Horizon Communications has the following stockholders' equity on December 31, 2016:

$$\begin{array}{c} \textbf{Stockholder's Equity}\\ \end{array}$$

$$\begin{array}{lr} \text{Paid in Capital:}\\ \text{Preferred Stock - 4\\\% \$11 Par Value; 150,000 shares}\\ \text{authorized, 22,000 shares issued and outstanding}&\$242,000\\ \text{Common Stock - \$4 Par Value; 575,000 shares}\\ \text{authorized, 350,000 shares issued and outstanding}&\$1,400,000\\ \text{Paid-in Capital in Excess of Par-Common}&1,050,000\\ \hline\text{Total Paid-in Capital}&2,692,000\\ \text{Retained Earnings}&220,000\\ \hline\textbf{Total Stockholder's Equity}&\$2,912,000\\ \hline \hline \end{array}$$

Requirements

1. Assuming the preferred stock is cumulative, compute the amount of dividends to preferred stockholders and to common stockholders for 2016 and 2017 if total dividends are $7,680$ in 2016 and $ 49,000 in 2017. Assume no changes in preferred stock and common stock in 2017.
2. Record the journal entries for 2016, assuming that Horizon Communications declared the dividend on December 1 for stockholders of record on December 10. Horizon Communications paid the dividend on December 20.

Located on Swiftcurrent Lake in Glacier National Park, Many Glacier Hotel was built in $1915$ by the Great Northern Railway. In an effort to supplement its lodging revenue, the hotel decided in $20 \times 1$ to begin manufacturing and selling small wooden canoes decorated with symbols hand painted by Native Americans living near the park. Due to the great success of the canoes, the hotel began manufacturing and selling paddles as well in $20 \times 3$. Many hotel guests purchase a canoe and paddles for use in self-guided tours of Swiftcurrent Lake. Because production of the two products began in different years, the canoes and paddles are produced in separate production facilities and employ different laborers. Each canoe sells for $\$ 500$, and each paddle sells for $\$ 50$. A $20 \times 3$ fire destroyed the hotel's accounting records. However, a new system put into place before the $20 \mathrm{X} 4$ season provides the following aggregated data for the hotel's canoe and paddle manufacturing and marketing activities: Manufacturing Data:

$$\begin{array}{ccc|ccc} \text{ Manufacturing Data: } \\ \hline &\text{ Number } & \text{ Total Canoe } & & \text{ Number } & \text{ Total Paddle } \\ & \text{ of Canoes } & \text{ Manufacturing } & & \text{ of Paddles } & \text{ Manufacturing } \\ \text{ Year } & \text{ Manufactured } & \text{ Costs } & \text{ Year } & \text{ Manufactured } & \text{ Costs }\\ \hline 20 \times9 & 250 & \$103,000 & 20 \times 9 & 900 & \$38,500 \\ 20 \times 8 & 275 & 128,000 & 20 \times 8 & 1,200 & 49,000 \\ 20 \times 7 & 240 & 108,000 & 20 \times 7 & 1,000 & 44,000 \\ 20 \times 6 & 310 & 114,000 & 20 \times 6 & 1,100 & 45,500 \\ 20 \times5 & 350 & 141,500 & 20 \times 5 & 1,400 & 52,000 \\ 20 \times4 & 400 & 140,000 & 20 \times 4 & 1,700 & 66,500 \\ \hline \end{array}$$

$$\begin{array}{ccc|ccc} \text{ Marketing Data: } \\ \hline & & \text{ Total Canoe } &&& \text{ Total Paddle } \\ & \text{ Number of } & \text{ Marketing } & & \text{ Number of } & \text{ Marketing } \\ \text{ Year } & \text{ Canoes sold }& \text{ Costs } & \text{ Year } & \text{ Paddles sold } & \text{ Costs }\\ \hline 20 \times9 & 250 & \$45,000 & 20 \times 9 & 900 & \$7,500 \\ 20 \times 8 & 275 & 43,000 & 20 \times 8 & 1,200 & 9,000 \\ 20 \times 7 & 240 & 44,000 & 20 \times 7 & 1,000 & 8,000 \\ 20 \times 6 & 310 & 51,000 & 20 \times 6 & 1,100 & 8,500 \\ 20 \times5 & 350 & 62,000 & 20 \times 5 & 1,400 & 10,000 \\ 20 \times4 & 400 & 60,000 & 20 \times 4 & 1,700 & 11,500 \\ \hline \end{array}$$

