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28 Sep 2019
Selected transactions completed by Equinox Products Inc. duringthe fiscal year ended December 31, 2016, were as follows:
Record on journal page 10:
Jan. 3 Issued 15,000 shares of $20 parcommon stock at $30, receiving cash. Feb. 15 Issued 4,000 shares of $80 parpreferred 5% stock at $100, receiving cash. May 1 Issued $500,000 of 10-year, 5%bonds at 104, with interest payable semiannually. 16 Declared a dividend of $0.50 pershare on common stock and $1.00 per share on preferred stock. Onthe date of record, 100,000 shares of common stock wereoutstanding, no treasury shares were held, and 20,000 shares ofpreferred stock were outstanding. Journalize this transactionas a single entry. 26 Paid the cash dividends declared onMay 16. Jun. 1 Purchased 7,500 shares of SolsticeCorp. at $40 per share, plus a $150 brokerage commission. Theinvestment is classified as an available-for-sale investment. 8 Purchased 8,000 shares of treasurycommon stock at $33 per share. 22 Purchased 40,000 shares ofPinkberry Co. stock directly from the founders for $24 per share.Pinkberry has 125,000 shares issued and outstanding. EquinoxProducts Inc. treated the investment as an equity methodinvestment. 30 Declared a $1.00 cash dividend pershare on preferred stock. On the date of record, 20,000 shares ofpreferred stock were outstanding. Jul. 11 Paid the cash dividends declared onJul. 11 to the preferred stockholders. Aug. 27 Received $27,500 dividend fromPinkberry Co. investment of Jun. 22.
Record on journal page 11:
Oct. 1 Purchased $90,000 of Dream Inc.10-year, 5% bonds, directly from the issuing company, at their faceamount plus accrued interest of $375. The bonds are classified as aheld-to-maturity long-term investment. 7 Sold, at $38 per share, 2,600shares of treasury common stock purchased on Jun. 8. 14 Received a dividend of $0.60 pershare from the Solstice Corp. investment on Jun. 1. 29 Sold 1,000 shares of Solstice Corp.at $45, including commission. 31 Recorded the payment of semiannualinterest on the bonds issued on May 1 and the amortization of thepremium for six months. The amortization is determined using thestraight-line method. Dec. 31 Accrued interest for three monthson the Dream Inc. bonds purchased on Oct. 1. 31 Pinkberry Co. recorded totalearnings of $240,000. Equinox Products recorded equity earnings forits share of Pinkberry Co. net income. 31 The fair value for Solstice Corp.stock was $39.02 per share on December 31, 2016. The investment isadjusted to fair value, using a valuation allowance account. AssumeValuation Allowance for Available-for-Sale Investments had abeginning balance of zero.
Required: 1. Journalize the selectedtransactions. Refer to the Chart of Accounts for exact wording ofaccount titles. 2. After all of the transactionsfor the year ended December 31, 2016, had been posted [includingthe transactions recorded in part (1) and all adjusting entries],the data that follows were taken from the records of EquinoxProducts Inc. A. Prepare a multiple-step incomestatement for the year ended December 31, 2016, concluding withearnings per share. In computing earnings per share, assume thatthe average number of common shares outstanding was 100,000 andpreferred dividends were $100,000. (Round earnings per share to thenearest cent.)* B. Prepare a retained earningsstatement for the year ended December 31, 2016.* C. Prepare a balance sheet inreport form as of December 31, 2016. * * Read the instructions aboveeach financial statement carefully. They may contain specificinstructions for completing the statement.
