Prepare an income statement for current year ended december

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Reference no: EM131146492


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%



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 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

1. Cash inflow on the issuance date




2. Total cash outflow through maturity




3. Total borrowing cost over the life of the bond issue




4. Interest expense for the year ended December 31, 20X1




5. Amortization for the year ended December 31, 20X1




6. Unamortized premium as of December 31, 20X1




7. Unamortized discount as of December 31, 20X1




8. 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


Machine lubricants


Wages and salaries Machine operators


Production supervisors


Maintenance personnel


Other factory overhead Variable




Sales commissions



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 Jefferson 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

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


$ -

Direct labor



Factory overhead









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.


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 $4.50 unit cost of direct materials if next year's production increases? Why?

Reference no: EM131146492

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