Fin – analysis of stockholders’ equity

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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:

20X6 20X5 
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? 

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 _______ _______ _______

. Definitions of manufacturing concepts 
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 

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 $85,000 Administrative expenses $59,000 
Selling expenses 34,000 Work in. process:
Sales 300,000 Jan. 1 29,000
Finished goods Dec. 31 21,000
Jan. 1 115,000 Direct material purchases 88,000
Dec. 31 131,000 Depreciation: factory 18,000
Raw (direct) materials on hand Indirect materials used 10,000
Jan. 1 31,000 Indirect labor 24,000
Dec. 31 40,000 Factory taxes 8,000
Factory utilities 11,000
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 $4.50 $ — 
Direct labor 6.5 — 
Factory overhead 9 50,000
Selling — 70,000
Administrative — 135,000

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. 
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?

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