Income Statement data: Advertising expense $150,000 Cost of merchandise sold 3,700,000 Delivery expense 30,000 Depreciation expense-officebuildings and equipment 30,000 Depreciation expense-storebuildings and equipment 100,000 Dividend revenue 4,500 Gain on sale of investments 4,980 Income from Pinkberry Co.investment 76,800 Income tax expense 140,500 Interest expense 21,000 Interest revenue 2,720 Miscellaneous administrativeexpense 7,500 Miscellaneous selling expense 14,000 Office rent expense 50,000 Office salaries expense 170,000 Office supplies expense 10,000 Sales 5,254,000 Sales commissions 185,000 Sales salaries expense 385,000 Store supplies expense 21,000
Retained earnings and balancesheet data: Accounts payable $194,300 Accounts receivable 545,000 Accumulated depreciationâofficebuildings and equipment 1,580,000 Accumulated depreciationâstorebuildings and equipment 4,126,000 Allowance for doubtfulaccounts 8,450 Available-for-sale investments (atcost) 260,130 Bonds payable, 5%, due 2024 500,000 Cash 246,000 Common stock, $20 par (400,000 shares authorized; 100,000shares issued, 94,600 outstanding) 2,000,000 Dividends: Cash dividends for commonstock 155,120 Cash dividends for preferredstock 100,000 Goodwill 500,000 Income tax payable 44,000 Interest receivable 1,125 Investment in Pinkberry Co. stock(equity method) 1,009,300 Investment in Dream Inc. bonds(long term) 90,000 Merchandise inventory (December 31,2016), at lower of cost (FIFO) ormarket 778,000 Office buildings and equipment 4,320,000 Paid-in capital from sale oftreasury stock 13,000 Excess of issue price overpar: -Common 886,800 -Preferred 150,000 Preferred 5% stock, $80 par (30,000 shares authorized; 20,000shares issued) 1,600,000 Premium on bonds payable 19,000 Prepaid expenses 27,400 Retained earnings, January 1,2016 9,319,725 Store buildings and equipment 12,560,000 Treasury stock (5,400 shares of common stock atcost of $33 per share) 178,200 Unrealized gain (loss) onavailable-for-sale investments (6,500) Valuation allowance foravailable-for-sale investments (6,500)
Selected transactions completed by Equinox Products Inc. duringthe fiscal year ended December 31, 2016, were as follows:
Record on journal page 10:
Jan. | 3 | Issued 15,000 shares of $20 parcommon stock at $30, receiving cash. |
Feb. | 15 | Issued 4,000 shares of $80 parpreferred 5% stock at $100, receiving cash. |
May | 1 | Issued $500,000 of 10-year, 5%bonds at 104, with interest payable semiannually. |
16 | Declared a dividend of $0.50 pershare on common stock and $1.00 per share on preferred stock. Onthe date of record, 100,000 shares of common stock wereoutstanding, no treasury shares were held, and 20,000 shares ofpreferred stock were outstanding. Journalize this transactionas a single entry. | |
26 | Paid the cash dividends declared onMay 16. | |
Jun. | 1 | Purchased 7,500 shares of SolsticeCorp. at $40 per share, plus a $150 brokerage commission. Theinvestment is classified as an available-for-sale investment. |
8 | Purchased 8,000 shares of treasurycommon stock at $33 per share. | |
22 | Purchased 40,000 shares ofPinkberry Co. stock directly from the founders for $24 per share.Pinkberry has 125,000 shares issued and outstanding. EquinoxProducts Inc. treated the investment as an equity methodinvestment. | |
30 | Declared a $1.00 cash dividend pershare on preferred stock. On the date of record, 20,000 shares ofpreferred stock were outstanding. | |
Jul. | 11 | Paid the cash dividends declared onJul. 11 to the preferred stockholders. |
Aug. | 27 | Received $27,500 dividend fromPinkberry Co. investment of Jun. 22. |
Record on journal page 11:
Oct. | 1 | Purchased $90,000 of Dream Inc.10-year, 5% bonds, directly from the issuing company, at their faceamount plus accrued interest of $375. The bonds are classified as aheld-to-maturity long-term investment. |
7 | Sold, at $38 per share, 2,600shares of treasury common stock purchased on Jun. 8. | |
14 | Received a dividend of $0.60 pershare from the Solstice Corp. investment on Jun. 1. | |
29 | Sold 1,000 shares of Solstice Corp.at $45, including commission. | |
31 | Recorded the payment of semiannualinterest on the bonds issued on May 1 and the amortization of thepremium for six months. The amortization is determined using thestraight-line method. | |
Dec. | 31 | Accrued interest for three monthson the Dream Inc. bonds purchased on Oct. 1. |
31 | Pinkberry Co. recorded totalearnings of $240,000. Equinox Products recorded equity earnings forits share of Pinkberry Co. net income. | |
31 | The fair value for Solstice Corp.stock was $39.02 per share on December 31, 2016. The investment isadjusted to fair value, using a valuation allowance account. AssumeValuation Allowance for Available-for-Sale Investments had abeginning balance of zero. |
Required: | |||||||||
1. | Journalize the selectedtransactions. Refer to the Chart of Accounts for exact wording ofaccount titles. | ||||||||
2. | After all of the transactionsfor the year ended December 31, 2016, had been posted [includingthe transactions recorded in part (1) and all adjusting entries],the data that follows were taken from the records of EquinoxProducts Inc.
