Finance and Accounting
ACC 206 Week Two Assignment
Please complete the following 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 20X6. The stockholders’ equity sections of the company’s balance sheets at the end of 20X6 and 20X5 follow:
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?
2. 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.
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 _______ _______ _______
3. Definitions of manufacturing concepts
Interstate Manufacturing produces brass fasteners and incurred the following costs for the year just ended:
Materials and supplies used
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
Sales commissions 20,000
a. Total direct materials consumed
b. Total direct labor
c. Total prime cost
d. Total conversion cost
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