# (Solution) -ACC 206 Week 2 Assignment Chapter Two and Three Problems

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ACC 206 Week 2 Assignment Chapter Two and Three Problems

Chapter Two and Three Problems

Please complete the following 7 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.

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:

a.      Jackson Corporation has common stock with a par value of \$1 per share.

b.      Royal Corporation has no-par common with a stated value of \$5 per share.

c.      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

Preferred stock, \$100 par value, 10%  \$580,000  \$500,000

Common stock, \$10 par value  2,350,000 1,750,000

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  \$16,044,000  \$12,770,000

a.      Compute the number of preferred shares that were issued during 20X6.

b.      Calculate the average issue price of the common stock sold in 20X6.

c.      By what amount did the company's paid-in capital increase during 20X6?

d.      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:

Complete the following table:

Case A Case B Case C

a.  Cash inflow on the issuance date _______ _______ _______

b. Total cash outflow through maturity _______ _______ _______

c. Total borrowing cost over the life of the bond issue  _______ _______ _______

d. Interest expense for the year ended December 31, 20X1  _______ _______ _______

e. Amortization for the year ended December 31, 20X1  _______ _______ _______

f. Unamortized premium as of December 31, 20X1  _______ _______ _______

g. Unamortized discount as of December 31, 20X1  _______ _______ _______

h. 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 Adams

a.      Determine which of these costs are product costs and which are period costs.

b.      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  128,000

Production supervisors  64,000

Maintenance personnel  41,000

Other factory overhead Variable  35,000

Fixed  46,000

Sales commissions 20,000

Compute:

a.      Total direct materials consumed

b.      Total direct labor

c.      Total prime cost

d.      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.:

Direct labor \$85,000  Administrative expenses \$59,000

Selling expenses 34,000 Work in. process

Sales 300,000 Jan. 1 29,000

Finished goods Dec. 31 21,000

Jan. 1 115,000 Direct material purchases 88,000

Dec. 31 131,000 Depreciation: factory 18,000

Raw (direct) materials on hand Indirect materials used 10,000

Jan. 1 31,000 Indirect labor 24,000

Dec. 31 40,000 Factory taxes 8,000

Factory utilities 11,000

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.

Chapter 3 Problem 3

3. 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.

Per Unit  Variable Cost  Fixed Cost

Direct materials  \$4.50  \$ —

Direct labor 6.5 —

Factory overhead  9 50,000

Selling  —  70,000

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:

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 \$4.50 unit cost of direct materials if next year's production increases? Why?