Problem 2. Hutton Co. reports the following data for the current


Question Description:

30

Problem 2. Hutton Co. reports the following data for the current year. Calculate Hutton’s pretax income. Problem 3. Calculate the present value of each of the alternatives below, if the discount rate is 12%. a. $45,000 today in one lump sum. b. $70,000 paid to you in seven equal payments of $10,000 each at the end of each of the next seven years. c. $80,000 paid in one lump sum 7 years from now. Problem 4. Prepare a complete cash flow statement, in good form, using the indirect method and the following information. Balance Sheet Jan 1 Dec 31 ASSETS: Current Assets: Cash 310,000 600,000 Marketable Securities 1,200,000 1,000,000 Accounts Receivable, net 290,000 330,000 Inventory 3,000,000 4,000,000 Prepaid Expenses 200,000 300,000 Total Current Assets 5,000,000 6,230,000 Total Fixed Assets, net 2,500,000 2,000,000 Total Assets 7,500,000 8,230,000 LIABILITIES & EQUITIES Current Liabilities: Accounts Payable 1,500,000 1,000,000 Notes Payable 1,000,000 1,000,000 Accrued Expenses 500,000 800,000 Total Current Liabilities 3,000,000 2,800,000 Total Long-term Liabilities 1,000,000 1,500,000 Total Liabilities 4,000,000 4,300,000 Preferred Stock 500,000 500,000 Common Stock 500,000 500,000 Capital in Excess of Par 1,000,000 1,000,000 Retained Earnings 1,500,000 1,930,000 Total Stockholders Equity 3,500,000 3,930,000 Total Liabilities and Equity 7,500,000 8,230,000 Income Statement (for ques 4) Sales 10,000,000 COGS 6,000,000 Gross Profit 4,000,000 Administrative expenses 1,200,000 Depreciation 500,000 EBIT 2,300,000 Interest Expense 500,000 EBT 1,800,000 Taxes (40%) 720,000 Net Income 1,080,000 MULTIPLE CHOICE 1. A responsibility center that incurs costs (and expenses) and generates revenues is classified as a(n): a. cost center. b. profit center. c. revenue center. d. investment center. 2. The most useful measure for evaluating a manager’s performance in controlling revenues and costs in a profit center is: a. controllable margin. b. contribution net income. c. contribution gross profit. d. contribution margin. 3. Marley Corporation desires to earn target net income of $180,000. If the selling price per unit is $30, unit variable cost is $24, and total fixed costs are $720,000, the number of units that the company must sell to earn its target net income is: a. 60,000. b. 90,000. c. 120,000. d. 150,000. 4. Oscar Corporation uses a process cost accounting system. Given the following data, compute the number of units transferred out during the current period. Beginning Work in Process 10,000 units (1/2 complete) Ending Work in Process 12,500 units (1/3 complete) Started into Production 75,000 units a. 85,000. b. 72,500. c. 62,500. d. 75,000. 5. Pilgrim Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under- or overapplication of overhead for the period: Estimated annual overhead cost $1,200,000 Actual annual overhead cost $1,150,000 Estimated machine hours 300,000 Actual machine hours 280,000 a. $1,120,000 applied and $30,000 underapplied. b. $1,200,000 applied and $30,000 overapplied. c. $1,120,000 applied and $30,000 overapplied. d. $1,150,000 applied and neither under- nor overapplied. 6. The following data has been collected for use in analyzing the behavior of maintenance costs of Sterling Corporation: Month Maintenance Costs Machine Hours January $121,000 20,000 February 125,000 23,000 March 128,000 24,000 April 159,000 34,000 May 168,000 36,000 June 178,000 38,000 July 181,000 40,000 Using the high-low method to separate the maintenance costs into their variable and fix…

Answer

30