Assignment
Exercise 1: Issuance of stock
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.
Exercise 2: Analysis of stockholders' equity
Star Corporation issued both common and preferred stock during 20X6. The stockholders' equity sections of the company's balance sheets atthe end of 20X6 and 20X5 follow:
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20X6
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20X5
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Preferred stock, $100 par value,10%
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$ 580,000
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$ 500,000
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Common stock, $10 par value
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2,350,000
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1,750,000
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Paid-in capital in excess of parvalue
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Preferred
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24,000
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-
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Common
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4,620,000
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3,600,000
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Retained earnings
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8,470,000
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6,920,000
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Total stockholders' equity
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$16,044,000
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$12,770,000
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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?
Exercise 3: Issuance of stock
Ventures Inc. was formed on January 1 to invest in artwork. The company is authorized to issue 10,000 shares of $1 par-value common stockand 1,000 shares of 10%, $50 par-value cumulative preferred stock. The following selected transactions occurred during the first quarter ofoperation:
Jan. 3 Sold 5,000 shares of common stock to the corporation'sfounders at $30 per share.
19 Sold 600 shares of preferred stock at $58 per share.
Feb. 4 Issued 100 common shares to an attorney for $3,300 of legalwork related to corporate start-up and formation.
11 Issued 2,000 shares of common stock to Pierre LaTour inexchange for a painting appraised at $75,000. The art originallycost LaTour $30,000.
Instructions
a. Prepare journal entries to record the company's transactions.
b. Prepare the stockholders' equity section of the firm's March 31 balance sheet. The Retained Earnings balance on this date totals $41,000.
c. The president of Ventures believes that organization costs should be expensed immediately. Briefly explain why the president's view isincorrect.
Exercise 4: Basic manufacturing computations
Lyon Manufacturing reported total manufacturing costs (direct materials used, direct labor, and factory overhead) of $549,000 for 20X3. Salesand operating expenses were $759,200 and $142,500, respectively. The following information appeared on company balance sheets:
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For the Year Ended
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12/31/X3
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12/31/X2
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Finished goods
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$150,000
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$153,700
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Work in process
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86,400
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74,100
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Compute cost of goods manufactured, cost of goods sold, and net income for 20X3.
Exercise 5
Straightforward manufacturing statements
The following information was extracted from the accounting records of Olympic Company for the year just ended:
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Sales
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$628,000
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Work in process, Jan. 1
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56,700
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Advertising expense
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23,500
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Direct material purchases
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231,500
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Finished goods, Dec. 31
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67,800
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Indirect materials used
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12,300
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Direct labor
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85,600
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Direct materials, Jan. 1
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45,500
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Finished goods, Jan. 1
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55,900
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Direct materials, Dec. 31
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38,200
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Sales staff salaries
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33,300
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Work in process, Dec. 31
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47,400
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Indirect labor
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50,700
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1. Utilities, taxes, insurance, and depreciation are incurred jointly by Olympic's manufacturing, sales, and administrative facilities. The costswere as follows:
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Utilities
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$40,000
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Taxes
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25,000
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Insurance
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10,000
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Depreciation
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36,000
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2. The first three costs are allocated proportionately on the basis of square feet occupied by the three functional areas. A review of thecompany's facilities revealed the following percentages would be appropriate: manufacturing, 50%; sales, 30%; and administrative, 20%.Depreciation is allocated 70, 20, and 10%, respectively.
Instructions
a. Prepare a schedule of cost of goods manufactured in good form.
b. Prepare an income statement in good form.