ACC 206 Week 2 Exercise/Assignment: Chapter Two and Three Problems

Chapter 2 Exercise 1

1. Issuance of stock

Prepare journal entries to record the issuance of 100,000 shares of common stock at $20 per share for each of the following independent cases:

1. Jackson Corporation has common stock with a par value of $1 per share.
2. Royal Corporation has no-par common with a stated value of $5 per share.
3. French Corporation has no-par common; no stated value has been assigned

  

Chapter 2 Exercise 3

3. Analysis of stockholders’ equity

Star Corporation issued both common and preferred stock during 20X6. The stockholders’ equity sections of the company’s balance sheets at the end of

20X6

and

20X5

follow.

 

 20X6 20X5

stock, $100 par value, 10%

stock, $10 par value

   

  

Preferred

—

Common

	Preferred	$580,000	$500,000
	Common	2,3	50,000	1,750,000
Paid-in capital in excess of par value
	24,000
4,620,000	3,600,000
Retained earnings	8,4	70,000	6,920,000
Total stockholders’ equity	$16,044,000	$12,770,000

 

1. Compute the number of preferred shares that were issued during 20X6.
2. Calculate the average issue price of the common stock sold in 20X6.
3. By what amount did the company’s paid-in capital increase during 20X6?
4. Did Star’s total legal capital increase or decrease during 20X6? By what amount?

       

Chapter 2 Problem 1

1. Bond computations: Straight-line amortization

Southlake Corporation issued $900,000 of 8% bonds on March 1, 20X1. 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:

   

 Case ACase BCase C

______________

_____________________

_____________________

_____________________

_____________________

_____________________

_____________________

_____________________

Complete the following table:

Cash inflow on the issuance date

_______

Total cash outflow through maturity

Total borrowing cost over the life of the bond issue

Interest expense for the year ended December 31, 20X1

Amortization for the year ended December 31, 20X1

Unamortized premium as of December 31, 20X1

Unamortized discount as of December 31, 20X1

Bond carrying value as of December 31, 20X1

  

Chapter 3 Exercise 1

1. Product costs and period costs

The costs that follow were extracted from the accounting records of several different manufacturers:

1. Weekly wages of an equipment maintenance worker
2. Marketing costs of a soft drink bottler
3. Cost of sheet metal in a Honda automobile
4. Cost of president’s subscription to Fortune magazine
5. Monthly operating costs of pollution control equipment used in a steel mill
6. Weekly wages of a seamstress employed by a jeans maker
7. Cost of compact discs (CDs) for newly recorded releases of Rush, Billy Joel, and Bryan AdamsDetermine which of these costs are product costs and which are period costs.For the product costs only, determine those that are easily traced to the finished product and those that are not.

 

Chapter 3 Exercise 2

2. Definitions of manufacturing concepts Interstate Manufacturing produces brass fasteners and incurred the following costs for the year just ended:

Materials and supplies used

Brass                     

                              

$75,000

Repair parts                                         16,000

Machine lubricants                              9,000

Wages and salaries Machine operators             12

8,000

Production supervisors                                    64,000

Maintenance personnel                                    41,000

Other factory overhead Variable         35,000

Fixed                                                   46,000

Sales

commissions                               20,000

 

Compute:

1. Total direct materials consumed
2. Total direct labor
3. Total prime cost
4. Total conversion cost

  

Chapter 3 Exercise 5

5. Schedule of cost of goods manufactured, income statement

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

 

expenses

expenses

 

 

Sales

 

  

Jan. 1

 

Dec. 31

 

Jan.

131,000

 

24,000

Dec. 31

 

8,000

   

	Direct labor	$85,000		Administrative	$59,000
	Selling	34,000	Work in. process
300,000			Jan. 1	29,000
Finished goods			Dec. 31	21,000
115,000	Direct material purchases	88,000
1	31,000	Depreciation: factory	18,000
Raw (direct) materials on hand	Indirect materials used	10,000
Indirect labor
40,000	Factory taxes
Factory utilities	11,000

Prepare the following:

1. A schedule of cost of goods manufactured for the year ended December 31.
2. An income statement for the year ended December 31.

 

Chapter 3 Problem 33. Manufacturing statements and cost behavior

Tampa 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 $36 per roll. Cost information for the year just ended follows.

Direct labor

—

950,000

Selling—70,000Administrative—

Per Unit	Variable Cost	Fixed Cost
Direct materials	$4.50	$ —
6.5
Factory overhead
135,000

                                      

Production and sales totaled 20,000 rolls and 17,000 rolls, respectively There is no work in process. Tampa carries its finished goods inventory at the average unit cost of production.

 Instructions:

1. Determine the cost of the finished goods inventory of light-gauge aluminum.
2. Prepare an income statement for the current year ended December 31
3. 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 $4.50 unit cost of direct materials if next year’s production increases? Why?