Selected transactions completed by Equinox Products Inc. during the fiscal year
ID: 2598598 • Letter: S
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.
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 21,000Explanation / Answer
BALANCE SHEET
$
$
NON CURRENT ASSETS
COST LESS DEP
NBV
INTANGIBLE
GOODWILL
500000
TANGIBLE
STORE BLDG & EQUIPMENT
12560 LESS 4126
8434000
OFFICE BUILDING & EQUIPMENT
4320 LESS 1580
2740000
INVESTMENTS (LT)
90000
TOTAL:
11764000
CURRENT ASSETS
INVESTMENTS
1009300
INVENTORY
778000
ACC REC LESS ALLOWANCE
536550
PREPAID
27400
INT REC
1125
CASH
246000
2598375
TOTAL ASSETS
14362375
CURRENT LIABILITIES
ACC PAY
194300
INCOME TAX PAYABLE
44000
DIV PAYABLE
255120
493420
LONG TERM LIABILITIES
5% BONDS PAYABLE
500000
LESS PREMIUM
-19000
481000
EQUITY
COMMON STOCK
2000000
EXCESS PAR COMMON STOCK
886800
PREFEREED STOCK
1600000
EXCESS PAR PREF STOCK
150000
TREASURY STOCK
165200
RETAINED EARNIGS
9393605
14195605
15170025
DIVIDENDS PAID
ON COMMON STOCK
155120
ON PREF STOCK
100000
-255120
73880
B/F ADD: RETAINED EARNINGS
9319725
C/F RETAINED EARNINGS
9393605
INCOME STATEMENT
$
$
SALES
5313000
COST OF GOODS
3700000
DEP STORES EQUIPMENT
100000
STORS SUPPLIES EXPENSE
21000
3821000
GROSS PROFIT
1492000
LESS :ADMIN EXPENSES
MISC ADMIN EXPENSE
7500
DEP OFFICE BLDG
30000
OFFICE RENT
50000
OFFICE SALARIES
170000
OFFICE SUPPLIES
10000
-267500
LESS: SELLING EXPENSES
SALES SALARIES
385000
SALES COMMISSIONS
185000
ADVERT
150000
DELIVERY EXPENSE
30000
MISC SELLING EXPENSE
14000
-764000
OPERATING INCOME
460500
INTEREST REVENUE
+30000
INTEREST EXPENSE
21000
+9000
469500
INCOME TAX
-140500
PROFIT AFTER TAX
329000
DATE
AS AT DEC 31 20Y8
DETAILS
$
DEBIT A/C
CREDIT A/C
A
RECEIVED CASH ON 15000 COMMON SHARES@$30
300,000
CASH
COMMON STOCK
150,000
CASH
EXCESS PAR
B
RECEIVED CASH FOR 4000 5% PREFERED SHARES @$100 (PAR $ 80)
320,000
CASH
PREFERED STOCK
80,000
CASH
EXCESS PAR
C
ISSUED $500,000 5% BONDS @ 104
500000
CASH
5% BONDS
20000
CASH
PREMIUM ON BONDS
D
DECLARED DIVIDEND -/50 PER SHARE COMMON STOCK 100,000
50000
ORD DIVIDENDS
ORD DIV PAYABLE
DECLARED DIVIDEND 1/00 PER 20,000 PREF SHARE STOCK
20000
PREF DIVIDENDS
PREF DIV PAYABLE
E
PAID DIVIDENDS
50000
ORD DIV PAYABLE
CASH
20000
PREF DIV PAYABLE
CASH
F
PURCHASE OF TREASURY STOCKS, 8000 @$33
160000
COMMON STOCK
CASH
104000
EXCESS PAR
CASH
G
DECLARED DIVIDEND 1/00 PER 20,000 PREF SHARE STOCK
20000
PREF DIVIDENDS
PREF DIV PAYABLE
H
PAID DIVIDENDS
20000
PREF DIV PAYABLE
CASH
I
SOLD 2600 SHARES TREASURY STOCK @$38
52000
CASH
COMMON STOCK
46800
CASH
EXCESS PAR
J
INTEREST ON BONDS ( HALF YEARLY)
12500
INTEREST ON BONDS
CASH
AMORTIZATION OF PREMIUM ( SEMIANNUAL)
1000
PREMIUM ON BONDS
AMORTIZATION OF BONDS
BALANCE SHEET
$
$
NON CURRENT ASSETS
COST LESS DEP
NBV
INTANGIBLE
GOODWILL
500000
TANGIBLE
STORE BLDG & EQUIPMENT
12560 LESS 4126
8434000
OFFICE BUILDING & EQUIPMENT
4320 LESS 1580
2740000
INVESTMENTS (LT)
90000
TOTAL:
11764000
CURRENT ASSETS
INVESTMENTS
1009300
INVENTORY
778000
ACC REC LESS ALLOWANCE
536550
PREPAID
27400
INT REC
1125
CASH
246000
2598375
TOTAL ASSETS
14362375
CURRENT LIABILITIES
ACC PAY
194300
INCOME TAX PAYABLE
44000
DIV PAYABLE
255120
493420
LONG TERM LIABILITIES
5% BONDS PAYABLE
500000
LESS PREMIUM
-19000
481000
EQUITY
COMMON STOCK
2000000
EXCESS PAR COMMON STOCK
886800
PREFEREED STOCK
1600000
EXCESS PAR PREF STOCK
150000
TREASURY STOCK
165200
RETAINED EARNIGS
9393605
14195605
15170025
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