Intermediate Accounting I Exam 2 Complete Solution

Question: #1313

Intermediate Accounting I
Exam 2
This problem is worth 20 points:
The following selected information is available for Raydon Corporation:
2014 2013
Cash $21 $35
Marketable securities 27 22
Accounts receivable (net) 60 98
Inventory 105 142
5 3
Land and building (net) 247 315
$57 $75
10 14
Notes payable (short-term) 8 4
52 66
2014 2013
Cash sales $750 $675
Credit sales (percent of cash sales) 82% 85%
Cost of goods sold (percent of total sales) 60% 58%
Net income $30 $38
Required:
Use the information given above to compute the following ratios:
a. Current ratio
b. Quick ratio
c. Accounts receivable turnover
d. Inventory turnover
e. Asset turnover
Accrued expenses
Bonds payable
For Year Ended
December 31,
December 31
Prepaid expenses
Accounts payable
Intermediate Accounting I
Exam 2
This problem is worth 40 points:
Accounts Payable ....................................... $75,900
Accounts Receivable .................................... 141,600
Accumulated Depreciation--Equipment .................... 84,000
Bonds Payable .......................................... 300,000
Cash ................................................... 243,900
Common Stock ........................................... 1,560,000
Deferred Income Tax Liability (noncurrent) ............. 6,900
Dividends Payable ...................................... 45,000
Equipment .............................................. 840,000
Income Taxes Payable ................................... 91,500
Inventory .............................................. 395,100
Investment in Land ..................................... 510,000
Investment in Stock of Subsidiary ...................... 492,000
Note Payable ........................................... 120,000
Notes Receivable ....................................... 150,000
Prepaid Insurance ...................................... 7,200
Retained Earnings ...................................... 453,600
Salaries and Wages Payable ............................. 42,900
Account balances and supplemental information for the Alain Corporation as of December 31, 2015, are
(a) $300,000 of 12% bonds were sold on November 1, 2015, at par.
(b) 40,000 shares of $30 par value common stock were sold for $1,560,000.
(c) All the equipment was purchased on January 2, 2014. The depreciation rate is 10 percent per year.
Required:
Prepare a properly classified balance sheet in report form for Alain Corporation as of December 31, 2015.
(d) 5 percent of accounts receivable are expected to be uncollectible.
(e) A two-year insurance policy was purchased on May 1, 2015, for $7,200.
(f) Accrued interest on $150,000 of short-term notes receivable from customers was $5,100 at
December 31, 2015.
(g) $120,000 was borrowed from the bank on a 5-year, 10% note payable dated July 1, 2015. The loan
is to be repaid in 10 semiannual payments of $12,000 plus interest, with the first payment due January
1, 2016.

This problem is worth 40 points:
The following pretax amounts pertain to the Spartan Corp. for the year ended December 31, 2014.
Sales ................................................. $ 400,000
Operating expenses .................................... 84,000
Extraordinary gain .................................... 30,000
Interest expense ...................................... 4,000
Cost of goods sold .................................... 280,000
Gain on sale of equipment ............................. 10,000
Prior period adjustment ............................... (16,000.00)
Gain on disposal of business component.................. 30,000
Retained earnings, January 1, 2014 .................... 1,600,000
Dividends declared .................................... 12,000
The effective corporate tax rate is 30 percent. The company had 10,000 shares of common stock
outstanding for the entire year.
Required:
1. Prepare a multiple-step income statement in good form for the year ended December 31, 2014.
2. Prepare a retained earnings statement in good form for the year ended December 31, 2014.

Solution: #1293

Intermediate Accounting I Exam 2 Complete Solution

Interest expense   -4000
Gain on sale of equipment   10000
Total revenues and expenses   6000
Income before income taxes   42000
Less taxes @ 30%   12600
Income from continuing operations&nb...