Selected transactions completed by Equinox Products Inc. during the fiscal year
ID: 2426450 • Letter: S
Question
Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2016, were as follows:
Record on journal page 10:
Record on journal page 11:
Jan. 3 Issued 15,000 shares of $20 par common stock at $30, receiving cash. Feb. 15 Issued 4,000 shares of $80 par preferred 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 per share on common stock and $1.00 per share on preferred stock. On the date of record, 100,000 shares of common stock were outstanding, no treasury shares were held, and 20,000 shares of preferred stock were outstanding. Journalize this transaction as a single entry. 26 Paid the cash dividends declared on May 16. Jun. 1 Purchased 7,500 shares of Solstice Corp. at $40 per share, plus a $150 brokerage commission. The investment is classified as an available-for-sale investment. 8 Purchased 8,000 shares of treasury common stock at $33 per share. 22 Purchased 40,000 shares of Pinkberry Co. stock directly from the founders for $24 per share. Pinkberry has 125,000 shares issued and outstanding. Equinox Products Inc. treated the investment as an equity method investment. 30 Declared a $1.00 cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock were outstanding. Jul. 11 Paid the cash dividends declared on Jul. 11 to the preferred stockholders. Aug. 27 Received $27,500 dividend from Pinkberry Co. investment of Jun. 22.Explanation / Answer
Answer: 1. Journalize the selected transactions. Journal in the books of Equinox Products Inc. (Amount In $) Date Particulars Debit amount Credit amount Jan. 3 Issued 15,000 shares of $20 par common stock at $30, receiving cash. Cash Account DR 450,000 To Common stock Account 300,000 To Securities Premium Account 150,000 (Being common stock issued) Feb. 15 Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash. Cash Account DR 400000 To 5% preferred stock Account 320000 To Securities Premium Account 80000 (Being 5% preferred stock issued) 1-May Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually. Cash Account DR 52000000 To 5% bonds Account 50000000 To Securities Premium Account 2000000 (Being 5% bonds issued) 16-May Declared a dividend of $0.50 per share on common stock and $1.00 per share on preferred stock. On the date of record, 100,000 shares of common stock and 20,000 shares of preferred stock were outstanding. Common stock dividend Account DR 50000 Preferred stock dividend Account DR 20000 To Dividend Payable Account 70000 (Being dividend declared) 26-May Paid the cash dividends declared on May 16. Dividend Payable Account DR 70000 To Cash Account 70000 (Being dividend paid) 1-Jun Purchased 7,500 shares of Solstice Corp. at $40 per share, plus a $150 brokerage commission. The investment is classified as an available-for-sale investment. Available for sale investment Account DR 300150 To Cash Account 300150 (Being investments in form of shares of Solstice Corp. purchased) 8-Jun Purchased 8,000 shares of treasury common stock at $33 per share. Treasury common stock Account DR 264000 To Cash Account 264000 (Being shares of treasury common stock purchased) 22-Jun Purchased 40,000 shares of Pinkberry Co. stock directly from the founders for $24 per share. Equity share capital Account DR 960000 To Cash Account 960000 (Being shares of Pinkberry Co. purchased) 30-Jun Declared a $1.00 cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock were outstanding. Preferred stock dividend Account DR 20000 To Dividend Payable Account 20000 (Being dividend declared) 11-Jul Paid the cash dividends declared on Jul. 11 to the preferred stockholders. Dividend Payable Account DR 20000 To Cash Account 20000 (Being dividend paid) 27-Aug Received $27,500 dividend from Pinkberry Co. investment of Jun. 22. Cash Account DR 27500 To Dividend Receivable Account 27500 (Being dividend received) 1-Oct Purchased $90,000 of Dream Inc. 10-year, 5% bonds, directly from the issuing company, at their face amount plus accrued interest of $375. 5% bonds (Investment) Account DR (assuming Face value as $100) 9000000 Accrued interest Account DR 375 To Cash Account 9000375 (Being 5% bonds purchased) 7-Oct Sold, at $38 per share, 2,600 shares of treasury common stock purchased on Jun. 8. Cash Account DR 98800 To Treasury common stock Account 85800 To Profit on sale of Treasury common stock Account 13000 (Being treasury common stock sold) 14-Oct Received a dividend of $0.60 per share from the Solstice Corp. investment on Jun. 1. Cash Account DR 4500 To Dividend Receivable Account 4500 (Being dividend received) 29-Oct Sold 1,000 shares of Solstice Corp. at $45, including commission. Cash Account DR 45000 To Available for sale investment Account 40000 To Profit on sale of Available for sale investment Account 5000 (Being 1000 shares of available for sale investment sold) 31-Oct Recorded the payment of semiannual interest on the bonds issued on May 1 and the amortization of the premium for six months. The amortization is determined using the straight-line method. Interest on 5% bonds Account DR 1250 To Cash Account 1250 (Being interest paid for half year) Securities Premium Account DR 100000 To Statement of Profit and Loss Account 100000 (Being premium amortised) 31-Dec Accrued interest for three months on the Dream Inc. bonds purchased on Oct. 1. Cash Account DR 112.5 To Accrued interest Account 112.5 (Being interest received for 3 months) 31-Dec Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income. Cash Account DR 76800 To Statement of Profit and Loss Account 76800 (Being income earned on 40000 shares) 31-Dec The fair value for Solstice Corp. stock was $39.02 per share on December 31, 2016. The investment is adjusted to fair value, using a valuation allowance account. Valuation allowance Account DR 6370 To Available for sale investment Account 6370 (Being fair value adjusted on 6500 shares)
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