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ACC206 Assignment Week Two

Week Two Assignment

 

Please complete the following 5 exercises below in either Excel or a word document (but must be single document). You must show your work where appropriate (leaving the calculations within Excel cells is acceptable). Save the document, and submit it in the appropriate week using the Assignment Submission button.

 

1. Analysis of stockholders’ equity

Star Corporation issued both common and preferred stock during 20X8. The stockholders’ equity sections of the company’s balance sheets at the end of 20X8 and 20X7 follow.

 

           

 

20X8

20X7

Preferred stock, $100 par value, 10%

$600,000

$500,000

Common stock, $10 par value

2,350,000

1,550,000

     

Paid-in capital in excess of par value

   

Preferred

24,000

—

Common

4,620,000

3,600,000

Retained earnings

8,470,000

6,920,000

Total stockholders’ equity

$16,064,000

$12,570,000

 

a.       Compute the number of preferred shares that were issued during 20X8.

b.      Calculate the average issue price of the common stock sold in 20X8.

c.       By what amount did the company’s paid-in capital increase during 20X8?

d.      Did Star’s total legal capital increase or decrease during 20X8? By what amount?

 

 

2. Bond computations: Straight-line amortization

Northern Corporation issued $800,000 of 7% bonds on March 1, 20X8. The bonds pay interest on March 1 and September 1 and mature in 10 years. Assume the independent cases that follow.

·         Case A—The bonds are issued at 100.

·         Case B—The bonds are issued at 96.

·         Case C—The bonds are issued at 105.

 

Southlake uses the straight-line method of amortization.

 

 

 

 

 

 

Instructions:

Complete the following table:

     
 

Case A

Case B

Case C

  1.  Cash inflow on the issuance date

_______

_______

_______

  1. Total cash outflow through maturity

_______

_______

_______

  1. Total borrowing cost over the life of the bond issue

_______

_______

_______

  1. Interest expense for the year ended December 31, 20X8

_______

_______

_______

  1. Amortization for the year ended December 31, 20X8

_______

_______

_______

  1. Unamortized premium as of December 31, 20X8

_______

_______

_______

  1. Unamortized discount as of December 31, 20X8

_______

_______

_______

  1. Bond carrying value as of December 31, 20X8

_______

_______

_______

 

 

 

3. Definitions of manufacturing concepts
J & B Manufacturing produces brass fasteners and incurred the following costs for the year just ended:

Materials and supplies used

Brass                                                    $80,000

Repair parts                                         18,000

Machine lubricants                              8,000

Wages and salaries Machine operators             140,000

Production supervisors                                    62,000

Maintenance personnel                                    39,000

Other factory overhead Variable         29,000

Fixed                                                   48,000

Sales commissions                               20,000

 

Compute:

a.       Total direct materials consumed

b.      Total direct labor

c.       Total prime cost

d.      Total conversion cost

 

 

 

 

 

 

4. Schedule of cost of goods manufactured, income statement

The following information was taken from the ledger of Jakob Industries, Inc.:

Direct labor

$75,000

 

Administrative expenses

$63,000

Selling expenses

36,000

 

Work in. process

 

Sales

310,000

 

Jan. 1

32,000

Finished goods

   

Dec. 31

21,000

Jan. 1

115,000

 

Direct material purchases

87,000

Dec. 31

131,000

 

Depreciation: factory

21,000

Raw (direct) materials on hand

Indirect materials used

11,000

Jan. 1

31,000

 

Indirect labor

26,000

Dec. 31

40,000

 

Factory taxes

8,000

     

Factory utilities

12,000

Prepare the following:

a.       A schedule of cost of goods manufactured for the year ended December 31.

b.      An income statement for the year ended December 31.

 

 

5. Manufacturing statements and cost behavior

Sioux Foundry began operations during the current year, manufacturing various products for industrial use. One such product is light-gauge aluminum, which the company sells for $38 per roll. Cost information for the year just ended follows.

Per Unit

Variable Cost

Fixed Cost

Direct materials

$4.00

$ —

Direct labor

7.0

—

Factory overhead

9.0

70,000

Selling

—

80,000

Administrative

—

135,000

                              

 

 

 

 

 

 

 

Production and sales totaled 20,000 rolls and 18,000 rolls, respectively There is no work in process. Sioux carries its finished goods inventory at the average unit cost of production.

 

Instructions:

a.       Determine the cost of the finished goods inventory of light-gauge aluminum.

b.      Prepare an income statement for the current year ended December 31

c.       On the basis of the information presented:

 

1.      Does it appear that the company pays commissions to its sales staff? Explain.

2.      What is the likely effect on the $4.00 unit cost of direct materials if next year’s production increases? Why?

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