. Selected financial statement data for Moor Company are presented below.
December 31, 2013
December 31, 2012
Total current liabilities
During 2013, net sales were $950,000, and cost of goods sold was $775,000.
Compute the following ratios at December 31, 2013
(c) Receivables turnover.
(d) Inventory turnover.