Cost-Volume-Profit Analysis, Single-Product Setting

Use CVP analysis to calculate the break-even point in units for

a. The canoe product line only (i.e., single-product setting)

b. The paddle product line only (i.e., single-product setting)

Prepare journal entries to record each of the following four separate issuances of stock. 1. A corporation issued 4,000 shares of $5 par value common stock for$35,000 cash. 2. A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $40,000. The stock has a$1 per share stated value. 3. A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $40,000. The stock has no stated value. 4. A corporation issued 1,000 shares of$50 par value preferred stock for $60,000 cash.

Ashford Corporation issued 10,000 shares of no-par common stock for $ 5 per share on March 13. Record the stock issuance.

Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage. a. Ownership and management are separated. b. Entity has continuous life. c. Transfer of ownership is easy. d. Stockholders' liability is limited. e. Exposure to double taxation is evident. f. Entity can raise more money than a partnership or sole proprietorship. g. Government regulation is expensive.

D-Mobile Wireless needed additional capital to expand, so the business incorporated. The charter from the state of Georgia authorizes D-Mobile to issue 50,000 shares of 8%, $50 par value cumulative preferred stock and 160,000 shares of$4 par value common stock. During the first month, D-Mobile completed the following transactions:

• Oct. 2 - Issued 19,000 shares of common stock for a building w ith a market value of $240,000.
•         6 - Issued 600 shares of preferred stock for$140 per share.
•         9 - Issued 11,000 shares of common stock for cash of $55,000.
•       10 - Declared a$19,000 cash dividend for stockholders of record on Oct. 20. Use a separate Dividends Payable account for preferred and common stock.
•       25 - Paid the cash dividend.

Requirements

1. Record the transactions in the general journal.
2. Prepare the stockholders' equity section of D-Mobile's balance sheet at October 31, 2018. Assume D-Mobile's net income for the month was $94,000.

The trial balance of Pacilio Security Services Inc. as of January 1, 2015, had the following normal balances:

$$\begin{array}{lrr} \text{Cash}&&\$62,860\\ \text{Accounts receivable}&&\text{20,500}\\ \text{Supplies}&&\text{150}\\ \text{Prepaid rent}&&\text{2,000}\\ \text{Merchandise inventory (9 @ \$240)}&&\text{2,160}\\ \text{Land}&&\text{4,000}\\ \text{Accounts payable}&&\text{980}\\ \text{Salaries payable}&&\text{1,500}\\ \text{Common stock}&&\text{50,000}\\ \text{Retained earnings}&&\text{39,190}\\ \end{array}$$

During 2015, Pacilio Security Services experienced the following transactions:

1. Paid the salaries payable from 2014.

2. On January 15, purchased 20 standard alarm systems for cash at a cost of $250 each.

3. On February 1, paid the accounts payable of$980, but not within the discount period. (The company uses the gross method.)

4. On March 1, leased a business van. Paid $4,800 for one year's lease in advance.

5. Paid$7,200 on May 1 for one year's rent on the office in advance.

6. Purchased with cash $500 of supplies to be used over the next several months by the business.

7. Purchased with cash another 25 alarm systems on August 1 for resale at a cost of$260 each.

8. On September 5, purchased on account 30 standard alarm systems at a cost of $265.

9. Installed 60 standard alarm systems for$33,000. $22,000 of the sales were on account and$11,000 were cash sales. (Note:* Be sure to record cost of goods sold using the perpetual FIFO method.)

10. Made a full refund to a dissatisfied customer who returned her alarm system. The sale had been a cash sale for $550 with a cost of$260.

11. Paid installers and other employees a total of $21,000 cash for salaries.

12. Sold$45,000 of monitoring services during the year. The services are billed to the customers each month.

13. Sold an additional monitoring service for $1,200 for one year's service. The customer paid the full amount of$1,200 on October 1.

