Accounting Principles and Financial Statement Analysis

Cash Flows and Dividends

1. Norris Company Dividends: Norris Company declared cash dividends of $60,000, payable as follows: $20,000 at the beginning of the year and $25,000 at the end of the year. (Calculation: $60,000 + $20,000 = $80,000; $80,000 - $25,000 = $55,000)

2. Indirect Method Cash Flow Statement: On the statement of cash flows prepared by the indirect method, the amortization of premium or discount on bonds payable is added back to net income.

8. Cash Receipts from Issuance: Cash receipts received from the issuance of stock are classified as financing activities.

11. Ten-Year Bond Issuance: A ten-year bond issued at par for $250,000 cash is classified as a financing activity.

17. Inflow of Cash: Issuance of long-term debt represents an inflow of cash.

19. Building Sale: A building with a book value of $54,000 sold for $63,000 cash results in an increase of $63,000 from investing activities and a deduction from net income of $9,000 (the gain on the sale).

Variance Analysis

3. Standard Cost Variances: At the end of the fiscal year, variances from standard costs are typically closed to the cost of goods sold account.

5. Fixed Factory Overhead Volume Variance: The fixed factory overhead volume variance is calculated as follows: (10,000 hours - (2,500 units x 3 hours)) x $0.80 per hour = $2,000 (unfavorable).

12. Price Variance: If the price paid per unit differs from the standard price, the difference is known as the price variance.

14. Rate Variance: If the wage rate paid per hour differs from the standard wage rate, the difference is known as the rate variance.

18. Favorable Volume Variances: Favorable volume variances may be harmful when production in excess of normal capacity cannot be sold.

20. Standard Cost Elements:

• Direct Materials Price = Actual Price
• Direct Labor Rate = Actual Rate per Hour
• Direct Labor Time = Actual Direct Hours
• Direct Materials Quantity = Actual Quantity
• Budgeted Variable Overhead = Standard Variable Overhead

21. Direct Labor Rate Variance: The direct labor rate variance is calculated as follows: ($14 - $16) x 7,700 hours = $15,400 (favorable).

22. Direct Materials Price Variance: (Further information needed to complete calculation. Please provide actual quantity and standard price.)

25. Myers Corporation Variance: Myers Corporation's direct materials price variance is calculated as follows: ($4.50 - $5.10) x 5,000 units = $3,000 (favorable).

Financial Ratios and Analysis

4. Ratio Analysis: (Further information needed to clarify the statement and provide a complete explanation.)

6. Gain on Sale of Fixed Assets: On the statement of cash flows, a $7,500 gain on the sale of fixed assets would be deducted from net income in the operating activities section.

7. Solvency Ratio: The ratio of fixed assets to long-term liabilities provides a measure of solvency.

9. Items on Government-Wide Statement of Net Position: Loans of land that is considered for public use would appear on a government-wide statement of net position.

10. Common-Sized Income Statement: In a common-sized income statement, net sales is used as the base (100%).

13. Lucy Corporation Calculation: $1,548,000 / 129,000 board feet = $12 per board foot. Since the actual cost per board foot is also $12, the variance is $0.

15. Preferred Stock Issuance: Preferred stock issued is typically reported in a separate schedule within the stockholders' equity section of the balance sheet.

16. Current Ratio: The current ratio measures a company's ability to pay its short-term obligations.

23. Interest Expense Calculation: ($420,000 + $80,000) / $80,000 = 6.25 (This calculation represents the times interest earned ratio).

24. Item Not Found in Cash Flow Statement: Purchase of treasury stock would not be found in the operating activities section of the cash flow statement.

26. Cash Flow Calculation: $175,000 + $28,000 - ($16,000 + $21,000) = $166,000