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Quiz 1: When Resisto Systems, Inc., was formed, the company was authorized to issue 5,000 shares of $100 par value, 8 percent cumulative preferred...

4. Slick Corporation is a small producer of synthetic motor oil. During May, the company produced 5,000 cases of lubricant. Each case contains 12 quarts of synthetic oil. To achieve this level of production, Slick purchased and used 16,500 gallons of direct materials at a cost of $20,374. It also incurred average direct labor costs of $15 per hour for the 4,298 hours worked in May by its production personnel. Manufacturing overhead for the month totaled $9,365, of which $2,200 was considered fixed. Slick's standard cost information for each case of synthetic motor oil is as follows.

Direct materials standard price

$

1.30

per gallon

Standard quantity allowed per case

3.25

gallons

Direct labor standard rate

$

16

per hour

Standard hours allowed per case

0.75

direct labor hours

Fixed overhead budgeted

$

2,600

per month

Normal level of production

5,200

cases per month

Variable overhead application rate

$

1.50

per case

Fixed overhead application rate ($2,600 ÷ 5,200 cases)

0.50

per case

Total overhead application rate

$

2.00

per case

Required:

a. Compute the materials price and quantity variances.

b. Compute the labor rate and efficiency variances.

c. Compute the manufacturing overhead spending and volume variances.

d. Prepare the journal entries to:

1. Charge materials (at standard) to Work in Process.

2. Charge direct labor (at standard) to Work in Process.

3. Charge manufacturing overhead (at standard) to Work in Process.

4. Transfer the cost of the 5,000 cases of synthetic motor oil produced in May to Finished Goods.

5. Close any over- or underapplied overhead to cost of goods sold.

Quiz 1: 1. When Resisto Systems, Inc., was formed, the company was authorized to issue 5,000 shares of $100 par value, 8 percent cumulative preferred stock, and 100,000 shares of $2 stated value common stock. Half of the preferred stock was issued at a price of $102 per share, and 86,000 shares of the common stock were sold for $24 per share. At the end of the current year, Resisto has retained earnings of $382,000. a. Prepare the stockholders’ equity section of the company’s balance sheet at the end of the current year. Stockholders' Equity Cumulative preferred stock$250,000 Common stock 172,000 Additional paid-in capital: Cumulative preferred stock 5,000 Common stock 2,064,000 Total paid-in capital $2,491,000 Retained earnings 382,000 Total stockholders' equity $2,873,000 Explanation a. 8% cumulative preferred stock, $100 par value,5,000 shares authorized, 2,500 shares issued and outstanding = $250,000. Common stock, $2 stated value, 100,000 shares authorized, 86,000 shares issued and outstanding = $172,000.
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2. The year-end balance sheet of Columbus Products, Inc., includes the following stockholders’ equity section (with certain details omitted). Stockholders' equity: Capital stock: 7% cumulative preferred stock, $100 par value $ 16,000,000 Common stock, $5 par value, 5,000,000 shares authorized, 4,300,000 shares issued and outstanding 21,500,000 Additional paid-in capital: Common stock 42,000,000 Retained earnings 64,450,000 Total stockholders’ equity $143,950,000 From this information, compute answers to the following questions. a. How many shares of preferred stock have been issued? b. What is the total amount of the annual dividends to which preferred stockholders are entitled? c. What was the average issuance price per share of common stock? d. What is the amount of legal capital and the amount of total paid-in capital? e. What is the book value per share of common stock, assuming no dividends in arrears? f. Is it possible to determine the fair market value per share of common stock from the stockholders' equity section above? Explanation a. 160,000 shares ($16,000,000 total par value, divided by $100 par value per share)
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