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:

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 Jun. 30 to the preferred stockholders. Aug. 27 Received $27,500 dividend from Pinkberry Co. investment of Jun. 22.

Explanation / Answer

Date Particulars Amount Dr. Amount Cr. 3-Jan Cash A/C Dr. (15,000*30) $450,000 To Common Stock A/C. (15,000*20) $300,000 To Paid In Capital in excess of Par Value $150,000 (Being Common Stock of 15,000 at par value od $20, issued at $30) 15-Feb Cash A/C Dr. (4000*100) $400,000 To Share Capital A/c. (4000*80) $320,000 To Security Premium A/c. $80,000 (Being 4000 preference shares of par value of $80 issued at a premium of $20) 1-May Cash A/C Dr. $500,000 TO Bond Payable A/C. $500,000 (Being $500,000 10 year 5% Bond issued) 16-May Retained Earnings A/C Dr. $70,000 To Dividend Payable A/c. (100,000*$0.5+20000*$1) $70,000 (Being Dividend Declared) 26-May Dividend Payable A/C Dr. $70,000 To Cash A/C. $70,000 (Being Dividend Paid)

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