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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 theappropriate 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 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, 20X8 _______ _______ _______ Amortization for the year ended December 31, 20X8 _______ _______ _______ Unamortized premium as of December 31, 20X8 _______ _______ _______ Unamortized discount as of December 31, 20X8 _______ _______ _______ 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

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. Scheduleof 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?