14. Collected $74,000 of accounts receivable during the year.

15. Paid an additional$6,000 to settle some of the accounts payable.

16. Paid $3,500 of advertising expense during the year.

17. Paid$2,320 of utilities expense for the year.

18. Paid a dividend of $15,000 to the shareholders.

Adjustments

19. There was$200 of supplies on hand at the end of the year.

20. Recognized the expired rent for both the van and the office building for the year.

21. Recognized the revenue earned from transaction 13.

22. Accrued salaries at December 31, 2015, were $1,000.

Required

Post the transactions to T-accounts.

The charter of Evergreen Capital Corporation authorizes the issuance of 900 shares of preferred stock and 1,250 shares of common stock. During a two month period, Evergreen completed these stock-issuance transactions: Mar 23. Issued 230 shares of $4 par common stock for cash of$15 per share. Apr 12. Received inventory valued at $23,000 and equipment with a market value of$20,000 for 320 shares of the $4 par common stock. 17. Issued 900 shares of 5%,$20 par preferred stock for $20 per share. Requirements

1. Record the transactions in the general journal.
2. Prepare the stockholders’ equity section of the Evergreen balance sheet for the transactions given in this exercise. Retained earnings has a balance of$79,000.

Nav-Go Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ equity accounts of Nav-Go Enterprises Inc., with balances on January 1, 2014, are as follows:

$$\begin{array}{lrr} \text{Common Stock, \$5 stated value (900,000 shares authorized,}\\ \hspace{10pt}\text{620,000 shares issued) . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .}&\$\hspace{10pt}3,100,000\\ \text{Paid-In Capital in Excess of Stated Value—Common Stock . . . . . . . . . . . . . . .}&{1,240,000}\\ \text{Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . }&{4,875,000}\\ \text{Treasury Stock (48,000 shares, at cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .}&{288,000}\\ \end{array}$$

The following selected transactions occurred during the year:

The following selected transactions occurred during the year:

Jan.  15.   Paid cash dividends of $0.06 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for$34,320.

Mar. 15.   Sold all of the treasury stock for $6.75 per share.

Apr.  13.   Issued 200,000 shares of common stock for$8 per share.

June 14.   Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $7.50 per share.

July  16.   Issued the certificates for the dividend declared on June 14.

Oct.  30.   Purchased 50,000 shares of treasury stock for$6 per share.

Dec. 30.   Declared a $0.08-per-share dividend on common stock.

        31.   Closed the credit balance of the income summary account,$775,000.

        31.   Closed the two dividends accounts to Retained Earnings.

Instructions

1. Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends.
2. Journalize the entries to record the transactions, and post to the eight selected accounts.
3. Prepare a retained earnings statement for the year ended December 31, 2014.
4. Prepare the Stockholders’ Equity section of the December 31, 2014, balance sheet.

Cascade, Inc., produces the basic fillings used in many popular frozen desserts and treats—vanilla and chocolate ice creams, puddings, meringues, and fudge. Cascade uses standard costing and carries over no inventory from one month to the next. The icecream product group’s results for June 2017 were as follows:

$$\begin{matrix} \text{Performance Report, June 2017}\\ \text{ } & \text{Actual Results} & \text{Static Budget}\\ \text{Units (pounts)} & \text{460.000} & \text{447.000}\\ \text{Revenues} & \text{\$ 2.626.600} & \text{\$ 2.592.600}\\ \text{Variable manufacturing costs} & \text{1.651.400} & \text{1.564.500}\\ \text{Contribution margin} & \text{\$ 975.200} & \text{\$ 1.028.100}\\ \end{matrix}$$

Jeff Geller, the business manager for ice-cream products, is pleased that more pounds of ice cream were sold than budgeted and that revenues were up. Unfortunately, variable manufacturing costs went up, too. The bottom line is that contribution margin declined by $52.900, which is just over 2% of the budgeted revenues of$2.592.600. Overall, Geller feels that the business is running fine. 1. Calculate the static-budget variance in units, revenues, variable manufacturing costs, and contribution margin. What percentage is each static-budget variance relative to its static-budget amount? 2. Break down each static-budget variance into a flexible-budget variance and a sales-volume variance. 3. Calculate the selling-price variance. 4. Assume the role of management accountant at Cascade. How would you present the results to Jeff Heller? Should he be more concerned? If so, why?

