Reference no: EM13903981
1. The financial statements of Gaines Company appear below:
GAINES COMPANY
Comparative Balance Sheet
December 31,
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Assets 2013 2012
Cash................................................................................................... mce_markernbsp; 25,000 mce_markernbsp; 40,000
Short-term investments...................................................................... 15,000 60,000
Accounts receivable (net).................................................................. 50,000 30,000
Inventory........................................................................................... 50,000 70,000
Property, plant and equipment (net).................................................. 260,000 300,000
Total assets .................................................................................. $400,000 $500,000
Liabilities and stockholders' equity
Accounts payable............................................................................... mce_markernbsp; 20,000 mce_markernbsp; 30,000
Short-term notes payable................................................................... 30,000 90,000
Bonds payable................................................................................... 90,000 160,000
Common stock................................................................................... 150,000 150,000
Retained earnings.............................................................................. 110,000 70,000
Total liabilities and stockholders' equity...................................... $400,000 $500,000
GAINES COMPANY
Income Statement
For the Year Ended December 31, 2013
Net sales............................................................................................. $400,000
Cost of goods sold............................................................................. 240,000
Gross profit........................................................................................ 160,000
Expenses
Operating expenses...................................................................... $42,000
Interest expense........................................................................... 18,000
Total expenses........................................................................ 60,000
Income before income taxes.............................................................. 100,000
Income tax expense........................................................................... 30,000
Net income......................................................................................... mce_markernbsp; 70,000
Additional information:
a. Cash dividends of $23,000 were declared and paid in 2013.
b. Weighted-average number of shares of common stock outstanding during 2013 was 30,000 shares.
c. Market value of common stock on December 31, 2013, was $21 per share.
Required:
Using the financial statements and additional information, compute the following ratios for Gaines Company for 2013. Show all computations. Show computations. (20 min.)
1. Current ratio _________.
2. Return on common stockholders' equity _________.
3. Price-earnings ratio _________.
4. Acid-test ratio _________.
5. Receivables turnover _________.
6. Times interest earned _________.
7. Profit margin _________.
8. Days in inventory _________.
9. Payout ratio _________.
10. Return on assets _________.
2. Glavine Corporation incurred the following costs while manufacturing its product.
Materials used in product $120,000 Advertising expense $45,000
Depreciation on plant 60,000 Property taxes on plant 19,000
Property taxes on store 7,500 Delivery expense 21,000
Labor costs of assembly-line workers 110,000 Sales commissions 35,000
Factory supplies used 23,000 Salaries paid to sales clerks 50,000
Work-in-process inventory was $22,000 at January 1 and $15,500 at December 31. Finished goods inventory was $65,000 at January 1 and $50,600 at December 31.
Required:
(a) Compute cost of goods manufactured.
(b) Compute cost of goods sold. (10 min.)
3.Klinger Company estimates that annual manufacturing overhead costs will be $4,200,000 for 2012. The actual overhead costs at the end of 2012 are $4,360,000. Activity base information for 2012 follows:
Activity Base Estimated Actual
Direct Labor Cost $3,000,000 $3,150,000
Direct Labor Hours 200,000 212,000
Machine Hours 150,000 152,000
Required:
(a) Compute the predetermined overhead rate for each activity base.
(b) Compute the amount of overhead applied in 2012 for each activity base.
(c) Compute the amount of under- or overapplied overhead for 2012 for each activity base. (15 min.)
4. Sanders Company has two production departments: Fabricating and Finishing. Beginning inventories are: Work in Process-Fabricating, $6,030; Work in Process-Finishing, $4,100; and Finished Goods, $5,600. During the month the following transactions occurred:
1. Purchased $40,000 of raw materials on account.
2. Incurred $65,000 of factory labor. Wages are unpaid.
3. Incurred $50,000 of manufacturing overhead; $40,000 was paid and the remainder is unpaid.
4. Requisitioned materials for Fabricating, $10,000 and Finishing, $8,000.
5. Used factory labor for Finishing, $52,000 and Fabricating, $13,000.
6. Applied $45,000 of overhead based on machine hours used in each department. The Finishing Department used twice as many machine hours as did Fabricating.
Required:
Journalize the transactions for the month.