Reference no: EM132777118
Questions -
Q1) Flax Corp. uses the direct method to prepare its statement of cash flows. Flax's trial balances at December 31, Year 2 and Year 1, are as follows:
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December 31
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Debits
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Year 2
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Year 1
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Cash
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$35,000
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$32,000
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Accounts receivable
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$33,000
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$30,000
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Inventory
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$31,000
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$47,000
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Property, plant and equipment
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$100,000
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$95,000
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Unamortized bond discount
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$4,500
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$5,000
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Cost of goods sold
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$250,000
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$380,000
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Selling expenses
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$141,500
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$172,000
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General and administrative expenses
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$137,000
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$151,300
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Interest expense
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$4,300
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$2,600
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Income tax expense
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$20,400
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$61,200
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$756,700
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$976,100
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Credits
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Allowance for credit losses
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$1,300
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$1,100
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Accumulated depreciation
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$16,500
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$15,000
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Trade accounts payable
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$25,000
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$17,500
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Income taxes payable
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$21,000
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$27,100
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Deferred income taxes
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$5,300
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$4,600
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8% callable bonds payable
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$45,000
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$20,000
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Common stock
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$50,000
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$40,000
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Additional paid-in capital
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$9,100
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$7,500
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Retained earnings
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$44,700
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$64,600
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Sales
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$538,800
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$778,700
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$756,700
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$976,100
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Additional information - Flax purchased $5,000 in equipment during Year 2.
Flax allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses.
What amounts should Flax report in its statement of cash flows for the year ended December 31, Year 2, for cash paid for goods to be sold?
A. $258,500
B. $257,500
C. $242,500
D. $226,500
Q2) Paper Co. had net income of $70,000 during the year. Dividend payment was $10,000. The following information is available:
Mortgage repayment $20,000
Available-for-sale debt securities purchased 10,000 increase
Bonds payable-issued 50,000 increase
Inventory 40,000 increase
Accounts payable 30,000 decrease
What amount, if any, should Paper report as net cash provided by operating activities in its statement of cash flows for the year?
A. $0
B. $10,000
C. $20,000
D. $30,000
Q3) On January 1, 20X3, Point, Inc. purchased 10% of Iona Co.'s common stock. Point purchased additional shares bringing its ownership up to 40% of Iona's common stock outstanding on August 1, 20X3. During October 20X3, Iona declared and paid a cash dividend on all of its outstanding common stock. Point uses the equity method to account for its investment in Iona. How much income from the Iona investment should Point's 20X3 income statement report?
A. 10% of Iona's income for January 1 to July 31, 20X3, plus 40% of Iona's income for August 1 to December 31, 20X3.
B. 40% of Iona's income for August 1 to December 31, 20X3 only.
C. 40% of Iona's 20X3 income.
D. Amount equal to dividends received from Iona
Q4) During year 3, Gilman Co. purchased 5,000 shares of the 500,000 outstanding shares of Meteor Corp.'s common stock for $35,000. During year 3, Gilman received $1,800 of dividends from its investment in Meteor's stock. The fair value of Gilman's investment on December 31, year 3, is $32,000. Gilman has elected the fair value option for this investment. What amount of income or loss that is attributable to the Meteor stock investment should be reflected in Gilman's earnings for year 3?
A. Income of $4,800.
B. Income of $1,800.
C. Loss of $1,200.
D. Loss of $3,000
Q5) Sun Corp. had investments in marketable debt securities costing $650,000 that were classified as available-for-sale. On June 30, Year 3, Sun decided to hold the investments to maturity and accordingly reclassified them to the held-to-maturity category on that date. The investments' market value was $575,000 at December 31, Year 2, $530,000 at June 30, Year 3, and $490,000 at December 31, Year 3. The changes in value were all determined to be noncredit related. Sun does not elect the fair value option to account for these investments.
What amount should Sun report as net unrealized loss on marketable debt securities in its Year 3 statement of stockholders' equity?
A. $40,000
B. $45,000
C. $120,000
D. $160,000
Q6) For a marketable debt securities portfolio classified as available-for-sale, which of the following amounts should be included in the period's net income?
A. Unrealized temporary gains/losses related to market risk during the period
B. Realized gains/losses on securities sold during the period.
C. Changes in the noncredit related valuation account during the period.
D. None, all gains/losses are included in other comprehensive income.
Q7) At the end of Year 1, Lane Co. held trading securities that cost $86,000 and which had a year-end fair value of $92,000. During Year 2, all these securities were sold for $104,500. At the end of Year 2, Lane had acquired additional trading securities that cost $73,000 and had a year-end fair value of $71,000. What is the impact of these activities on Lane's Year 2 income statement?
A. Loss of $2,000.
B. Gain of $10,500.
C. Gain of $16,500.
D. Gain of $18,500.