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22. A manufacturing company prices its goods to achieve a gross profit of 40 percent. The...

22. A manufacturing company prices its goods to achieve a gross profit of 40 percent. The total cost of goods available for sale during the period was $350,000. Sales revenue was $500,000 during the period. What is the estimated cost of the unsold (ending) inventory, using the gross profit estimation method?

a. $90,000

b. $50,000

c. $300,000

d. $150,000

23. Assume that the semi-annual cash payments on a particular bond issue are $25,000, and that the accrued interest on the bonds for the first 6 month period is only $24,300. The carrying value of the bonds will change by an amount of:

a. $700 decrease

b. $700 increase

c. cannot be determined from the information given

24. Thompson Co. has 75,000 shares of $4 par value stock outstanding (total legal capital of $300,000). If Thompson splits the stock 2-for-1, what will be the total legal capital of all Thompson Co. shares after the split?

a. $150,000

b. $450,000

c. $300,000

d. $600,000

The following Income Statement and account balance changes apply to this question:

Income Statement for the year:

Sales                                   $1,400,000

Cost of Goods Sold                 810,000

Gross Profit                            $590,000

Operating Expenses               360,000

Net Income before Taxes $230,000

Taxes                                             34,000

Net Income                              $196,000

Account Balance Changes during the year:

Accounts Payable increase                                  $6,000

Prepaid expenses decrease                                          $4,500

Taxes Payable increase                                                  $8,200

Accounts Receivable decrease                                    $24,000

Additions to Accumulated Depreciation                     $76,000

Inventory increase                                               $12,000

Accrued liabilities (e.g., Wages Payable) decrease        $5,000

25. What was the amount of cash payments for taxes this year, using the direct method?

a. $25,800

b. $51,200

c. $20,800

d. $34,800
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Answer #1

22. b. $50,000

Calculations:

Cost of goods available for sale $350,000
(Less): Cost of goods sold [$500,000 x 60% (100%-40%)] ($300,000)
Estimated cost of the unsold (ending) inventory $50,000

23.a. $700 decrease

Calculations:

Cash payment (interest payment) $25,000
Interest expense ($24,300)
Decrease in carrying value $700

24.c.$300,000

Explanation:

No Change in total legal capital after stock-split.

25.a.$25,800

Calculations:

Taxes $34,000
Taxes payable increase ($8,200)
Cash payments for taxes $25,800
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