Financial & Managerial Accounting
13th Edition
ISBN: 9781285866307
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 13, Problem 1CPP
Selected transactions completed by Equinox Products Inc. during the fiscal year ended
December 31, 2016, were as follows:
- a. Issued 15,000 shares of $ 0 par common stock at $ 0, 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 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.
- g. Purchased 8,000 shares of treasury common stock at $33 per share.
- h. 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.
- i. 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.
- j. Paid the cash dividends to the preferred stockholders.
- k. Received $27,500 dividend from Pinkberry Co. investment in (h).
- l. 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-maturitv long-term investment.
- m. Sold, at $38 per share, 2,600 shares of treasury common stock purchased in (g).
- n. Received a dividend of $0.60 per share from the Solstice Corp. investment in (f).
- o. Sold 1,000 shares of Solstice Corp. at 545, including commission.
- p. 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,
- q. Accrued interest for three months on the Dream Inc. bonds purchased in (1).
- r. Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income.
- s. 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. Assume Valuation Allowance for Available-for-Sale Investments had a beginning balance of zero.
Instructions
Journalize the selected transactions.
After all of the transactions for the year ended December 31, 2016, had been
- a. Prepare a multiple-step income statement for the year ended December 31, 2016, concluding with earnings per share. In computing earnings per share, assume that the average number of common shares outstanding was 100,000 and preferred dividends were $100,000. (Round earnings per share to the nearest cent.)
- b. Prepare a
retained earnings statement for the year ended December 31, 2016. - c. Prepare a balance sheet in report form as of December 31, 2016.
Income statement data: | |
Advertising expense | $ 150,000 |
Cost of merchandise sold | 3,700,000 |
Delivery expense | 30,000 |
Depreciation expense -office buildings and equipment | 30,000 |
Depreciation expense—store buildings and equipment | 100,000 |
Dividend revenue | 4,500 |
Gain on sale of investment | 4,980 |
Income from Pinkberry Co. investment | 76,800 |
Income tax expense | 140,500 |
Interest expense | 21,000 |
Interest revenue | 2,720 |
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 | 5,254,000 |
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 |
Available for sale investments (at cost) | $ 260,130 |
Bonds payable. 5%. due 2024 | 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 |
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) or market | 778,000 |
Office buildings and equipment | 4.320,000 |
Paid-in capital from sale of |
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, 2016 | 9,319,725 |
Store buildings and equipment | 12,560,000 |
Treasury stock (5,400 shares of common stock at cost of $33 per share) | 178,200 |
Unrealized gain (loss) on available for sale investments | (6,500) |
Valuation allowance for available for sale investments | (6,500) |
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Chapter 13 Solutions
Financial & Managerial Accounting
Ch. 13 - Prob. 1DQCh. 13 - What causes a gain or loss on the sale of a bond...Ch. 13 - Prob. 3DQCh. 13 - Prob. 4DQCh. 13 - Prob. 5DQCh. 13 - Prob. 6DQCh. 13 - Prob. 7DQCh. 13 - Prob. 8DQCh. 13 - What are the factors contributing to the trend...Ch. 13 - Prob. 10DQ
Ch. 13 - Prob. 1APECh. 13 - Bond investment transactions Journalize the...Ch. 13 - Prob. 2APECh. 13 - Stock investment transactions On September 12,...Ch. 13 - Prob. 3APECh. 13 - Prob. 3BPECh. 13 - Prob. 4APECh. 13 - Prob. 4BPECh. 13 - Prob. 5APECh. 13 - Prob. 5BPECh. 13 - Prob. 6APECh. 13 - Prob. 6BPECh. 13 - Prob. 1EXCh. 13 - Prob. 2EXCh. 13 - Prob. 3EXCh. 13 - Prob. 4EXCh. 13 - Prob. 5EXCh. 13 - Entries for investment in stock, receipt of...Ch. 13 - Prob. 7EXCh. 13 - Prob. 8EXCh. 13 - Entries for stock investments, dividends, and sale...Ch. 13 - Prob. 10EXCh. 13 - Prob. 11EXCh. 13 - Prob. 12EXCh. 13 - Prob. 13EXCh. 13 - Prob. 14EXCh. 13 - Prob. 15EXCh. 13 - Prob. 16EXCh. 13 - Fair value journal entries, trading investments...Ch. 13 - Prob. 18EXCh. 13 - Prob. 19EXCh. 13 - Prob. 20EXCh. 13 - Prob. 21EXCh. 13 - Prob. 22EXCh. 13 - Prob. 23EXCh. 13 - Prob. 24EXCh. 13 - Prob. 25EXCh. 13 - Prob. 26EXCh. 13 - Prob. 27EXCh. 13 - Prob. 28EXCh. 13 - Prob. 29EXCh. 13 - Debt investment transactions, available-for-sale...Ch. 13 - Prob. 2APRCh. 13 - Stock investment transactions, equity method and...Ch. 13 - Prob. 4APRCh. 13 - Prob. 1BPRCh. 13 - Prob. 2BPRCh. 13 - Stock investment transactions, equity method and...Ch. 13 - Prob. 4BPRCh. 13 - Selected transactions completed by Equinox...Ch. 13 - Benefits of fair value On July 16, 1998, Wyatt...Ch. 13 - Prob. 2CPCh. 13 - Prob. 3CPCh. 13 - Prob. 4CP
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