Reference no: EM13858649
QUESTION 1:
Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transactions would have upon cash and net income. The first transaction has been completed as an example.(If an amount reduces the account balance then enter with negative sign preceding the number e.g. -15,000 or parentheses e.g. (15,000).)
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Cash
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Net Income
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(a) Purchased $110 of supplies for cash.
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$-110
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$0
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(b) Recorded an adjusting entry to record use of $44 of the above supplies.
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(c) Made sales of $1,299, all on account.
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(d) Received $879 from customers in payment of their accounts.
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(e) Purchased equipment for cash, $2,732.
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(f) Recorded depreciation of building for period used, $768.
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QUESTION 2:
The financial statements of Tootsie Roll are presented below.
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TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Earnings, Comprehensive Earnings and Retained Earnings (in thousands except per share data)
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For the year ended December 31,
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2011
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2010
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2009
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Net product sales
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$528,369
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$517,149
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$495,592
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Rental and royalty revenue
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4,136
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4,299
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3,739
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Total revenue
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532,505
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521,448
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499,331
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Product cost of goods sold
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365,225
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349,334
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319,775
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Rental and royalty cost
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1,038
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1,088
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852
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Total costs
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366,263
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350,422
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320,627
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Product gross margin
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163,144
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167,815
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175,817
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Rental and royalty gross margin
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3,098
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3,211
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2,887
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Total gross margin
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166,242
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171,026
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178,704
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Selling, marketing and administrative expenses
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108,276
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106,316
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103,755
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Impairment charges
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-
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-
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14,000
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Earnings from operations
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57,966
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64,710
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60,949
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Other income (expense), net
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2,946
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8,358
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2,100
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Earnings before income taxes
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60,912
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73,068
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63,049
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Provision for income taxes
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16,974
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20,005
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9,892
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Net earnings
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$43,938
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$53,063
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$53,157
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Net earnings
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$43,938
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$53,063
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$53,157
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Other comprehensive earnings (loss)
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(8,740
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)
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1,183
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2,845
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Comprehensive earnings
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$35,198
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$54,246
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$56,002
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Retained earnings at beginning of year
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$135,866
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$147,687
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$144,949
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Net earnings
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43,938
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53,063
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53,157
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Cash dividends
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(18,360
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)
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(18,078
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)
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(17,790
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)
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Stock dividends
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(47,175
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)
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(46,806
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(32,629
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)
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Retained earnings at end of year
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$114,269
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$135,866
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$147,687
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Earnings per share
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$0.76
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$0.90
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$0.89
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Average Common and Class B Common shares outstanding
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57,892
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58,685
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59,425
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(The accompanying notes are an integral part of these statements.)
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CONSOLIDATED STATEMENTS OF
Financial Position
TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES (in thousands except per share data)
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Assets
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December 31,
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2011
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2010
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CURRENT ASSETS:
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Cash and cash equivalents
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$78,612
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$115,976
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Investments
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10,895
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7,996
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Accounts receivable trade, less allowances of $1,731 and $1,531
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41,895
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37,394
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Other receivables
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3,391
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9,961
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Inventories:
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Finished goods and work-in-process
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42,676
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35,416
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Raw materials and supplies
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29,084
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21,236
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Prepaid expenses
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5,070
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6,499
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Deferred income taxes
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578
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689
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Total current assets
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212,201
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235,167
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PROPERTY, PLANT AND EQUIPMENT, at cost:
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Land
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21,939
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21,696
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Buildings
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107,567
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102,934
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Machinery and equipment
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322,993
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307,178
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Construction in progress
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2,598
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9,243
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455,097
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440,974
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Less-Accumulated depreciation
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242,935
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225,482
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Net property, plant and equipment
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212,162
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215,492
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OTHER ASSETS:
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Goodwill
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73,237
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73,237
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Trademarks
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175,024
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175,024
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Investments
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96,161
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64,461
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Split dollar officer life insurance
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74,209
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74,441
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Prepaid expenses
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3,212
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6,680
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Equity method investment
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3,935
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4,254
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Deferred income taxes
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7,715
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9,203
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Total other assets
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433,493
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407,300
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Total assets
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$857,856
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$857,959
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Liabilities and Shareholders' Equity
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December 31,
