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, 20Y8, were as follows:

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

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

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

d. Declared a quarterly 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.

e. Paid the cash dividends declared in (D).

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

g. Declared a $1.00 quarterly cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock had been issued.

h. Paid the cash dividends to the preferred stockholders.

i. Sold, at $38 per share, 2,600 shares of treasury common stock purchased in (F).

j. Recorded the payment of semiannual interest on the bonds issued in (C) and the amortization of the premium for six months. The amortization is determined using the straight-line method.

Instructions

1. Journalize the selected transactions.

Answer

C. Total assets, $13,500,000

2. After all of the transactions for the year ended December 31, 20Y8, had been posted [including the transactions recorded in part (1) and all adjusting entries], the data that follow were taken from the records of Equinox Products Inc.

A. Prepare a multiple-step income statement for the year ended December 31, 20Y8.

B. Prepare a retained earnings statement for the year ended December 31, 20Y8.

C. Prepare a balance sheet in report form as of December 31, 20Y8.

Answer

Check Figure: Total assets, $13,500,000

Income statement data: Advertising expense $       150,000 Cost of goods sold 3,700,000 Delivery expense 30,000 Depreciation expense—office buildings and equipment 30,000 Depreciation expense—store buildings and equipment 100,000 Income tax expense 140,500 Interest expense 21,000 Interest revenue 30,000 Miscellaneous administrative expense 7,500 Miscellaneous selling expense 14,000 Office rent expense 50,000 Office salaries expense 170,000 Office supplies expense 10,000 Sales 5,313,000 Sales commissions 185,000 Sales salaries expense 385,000 Store supplies expense 21,000

Explanation / Answer

a

Cash

$450,000.00

Common Stock

$300,000.00

Paid-In Capital in Excess of Par—

Common Stock

$150,000.00

b

Cash

$400,000.00

Preferred Stock

$320,000.00

Paid-In Capital in Excess of Par—

Preferred Stock

$80,000.00

c

Cash*

$520,000.00

Bonds Payable

$500,000.00

Premium on Bonds Payable

$20,000.00

*$500,000 × 1.04

d

Cash Dividends*

$50,000.00

Cash Dividends Payable

$50,000.00

*100,000 shares × $0.50 per share

Cash Dividends*

$20,000.00

Cash Dividends Payable

$20,000.00

*20,000 shares × $1.00 per share

e

Cash Dividends Payable

$70,000.00

Cash

$70,000.00

f

Treasury Stock*

$264,000.00

Cash

$264,000.00

*8,000 shares × $33 per share

g

Cash Dividends

$20,000.00

Cash Dividends Payable

$20,000.00

h

Cash Dividends Payable

$20,000.00

Cash

$20,000.00

i

Cash*

$98,800.00

Treasury Stock**

$98,800.00

Paid-In Capital from Sale of Treasury Stock

* 2,600 shares × $38 per share

** 2,600 shares × $33 per share

j

Interest Expense

$11,500.00

Premium on Bonds Payable

$1,000.00

Cash

$11,500.00

Computations: Semiannual interest payment ($500,000 × 5% × 1/2)……………… $12,500

Less amortization premium [($20,000 ÷ 10 years) × 1/2]………… 1,000

Interest expense………………………………………………………… $11,500

as my totals are matching in the balance sheet. as per the information provided the answer is correct, do not provide negative feedback if you are not satisfied with answer, please comment before i will help you out.

Thank you:)

a

Cash

$450,000.00

Common Stock

$300,000.00

Paid-In Capital in Excess of Par—

Common Stock

$150,000.00

b

Cash

$400,000.00

Preferred Stock

$320,000.00

Paid-In Capital in Excess of Par—

Preferred Stock

$80,000.00

c

Cash*

$520,000.00

Bonds Payable

$500,000.00

Premium on Bonds Payable

$20,000.00

*$500,000 × 1.04

d

Cash Dividends*

$50,000.00

Cash Dividends Payable

$50,000.00

*100,000 shares × $0.50 per share

Cash Dividends*

$20,000.00

Cash Dividends Payable

$20,000.00

*20,000 shares × $1.00 per share

e

Cash Dividends Payable

$70,000.00

Cash

$70,000.00

f

Treasury Stock*

$264,000.00

Cash

$264,000.00

*8,000 shares × $33 per share

g

Cash Dividends

$20,000.00

Cash Dividends Payable

$20,000.00

h

Cash Dividends Payable

$20,000.00

Cash

$20,000.00

i

Cash*

$98,800.00

Treasury Stock**

$98,800.00

Paid-In Capital from Sale of Treasury Stock

* 2,600 shares × $38 per share

** 2,600 shares × $33 per share

j

Interest Expense

$11,500.00

Premium on Bonds Payable

$1,000.00

Cash

$11,500.00

Computations: Semiannual interest payment ($500,000 × 5% × 1/2)……………… $12,500

Less amortization premium [($20,000 ÷ 10 years) × 1/2]………… 1,000

Interest expense………………………………………………………… $11,500

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