1st 2 questions are due by midnight EST today, the other ones can take the rest of the week, thanks.

Question 1 (11-4A)

The equity sections from Salazar Group's 2011 and 2012 year-end balance sheets follow.

The following transactions and events affected its equity during year 2012.

January 5 Declared a $0.50 per share cash dividend, date of record January 10
March 20 Purchased treasury stock for cash
April 5 Declared a $0.50 per share cash dividend, date of record April 10
July 5 Declared a $0.50 per share cash dividend, date of record July 10
July 31 Declared a 20% stock dividend when the stock’s market value is $12
August 14 Issued the stock dividend that was declared on July 31
October 5 Declared a $0.50 per share cash dividend, date of record October 10

Required

1. How many common shares are outstanding on each cash dividend date?
2. What is the total dollar amount for each of the four cash dividends?
3. What is the amount of the capitalization of retained earnings for the stock dividend?
4. What is the per share cost of the treasury stock purchased?
5. How much net income did the company earn during year 2012?

Question 2 (11-5A)

Razz Corporation's common stock is currently selling on a stock exchange at $170 per share, and its current balance sheet shows the following stockholders' equity section:

Required (Round per-share amounts to cents)

1. What is the current market value (price) of this corporation's common stock?
2. What are the par values of the corporation's preferred stock and its common stock?
3. If no dividends are in arrears, what are the book values per share of the preferred stock and the common stock?
4. If two years' preferred dividends are in arrears, what are the book values per share of the preferred stock and the common stock?
5. If two years' preferred dividends are in arrears and the preferred stock is callable at $110 per share, what are the book values per share of the preferred stock and the common stock?
6. If two years' preferred dividends are in arrears and the board of directors declares cash dividends of $20,000, what total amount will be paid to the preferred and to the common shareholders? What is the amount of dividends per share for the common stock?

Analysis:

1. What are some factors that can contribute to a difference between the book value of common stock and its market value (price)?

Question 3 (12-1A)

Kazaam Company, a merchandiser, recently completed its calendar-year 2011 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company's balance sheets and income statement follow:

Additional Information on Year 2011 Transactions

1. The loss on the cash sale of equipment was $5,125 (details in b).
2. Sold equipment costing $46,875, with accumulated depreciation of $28,125, for $13,625 cash.
3. Purchased equipment costing $96,375 by paying $25,000 cash and signing a long-term note payable for the balance.
4. Borrowed $3,750 cash by signing a short-term note payable.
5. Paid $31,375 cash to reduce the long-term notes payable.
6. Issued 2,500 shares of common stock for $18 cash per share.
7. Declared and paid cash dividends of $62,125.

Required

1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. Disclose any noncash investing and financing activities in a note.
   
   

Analysis

1. Analyze and discuss the statement of cash flows prepared in part 1, giving special attention to the wisdom of the cash dividend payment.

Question 4 (12-3A)

Cash flows spreadsheet (indirect method)

Refer to the information reported about Kazaam Company in Problem 12-1A.

Required

Prepare a complete statement of cash flows using a spreadsheet as in Exhibit 12A.1; report its operating activities using the indirect method. Identify the debits and credits in the Analysis of Changes columns with letters that correspond to the following list of transactions and events.

1. Net income was $73,750.
2. Accounts receivable increased.
3. Merchandise inventory increased.
4. Prepaid expenses decreased.
5. Accounts payable decreased.
6. Depreciation expense was $18,750.
7. Sold equipment costing $46,875, with accumulated depreciation of $28,125, for $13,625 cash. This yielded a loss of $5,125.
8. Purchased equipment costing $96,375 by paying $25,000 cash and (i.) by signing a long-term note payable for the balance.
9. Borrowed $3,750 cash by signing a short-term note payable.
10. Paid $31,375 cash to reduce the long-term notes payable.
11. Issued 2,500 shares of common stock for $18 cash per share.
12. m. Declared and paid cash dividends of $62,125.
    
    

Question 5 (14-3A)

Cost classification and explanation

Assume that you must make a presentation to the marketing staff explaining the difference between product and period costs. Your supervisor tells you the marketing staff would also like clarification regarding prime and conversion costs and an explanation of how these terms fit with product and period cost. You are told that many on the staff are unable to classify costs in their merchandising activities.

Required

Prepare a one-page memorandum to your supervisor outlining your presentation to the marketing staff.

Question 6 (14-6A)

Inventory computation and reporting

Shown here are annual financial data at December 31, 2011, taken from two different companies.

Required

1. Compute the cost of goods sold section of the income statement at December 31, 2011, for each company. Include the proper title and format in the solution.
2. Write a half-page memorandum to your instructor (a) identifying the inventory accounts and (b) describing where each is reported on the income statement and balance sheet for both companies.

Question 7 (14-8A)

Manufacturing and income statements; inventory analysis
P2

The following calendar year-end information is taken from the December 31, 2011, adjusted trial balance and other records of Plaza Company.

Required

1. Prepare the company's 2011 manufacturing statement.
2. Prepare the company's 2011 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.

Analysis Component

1. Compute the (a) inventory turnover, defined as cost of goods sold divided by average inventory, and (b) days' sales in inventory, defined as 365 times ending inventory divided by cost of goods sold, for both its raw materials inventory and its finished goods inventory. (To compute turnover and days' sales in inventory for raw materials, use raw materials used rather than cost of goods sold.) Discuss some possible reasons for differences between these ratios for the two types of inventories. Round answers to one decimal place.

Question 8 (18-1A)

The following costs result from the production and sale of 4,000 drum sets manufactured by Vince Drum Company for the year ended December 31, 2011. The drum sets sell for $250 each. The company has a 25% income tax rate.

Required

1. Prepare a contribution margin income statement for the company.
2. Compute its contribution margin per unit and its contribution margin ratio.

Analysis Component

1. Interpret the contribution margin and contribution margin ratio from part 2.

Question 9 (18-4A)

Jetson Co. sold 20,000 units of its only product and incurred a $50,000 loss (ignoring taxes) for the current year as shown here. During a planning session for year 2012's activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $150,000. The maximum output capacity of the company is 40,000 units per year.

Required

1. Compute the break-even point in dollar sales for year 2011.
2. Compute the predicted break-even point in dollar sales for year 2012 assuming the machine is installed and there is no change in the unit sales price.
3. Prepare a forecasted contribution margin income statement for 2012 that shows the expected results with the machine installed. Assume that the unit sales price and the number of units sold will not change, and no income taxes will be due.
4. Compute the sales level required in both dollars and units to earn $140,000 of after-tax income in 2012 with the machine installed and no change in the unit sales price. Assume that the income tax rate is 30%.
5. Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assume an income tax rate of 30%.

Question 10 (18-5A)

Letter Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Sales and costs for each product follow.

Required

1. Compute the break-even point in dollar sales for each product.
2. Assume that the company expects sales of each product to decline to 33,000 units next year with no change in unit sales price. Prepare forecasted financial results for next year following the format of the contribution margin income statement as just shown with columns for each of the two products (assume a 32% tax rate). Also, assume that any loss before taxes yields a 32% tax savings.
3. 3. Assume that the company expects sales of each product to increase to 64,000 units next year with no change in unit sales price. Prepare forecasted financial results for next year following the format of the contribution margin income statement shown with columns for each of the two products (assume a 32% tax rate).

Analysis Component

1. If sales greatly decrease, which product would experience a greater loss? Explain.
2. Describe some factors that might have created the different cost structures for these two products.