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.






Preferred stock, $100 par value, 10%



Common stock, $10 par value




Paid-in capital in excess of par value








Retained earnings



Total stockholders’ equity




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.








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



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



Administrative expenses


Selling expenses



Work in. process





Jan. 1


Finished goods


Dec. 31


Jan. 1



Direct material purchases


Dec. 31



Depreciation: factory


Raw (direct) materials on hand

Indirect materials used


Jan. 1



Indirect labor


Dec. 31



Factory taxes



Factory utilities


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


$ —

Direct labor



Factory overhead

















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.



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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