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The Oxford Company

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1. When a corporation distributes a dividend the
a. most common form of distribution is a cash dividend.
b. Dividends account will be increased with a credit.
c. Retained Earnings account will be directly increased with a debit.
d. Dividends account will be decreased with a debit.

2. A corporation has which of the following sets of characteristics?
a. Shared control, tax advantages, increased skills, and resources
b. Simple to set up and maintains control with the founder
c. Easier to transfer ownership and raise funds, no personal liability for stockholders
d. Harder to raise funds and gives owner control

3. The following data are taken from the financial statements of Dellmont Company. The data are in alphabetical order.

Accounts payable $ 28,000 Net sales 500,000
Accounts receivable 65,000 Other current liabilities 20,000
Average common shares O/S 20,000 Salaries payable 7,000
Cash 56,000 Stockholders’ equity 169,000
Gross profit 190,000 Total assets 325,000
Net income $ 50,000

Compute the following:
(a) Current ratio.
(b) Working capital.
(c) Earnings per share.
(d) Debt to total assets ratio.

4. The following items are taken from the financial statements of Grove Company for 2010:

Accounts Payable $18,500
Accounts Receivable 4,000
Accumulated Depreciation 4,800
Bonds Payable 18,000
Cash 24,000
Common Stock 25,000
Cost of Goods Sold 13,000
Depreciation Expense 4,800
Dividends 5,300
Equipment 48,000
Interest Expense 2,500
Patents 7,500
Retained Earnings, January 1 16,000
Salaries Expense 5,200
Sales Revenue 36,500
Supplies 4,500

Instructions: Prepare an income statement and a retained earnings statement for Grove Company.

5. Below is a partial list of account balances for Kerner Company:
Cash $10,000
Prepaid insurance 1,000
Accounts receivable 5,000
Accounts payable 4,000
Notes payable 6,000
Common stock 2,000
Dividends 1,000
Revenues 30,000
Expenses 25,000
What did Kerner Company show as total credits?
a. $43,000
b. $41,000
c, $42,000
d. $44,000

6. The Oxford Company has budgeted sales revenues as follows.
April May June
Credit sales $60,000 $48,000 $36,000
Cash sales 36,000 102,000 78,000

Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month.

Purchases of inventory are all on credit, with 60% paid in the month of purchase and 40% in the month following purchase. Budgeted inventory purchases are $130,000 in April, $90,000 in May, and $42,000 in June.

Other budgeted cash receipts include (a) the sale of plant assets for $24,700 in May and (b) the sale of new common stock for $33,700 in June. Other budgeted cash disbursements include (a) operating expenses of $13,500 each month, (b) selling and administrative expenses of $25,000 each month, (c) dividends of $38,000 to be paid in May, and (d) purchase of equipment for $12,000 cash in June.
The company has a cash balance of $20,000 at the beginning of June and wishes to maintain a minimum cash balance of $20,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 12%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that $7,000 of financing was obtained on May 1

Requirements: Use this information to prepare a schedule of expected cash collections from customers for the months of May and June only.

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