Straight-line amortization, manufacturing concepts, schedule of cost of goods manufactured, income statement, manufacturing statements and cost behavior. ACC 206

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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.

 

 

 

Instructions:

 

Complete the following table:

   
 

Case A

Case B

Case C

  1.  Cash inflow on the issuance date

$900,000

$900,000

$900,000

  1. Total cash outflow through maturity

_______

_______

_______

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

_______

_______

_______

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

_______

_______

_______

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

_______

_______

_______

  1. Unamortized premium as of December 31, 20X1

_______

_______

_______

  1. Unamortized discount as of December 31, 20X1

_______

_______

_______

  1. 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

 

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:

 

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.

 

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:

 

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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