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2011
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2010
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CURRENT LIABILITIES:
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Accounts payable
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$10,683
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$9,791
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Dividends payable
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4,603
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4,529
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Accrued liabilities
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43,069
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44,185
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Total current liabilities
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58,355
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58,505
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NONCURRENT LIABILITES:
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Deferred income taxes
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43,521
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47,865
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Postretirement health care and life insurance benefits
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26,108
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20,689
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Industrial development bonds
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7,500
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7,500
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Liability for uncertain tax positions
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8,345
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9,835
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Deferred compensation and other liabilities
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48,092
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46,157
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Total noncurrent liabilities
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133,566
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132,046
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SHAREHOLDERS' EQUITY:
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Common stock, $.69-4/9 par value-120,000 shares authorized-36,479 and 36,057 respectively, issued
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25,333
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25,040
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Class B common stock, $.69-4/9 par value-40,000 shares authorized-21,025 and 20,466 respectively, issued
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14,601
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14,212
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Capital in excess of par value
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533,677
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505,495
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Retained earnings, per accompanying statement
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114,269
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135,866
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Accumulated other comprehensive loss
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(19,953
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)
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(11,213
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)
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Treasury stock (at cost)-71 shares and 69 shares, respectively
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(1,992
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(1,992
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Total shareholders' equity
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665,935
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667,408
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Total liabilities and shareholders' equity
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$857,856
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$857,959
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TOOTSIE ROLL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
Cash Flows (in thousands)
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For the year ended December 31,
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2011
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2010
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2009
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net earnings
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$43,938
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$53,063
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$53,157
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Adjustments to reconcile net earnings to net cash provided by operating activities:
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Depreciation
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19,229
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18,279
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17,862
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Impairment charges
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-
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-
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14,000
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Impairment of equity method investment
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-
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-
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4,400
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Loss from equity method investment
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194
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342
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233
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Amortization of marketable security premiums
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1,267
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522
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320
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Changes in operating assets and liabilities:
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Accounts receivable
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(5,448
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)
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717
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(5,899
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)
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Other receivables
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3,963
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(2,373
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)
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(2,088
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)
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Inventories
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(15,631
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)
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(1,447
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)
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455
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Prepaid expenses and other assets
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5,106
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4,936
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5,203
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Accounts payable and accrued liabilities
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84
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2,180
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(2,755
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)
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Income taxes payable and deferred
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(5,772
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)
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2,322
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(12,543
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)
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Postretirement health care and life insurance benefits
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2,022
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1,429
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1,384
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Deferred compensation and other liabilities
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2,146
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2,525
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2,960
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Others
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(708
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)
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310
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305
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Net cash provided by operating activities
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50,390
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82,805
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76,994
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Capital expenditures
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(16,351
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)
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(12,813
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)
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(20,831
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Net purchase of trading securities
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(3,234
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)
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(2,902
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)
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(1,713
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)
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Purchase of available for sale securities
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(39,252
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)
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(9,301
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)
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(11,331
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)
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Sale and maturity of available for sale securities
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7,680
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8,208
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17,511
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Net cash used in investing activities
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(51,157
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)
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(16,808
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)
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(16,364
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)
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Shares repurchased and retired
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(18,190
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)
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(22,881
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)
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(20,723
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)
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Dividends paid in cash
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(18,407
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)
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(18,130
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)
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(17,825
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)
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Net cash used in financing activities
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(36,597
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)
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(41,011
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)
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(38,548
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)
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Increase (decrease) in cash and cash equivalents
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(37,364
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)
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|
24,986
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|
|
22,082
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Cash and cash equivalents at beginning of year
|
|
115,976
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|
|
90,990
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|
|
68,908
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Cash and cash equivalents at end of year
|
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$78,612
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|
|
$115,976
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|
|
$90,990
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|
|
|
|
Supplemental cash flow information
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|
|
|
|
|
|
|
|
|
|
|
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|
Income taxes paid
|
|
$16,906
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|
|
$20,586
|
|
|
$22,364
|
|
|
|
|
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Interest paid
|
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$38
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|
|
$49
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|
|
$182
|
|
|
|
|
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Stock dividend issued
|
|
$47,053
|
|
|
$46,683
|
|
|
$32,538
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|
|
|
|
(The accompanying notes are an integral part of these statements.)
