Comprehensive Problem 4 Part 1: Selected transactions completed by Equinox Produ

Question

Comprehensive Problem 4
  Part 1:

Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2014, were as follows:

1.  Journalize the selected transactions.

If no entry is required, select "No entry required" from the dropdown and leave the amount boxes blank. For a compound transaction, if an amount box does not require an entry, leave it blank.

q.  Accrued interest for three months on the Dream Inc. bonds purchased in (l).

r.  Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income.

Explanation / Answer

(Q) Accrued interest for three months on the Dream Inc. bonds purchased in (l).

Dream Inc. bond principal (90,000) x interest rate (5%) x 3/12 year = $1,125 interest; Increase Interest Receivable (debit) and Interest Revenue (credit) for this amount

Interest Receivable - Dr 1,125

Interest Revenue - Cr 1,125

(R) Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income.

Calculate the percentage of Pinkberry investment by dividing acquired stock of 40,000 shares by shares outstanding of 125,000. Increase Investment (debit) and increase income (credit) for share of income (Total earnings of $240,000 x 30% of investment).

Investment in Pinkberry Co. Stock - Dr 76,800

Income from Pinkberry Co. - Cr 76,800

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