Selected transactions completed by Equinox Products Inc. during the fiscal year
ID: 2599750 • Letter: S
Question
Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 20Y8, were as follows:
Issued 15,000 shares of $20 par common stock at $30, receiving cash.
Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash.
Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually.
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.
Paid the cash dividends declared in (D).
Purchased 8,000 shares of treasury common stock at $33 per share.
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.
Paid the cash dividends to the preferred stockholders.
Sold, at $38 per share, 2,600 shares of treasury common stock purchased in (F).
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
Journalize the selected transactions.
Answer C. Total assets, $13,500,000
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. Prepare a multiple-step income statement for the year ended December 31, 20Y8.
Prepare a retained earnings statement for the year ended December 31, 20Y8.
Prepare a balance sheet in report form as of December 31, 20Y8.
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
Retained earnings and balance sheet data:
Accounts payable $ 194,300
Accounts receivable 545,000
Accumulated depreciation—office buildings and equipment 1,580,000
Accumulated depreciation—store buildings and equipment 4,126,000
Allowance for doubtful accounts 8,450
Bonds payable, 5%, due in 10 years 500,000
Cash 246,000
Common stock, $20 par (400,000 shares authorized; 100,000 shares issued, 94,600 outstanding) 2,000,000
Dividends:
Cash dividends for common stock 155,120
Cash dividends for preferred stock 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
Inventory (December 31, 20Y8), at lower of cost (FIFO) or market 778,000
Office buildings and equipment 4,320,000
Paid-in capital from sale of treasury stock 13,000
Excess of issue price over par—common stock 886,800
Excess of issue price over par—preferred stock 150,000
Preferred 5% stock, $80 par (30,000 shares authorized; 20,000 shares issued) 1,600,000
Premium on bonds payable 19,000
Prepaid expenses 27,400 Retained earnings, January 1, 20Y8 9,319,725
Store buildings and equipment 12,560,000
Treasury stock (5,400 shares of common stock at cost of $33 per share)
Explanation / Answer
DESCRIPTION DEBIT CREDIT Cash (15000 shares x $30 per share) $450,000 Common Stock (15000 shares x $20 per share) $300,000 Paid-In Capital in Excess of Par—Common stock $150,000 Cash (4000 shares × $100 per share) $400,000 Preferred Stock (4000 shares x $80 per share) $320,000 Paid-In Capital in Excess of Par—Preferred stock (4000 x ($100-80)) $80,000 Cash ($500,000 x 1.04) $520,000 Bonds Payable $500,000 Premium on Bonds Payable $20,000 Cash Dividends $70,000 Cash Dividends Payable $70,000 (100,000 shares × $0.50 per share)+ (20,000 shares × $1 per share) Cash Dividends Payable $70,000 Cash $70,000 Treasury Stock $264,000 Cash(8000 shares × $33 per share) $264,000 Cash Dividends (20,000 shares x $1 per share) $20,000 Cash Dividends Payable $20,000 Cash Dividends Payable $20,000 Cash $20,000 Cash (2,600 shares × $38 per share) $98,800 Treasury Stock (2,600 shares × $33 per share) $85,800 Paid-In Capital from Sale of Treasury Stock $13,000 Interest Expense $11,500 Premium on Bonds Payable (amortization premium [($20,000/10 years)× ½] 1000 Cash (Semiannual interest payment ($500,000 × 5% × ½) $12,500
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