Northwood Company manufactures basketballs. The company has a ball that sells for $25. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling$15 per ball, of which 60% is direct labor cost.

Last year, the company sold 30,000 of these balls, with the following results:

$$\begin{array}{lr} \text{Sales(30,000 balls)}&\text{\$750,000}\\ \text{Variable expenses}&\underline{\text{\hspace{5pt}450,000}}\\ \text{Contribution margin}&\text{300,000}\\ \text{Fixed expenses}&\underline{\text{\hspace{5pt}210,000}}\\ \text{Net opening income}&\underline{\underline{\text{\$\hspace{5pt}90,000}}}\\ \end{array}$$

Required:

1. Compute (a) the CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level.

2. Due to an increase in labor rates, the company estimates that variable expenses will increase by $3 per ball next year. If this change takes place and the selling price per ball remains constant at$25, what will be the new CM ratio and break-even point in balls?

3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year?

4. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year, what selling price per ball must it charge next year to cover the increased labor costs?

5. Refer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new break-even point in balls?

6. Refer to the data in (5) above.

a. If the new plant is built, how many balls will have to be sold next year to earn the same net operating income,$90,000, as last year?

b. Assume the new plant is built and that next year the company manufactures and sells 30,000 balls (the same number as sold last year). Prepare a contribution format income statement and compute the degree of operating leverage.

c. If you were a member of top management, would you have been in favor of constructing the new plant? Explain.

The following are data regarding last year's production of Dicer Ricer, one of the major products of Kitchen Gadget Company:

During the year, 61,000 units of this product were manufactured and 62,100 units were sold. Selected information concerning inventories during the year follows:

e. Explain how the $\$ 180,000$ in direct labor costs assigned to production affect the company's income statement and balance sheet.

Pie Corporation acquired 80 percent of Slice Company's common stock on December 31, 20X5, at underlying book value. The book values and fair values of Slice's assets and liabilities were equal, and the fair value of the non-controlling interest was equal to 20 percent of the total book value of Slice. Slice provided the following trial balance data at December 31, 20X5:

$$\begin{array}{lrr} & \textbf{ Debit } & \textbf{Credit} \\ \\ \text{Cash} & \$\hspace{6pt}28,000 \\ \text{Accounts Receivable} & 65,000 \\ \text{Inventory} & 90,000 \\ \text{Buildings \& Equipment (net)} & 210,000 \\ \text{Cost of Goods Sold} & 105,000 \\ \text{Depreciation Expense} & 24,000 \\ \text{Other Operating Expenses} & 31,000 \\ \text{Dividends Declared} & 15,000 \\ \text{Accounts Payable} & & \$\hspace{6pt}33,000 \\ \text{Notes Payable} & & 120,000 \\ \text{Common Stock} & & 90,000 \\ \text{Retained Earnings} & & 130,000 \\ \text{Sales} & & 195,000 \\ \hline \text{Total} & \underline{\underline{\$568,000}} & \underline{\underline{\$568,000}}\\ \end{array}$$

Required

How much did Pie pay to purchase its shares of Slice?

On January 1, 2020, McIlroy, Inc., obtained a 60% interest in the common stock of Stinson, Inc., for $372,000. Stinson’s book value on that date consisted of common stock of$100,000 and retained earnings of $220,000. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was$248,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company’s accounting records by $70,000 and an unrecorded customer list (15-year remaining life) assessed at a$45,000 fair value. Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, McIlroy has applied the equity method to its Investment in Stinson account and no goodwill impairment has occurred. At year-end, there are no intra-entity payables or receivables.
 Intra-entity inventory sales between the two companies have been made as follows:

 The individual financial statements for these two companies as of December 31, 2021, and the year then ended follow:

a. Show how McIlroy determined the$411,000 Investment in Stinson account balance. Assume that McIlroy defers 100 percent of downstream intra-entity profits against its share of Stinson’s income.
b. Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2021.