Selected transactions completed by Equinox Products Inc. during the fiscal year

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:

Income Statement data:

Retained earnings and balance sheet data:

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

1.Journalize the selected transactions.

Issued 15,000 shares of $20 par common stock at $30, receiving cash

Cash Account Debit (15,000 * 30)

Shares Capital Account Credit ( With the face value of shares) (15,000 * 20)
Excess of issue price over par-common stock( With the amount of premium) (15,000 * 10)

450,000

300,000

150.000

Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash.

Cash Account Debit (4,000 * 100)

Preferred Stock Account credit (4,000 *80)

Excess of issue price over par - Preferred Stock Account credit (4.000 *20)

400,000

320,000

80,000

Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually.

Cash Account Debit

Bond payable account credit

interest payable account credit

note:

The bond will mature in 10 years and requires interest payments on June 30 and December 31 of each year.
The bond is issued on may 1 at its par value plus accrued interest.ince the bond was sold to investors at par, the issuing corporation will receive 100% of the bond's face value plus one month of accrued interest. The accrued interest amounts to $4,167 ($500,000 x 5% x 2/12). In total the issuing corporation will receive $504,167.

504,167

500,000

4,167

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.

Dividend account debit

to dividend payable account (120,000 * 0.5)

Preferred stock dividends (0.5 x 20,000 shares)=10,000

Common stock dividends (100,000 *0.5))=50,000

Total dividends =60,000

60,000

60,000

Paid the cash dividends declared on May 16.

dividend payable account

cash Account credit

60.000

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 investments account debit

brokerage commission expenses account debit

cash account credit

300,000

150

300,150

Purchased 8,000 shares of treasury common stock at $33 per share.

Treasury common stock account debit

cash acount credit

264,000

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.

Investment in Pinkberry Co. stock (equity method) debit

cash acount credit

960,000

960,000

Declared a $1.00 cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock were outstanding.

Dividend account debit

to dividend payable account (20,000 * 1)

20,000

20,000

Paid the cash dividends declared on Jul. 11 to the preferred stockholders.

dividend payable account

cash Account credit

20,000

Received $27,500 dividend from Pinkberry Co. investment of Jun. 22.

bank account debit

dividend income acount credit

27,000

Purchased $90,000 of Dream Inc. 10-year, 5% bonds, directly from the issuing company, at their face amount plus accrued interest of $375. The bonds are classified as a held-to-maturity long-term investment.

Investment in Dream Inc. bonds (long term) account debit

Interest receivable acount debit

cash acount credit

90,000

375

90,375

Sold, at $38 per share, 2,600 shares of treasury common stock purchased on Jun. 8.

cash account debit (2600 *38)

tresury common stock acount (2600*33)

profit on sale of tresuary stock (2600 * 5)

85,800

13,000

Received a dividend of $0.60 per share from the Solstice Corp. investment on Jun. 1.

cash account debit

dividend income (7500 * 0.6)

4,500

Sold 1,000 shares of Solstice Corp. at $45, including commission.

cash acount debit (1000*45)

Available-for-sale investments account credit (1000*40)

commision on sale of investment account credit (1000*5)

40,000

5,000

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.

bonds payable account debit

cash acount credit

4,167

4,167

Accrued interest for three months on the Dream Inc. bonds purchased on Oct. 1

cash acount debit

interest income acount credit

375

Date entry Debit Credit jan 3rd

Issued 15,000 shares of $20 par common stock at $30, receiving cash

Cash Account Debit (15,000 * 30)

Shares Capital Account Credit ( With the face value of shares) (15,000 * 20)
Excess of issue price over par-common stock( With the amount of premium) (15,000 * 10)

450,000

300,000

150.000

feb 15th

Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash.

Cash Account Debit (4,000 * 100)

Preferred Stock Account credit (4,000 *80)

Excess of issue price over par - Preferred Stock Account credit (4.000 *20)

400,000

320,000

80,000

may 1st

Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually.

Cash Account Debit

Bond payable account credit

interest payable account credit

note:

The bond will mature in 10 years and requires interest payments on June 30 and December 31 of each year.
The bond is issued on may 1 at its par value plus accrued interest.ince the bond was sold to investors at par, the issuing corporation will receive 100% of the bond's face value plus one month of accrued interest. The accrued interest amounts to $4,167 ($500,000 x 5% x 2/12). In total the issuing corporation will receive $504,167.

504,167

500,000

4,167

may 16th

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.

Dividend account debit

to dividend payable account (120,000 * 0.5)

Preferred stock dividends (0.5 x 20,000 shares)=10,000

Common stock dividends (100,000 *0.5))=50,000

Total dividends =60,000

60,000

60,000

may 26th

Paid the cash dividends declared on May 16.

dividend payable account

cash Account credit

60.000

60.000

june 1st

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 investments account debit

brokerage commission expenses account debit

cash account credit

300,000

150

300,150

june 8th

Purchased 8,000 shares of treasury common stock at $33 per share.

Treasury common stock account debit

cash acount credit

264,000

264,000

june 22nd

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.

Investment in Pinkberry Co. stock (equity method) debit

cash acount credit

960,000

960,000

june 30th

Declared a $1.00 cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock were outstanding.

Dividend account debit

to dividend payable account (20,000 * 1)

20,000

20,000

july 11th

Paid the cash dividends declared on Jul. 11 to the preferred stockholders.

dividend payable account

cash Account credit

20,000

20,000

Aug 27th

Received $27,500 dividend from Pinkberry Co. investment of Jun. 22.

bank account debit

dividend income acount credit

27,000

27,000

oct1st

Purchased $90,000 of Dream Inc. 10-year, 5% bonds, directly from the issuing company, at their face amount plus accrued interest of $375. The bonds are classified as a held-to-maturity long-term investment.

Investment in Dream Inc. bonds (long term) account debit

Interest receivable acount debit

cash acount credit

90,000

375

90,375

oct 7th

Sold, at $38 per share, 2,600 shares of treasury common stock purchased on Jun. 8.

cash account debit (2600 *38)

tresury common stock acount (2600*33)

profit on sale of tresuary stock (2600 * 5)

98,800

85,800

13,000

oct 14th

Received a dividend of $0.60 per share from the Solstice Corp. investment on Jun. 1.

cash account debit

dividend income (7500 * 0.6)

4,500

4,500

oct 29

Sold 1,000 shares of Solstice Corp. at $45, including commission.

cash acount debit (1000*45)

Available-for-sale investments account credit (1000*40)

commision on sale of investment account credit (1000*5)

45,000

40,000

5,000

oct 31st

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.

bonds payable account debit

cash acount credit

4,167

4,167

dec 31

Accrued interest for three months on the Dream Inc. bonds purchased on Oct. 1

cash acount debit

interest income acount credit

375

375

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