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ACC206 7 Qs

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Chapter 2 Exercise 1

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

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:

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

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

Chapter 3 Exercise 1

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
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 the following:
a. Total direct materials consumed
b. Total direct labor
c. Total prime cost
d. Total conversion cost

Chapter 3 Exercise 5
The following information was taken from the ledger of Jefferson Industries Inc.:


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

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:

Direct materials 4.50
Direct labor 6.50
Factory overhead 9.0050,000
Selling70,000
Administrative135,000

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, answer the following questions:
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?

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