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:
- Jackson Corporation has common stock with a par value of $1 per share.
- Royal Corporation has no-par common with a stated value of $5 per share.
- 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 |
- Compute the number of preferred shares that were issued during 20X6.
- Calculate the average issue price of the common stock sold in 20X6.
- By what amount did the company s paid-in capital increase during 20X6?
- 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 |
|
|
_______ |
_______ |
_______ |
|
_______ |
_______ |
_______ |
|
_______ |
_______ |
_______ |
|
_______ |
_______ |
_______ |
|
_______ |
_______ |
_______ |
|
_______ |
_______ |
_______ |
|
_______ |
_______ |
_______ |
|
_______ |
_______ |
_______ |
Chapter 3 Exercise 1
1. Product costs and period costs
The costs that follow were extracted from the accounting records of several different manufacturers:
- Weekly wages of an equipment maintenance worker
- Marketing costs of a soft drink bottler
- Cost of sheet metal in a Honda automobile
- Cost of president s subscription to Fortune magazine
- Monthly operating costs of pollution control equipment used in a steel mill
- Weekly wages of a seamstress employed by a jeans maker
- Cost of compact discs (CDs) for newly recorded releases of Rush, Billy Joel, and Bryan Adams
- Determine 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 128,000
Production supervisors 64,000
Maintenance personnel 41,000
Other factory overhead Variable 35,000
Fixed 46,000
Sales commissions 20,000
Compute:
- Total direct materials consumed
- Total direct labor
- Total prime cost
- Total conversion cost
Chapter 3 Exercise 5
5. Scheduleof 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 schedule of cost of goods manufactured for the year ended December 31.
- 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 |
Administrative |
|
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:
- Determine the cost of the finished goods inventory of light-gauge aluminum.
- Prepare an income statement for the current year ended December 31
- On the basis of the information presented:
- Does it appear that the company pays commissions to its sales staff? Explain.
- What is the likely effect on the $4.50 unit cost of direct materials if next year s production increases? Why?