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What was the amount of depreciation expense for 2011 and 2010? (You will need to examine the notes to the financial statements or the statement of cash flows.)
What was the cash paid for income taxes during 2011, reported at the bottom of the consolidated statement of cash flows? What was income tax expense (provision for income taxes) for 2011?
QUESTION 3:
The Solo Hotel opened for business on May 1, 2014. Here is its trial balance before adjustment on May 31.
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SOLO HOTEL
Trial Balance
May 31, 2014
|
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Debit
|
|
Credit
|
|
Cash
|
|
$ 2,779
|
|
|
|
Supplies
|
|
2,600
|
|
|
|
Prepaid Insurance
|
|
1,800
|
|
|
|
Land
|
|
15,279
|
|
|
|
Buildings
|
|
71,200
|
|
|
|
Equipment
|
|
16,800
|
|
|
|
Accounts Payable
|
|
|
|
$ 4,979
|
|
Unearned Rent Revenue
|
|
|
|
3,300
|
|
Mortgage Payable
|
|
|
|
37,200
|
|
Common Stock
|
|
|
|
60,279
|
|
Rent Revenue
|
|
|
|
9,000
|
|
Salaries and Wages Expense
|
|
3,000
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|
|
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Utilities Expense
|
|
800
|
|
|
|
Advertising Expense
|
|
500
|
|
|
|
|
$114,758
|
|
$114,758
|
Other data:
1. Insurance expires at the rate of $300 per month.
2. A count of supplies shows $1,174 of unused supplies on May 31.
3. (a) Annual depreciation is $3,720 on the building.
(b) Annual depreciation is $3,600 on equipment.
4. The mortgage interest rate is 6%. (The mortgage was taken out on May 1.)
5. Unearned rent of $2,690 has been earned.
6. Salaries of $650 are accrued and unpaid at May 31.
Journalize the adjusting entries on May 31.
Prepare a ledger using T-accounts. Enter the trial balance amounts and post the adjusting entries.
Prepare an adjusted trial balance on May 31.
Prepare an income statement for the month of May.
Prepare a retained earnings statement for the month of May.
Prepare a classified balance sheet at May 31.
QUESTION 4:
Ken Lumas started his own consulting firm, Lumas Consulting, on June 1, 2014. The trial balance at June 30 is as follows.
|
LUMAS CONSULTING
Trial Balance
June 30, 2014
|
|
|
Debit
|
|
Credit
|
|
Cash
|
|
$ 6,850
|
|
|
|
Accounts Receivable
|
|
7,000
|
|
|
|
Supplies
|
|
2,059
|
|
|
|
Prepaid Insurance
|
|
3,480
|
|
|
|
Equipment
|
|
15,000
|
|
|
|
Accounts Payable
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|
|
|
$ 4,280
|
|
Unearned Service Revenue
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|
|
|
5,200
|
|
Common Stock
|
|
|
|
22,149
|
|
Service Revenue
|
|
|
|
8,000
|
|
Salaries and Wages Expense
|
|
4,000
|
|
|
|
Rent Expense
|
|
1,240
|
|
|
|
|
$39,629
|
|
$39,629
|
In addition to those accounts listed on the trial balance, the chart of accounts for Lumas also contains the following accounts: Accumulated Depreciation-Equipment, Salaries and Wages Payable, Depreciation Expense, Insurance Expense, Utilities Expense, and Supplies Expense.
Other data:
1. Supplies on hand at June 30 total $720.
2. A utility bill for $235 has not been recorded and will not be paid until next month.
3. The insurance policy is for a year.
4. Services were performed for $4,114 of unearned service revenue by the end of the month.
5. Salaries of $1,439 are accrued at June 30.
6. The equipment has a 5-year life with no salvage value and is being depreciated at $250 per month for 60 months.
7. Invoices representing $4,252 of services performed during the month have not been recorded as of June 30.
Prepare the adjusting entries for the month of June.
Post the adjusting entries to the ledger accounts. Enter the totals from the trial balance as beginning account balances. (Use T-Accounts.)
Prepare an adjusted trial balance at June 30, 2014.
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