Fleming Manufacturing, Embassy Company, Gaines Company

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Problem 1 

Selected account balances of Fleming Manufacturing Company appear below for 2011: 

 

                                         Beginning of Year           End of Year

Finished Goods Inventory       25,000                         32,000 

Work In Process Inventory     30,000                         35,000 

Raw Materials Inventory        46,000                           26,000 

Sales                                                                   360,000 

Direct Labor                                                        45,000 

Factory Supervisory Salaries                               18,000 

Income Tax Expense                                         25,000 

Factory Insurance                                            12,000 

Raw Material Purchases                                  75,000 

Administrative Expenses                                 17,000 

Sales Returns and Allowances                         15,000 

Factory Depreciation                                         22,000 

Indirect Labor                                                  11,000 

Selling Expenses                                               35,000 

 

Instructions :

Using the above information for Fleming Manufacturing Company, answer the following questions. Support your answers with clearly identified computations. 

 

1.  What were the total overhead costs incurred? 

2.  What was the amount of direct materials used in production? 

3.  What was the cost of goods manufactured? 

4.  What was the cost of goods sold? 

5.  What was the amount of net income?

 

 

Problem 2 

Embassy Company prepared the following income statement for 2011: 

 

FINNEY COMPANY 

Income Statement 

For the Year Ended December 31, 2011 

——————————————————————————————————————————— 

Sales (20,000 units) 500,000 

Variable expenses 300,000 

Fixed expenses 120,000 

Net income 80,000 

 

Instructions: 

Answer the following independent questions and show computations to support your answers. 

 

1.  What is the company's Contribution Margin in total dollars? 

2.  What is the company's CM per unit? 

3.  What is the company's CM in %? 

4.  What is the company's break-even point in units? 

5.  How many more units would the company have had to sell to earn net income of $120,000 in 2011? 

6.  If the company expects a 25% increase in sales volume in 2011, what would be the expected net income in 2012? 

7.  How much sales dollars would the company have to generate in order to earn a target net income of $160,000 in 2012?

 

Problem 3

 

The Financial Statements of Gaines Company appear below: 

 

Gaines Company 

Comparative Balance Sheet 

December 31, 

2013 

Assets 

Cash $25,000 

Short-term Investments 15,000 

Accounts Receivable (net) 50,000 

Inventory 50,000 

Property, Plant and Equipment (net) 260,000 

Total Assets $400,000 

 

Liabilities and Stockholders' Equity 

Accounts Payable $20,000 

Short-term Notes Payable 30,000 

Bonds Payable 90,000 

Common Stock 150,000 

Retained Earnings 110,000 

Total Liabilities and Stockholders' Equity $400,000 

 

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 Tax    100,000 

Income tax expense   30,000 

Net Income          $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. 

 

Instructions: 

Using the financial statements and additional information, compute the following ratios for Gaines Company for 2013. Show all computations.

 

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

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