Acc 206 Week 2

ACC 206 Week Two Assignment

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:

| 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.

800 shares

b. Calculate the average issue price of the common stock sold in 20X6.

$27

c. By what amount did the company's paid-in capital increase during 20X6?

$1,724,000

d. Did Star's total legal capital increase or decrease during 20X6? By what amount?

Yes, $680,000

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 |

a. Cash inflow on the issuance date | $900,000 | 864,000 | 945,000 |

b. Total cash outflow through maturity | 1,620,000 | 1,620,000 | 1,620,000 |

c. Total...