|
Income Statement data: | |
---|---|
Advertising expense | $150,000 |
Cost of merchandise sold | 3,700,000 |
Delivery expense | 30,000 |
Depreciation expense-officebuildings and equipment | 30,000 |
Depreciation expense-storebuildings and equipment | 100,000 |
Dividend revenue | 4,500 |
Gain on sale of investments | 4,980 |
Income from Pinkberry Co.investment | 76,800 |
Income tax expense | 140,500 |
Interest expense | 21,000 |
Interest revenue | 2,720 |
Miscellaneous administrativeexpense | 7,500 |
Miscellaneous selling expense | 14,000 |
Office rent expense | 50,000 |
Office salaries expense | 170,000 |
Office supplies expense | 10,000 |
Sales | 5,254,000 |
Sales commissions | 185,000 |
Sales salaries expense | 385,000 |
Store supplies expense | 21,000 |
Retained earnings and balancesheet data: | |
---|---|
Accounts payable | $194,300 |
Accounts receivable | 545,000 |
Accumulated depreciationâofficebuildings and equipment | 1,580,000 |
Accumulated depreciationâstorebuildings and equipment | 4,126,000 |
Allowance for doubtfulaccounts | 8,450 |
Available-for-sale investments (atcost) | 260,130 |
Bonds payable, 5%, due 2024 | 500,000 |
Cash | 246,000 |
Common stock, $20 par | |
(400,000 shares authorized; 100,000shares issued, 94,600 outstanding) | 2,000,000 |
Dividends: | |
Cash dividends for commonstock | 155,120 |
Cash dividends for preferredstock | 100,000 |
Goodwill | 500,000 |
Income tax payable | 44,000 |
Interest receivable | 1,125 |
Investment in Pinkberry Co. stock(equity method) | 1,009,300 |
Investment in Dream Inc. bonds(long term) | 90,000 |
Merchandise inventory (December 31,2016), | |
at lower of cost (FIFO) ormarket | 778,000 |
Office buildings and equipment | 4,320,000 |
Paid-in capital from sale oftreasury stock | 13,000 |
Excess of issue price overpar: | |
-Common | 886,800 |
-Preferred | 150,000 |
Preferred 5% stock, $80 par | |
(30,000 shares authorized; 20,000shares issued) | 1,600,000 |
Premium on bonds payable | 19,000 |
Prepaid expenses | 27,400 |
Retained earnings, January 1,2016 | 9,319,725 |
Store buildings and equipment | 12,560,000 |
Treasury stock | |
(5,400 shares of common stock atcost of $33 per share) | 178,200 |
Unrealized gain (loss) onavailable-for-sale investments | (6,500) |
Valuation allowance foravailable-for-sale investments | (6,500) |
Hubert KochLv2
28 Sep 2019