Question

PLEASE TYPE RESPONSE OR WRITE VERY NEATLY TO UNDERSTAND.

Note: You must complete Comprehensive Problem 4 (Part A) before completing Comprehensive Problem 4 (Part B).

Required:

2.

After all of the transactions for the year ended December 31, Year 1, had been posted [including the transactions recorded in part (1) and all adjusting entries], the data that follows were taken from the records of Equinox Products Inc. A. Prepare a multiple-step income statement for the year ended December 31, Year 1, 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. Enter all amounts as positive numbers EXCEPT in the Other income and expenses. In that section only, enter amounts that represent other expenses as negative numbers using a minus sign. (Round earnings per share to the nearest cent.) B. Prepare a retained earnings statement for the year ended December 31, Year 1.* C. Prepare a balance sheet in report form as of December 31, Year 1.* *Read the instructions above each financial statement carefully. They may contain specific instructions for completing the statement.

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 of 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 20Y2	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
Investments-Dream Inc. bonds (long term)	90,000
Merchandise inventory (December 31, Year 1),
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
-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, Year 1	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)

Chart of Accounts

CHART OF ACCOUNTS
Equinox Products Inc.
General Ledger
ASSETS 110 Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 131 Merchandise Inventory 132 Interest Receivable 133 Prepaid Expenses 141 Investments-Solstice Corp. Stock 142 Investment in Pinkberry Co. Stock 143 Investments-Dream Inc. Bonds 144 Valuation Allowance for Available-for-Sale Investments 181 Store Buildings and Equipment 182 Accumulated Depreciation-Store Buildings and Equipment 183 Office Buildings and Equipment 184 Accumulated Depreciation-Office Buildings and Equipment 191 Goodwill LIABILITIES 211 Accounts Payable 221 Income Tax Payable 225 Cash Dividends Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 311 Preferred Stock 312 Paid-in Capital in Excess of Par-Preferred Stock 321 Common Stock 322 Paid-in Capital in Excess of Par-Common Stock 331 Retained Earnings 341 Cash Dividends 351 Treasury Stock 352 Paid-in Capital from Sale of Treasury Stock 361 Unrealized Gain (Loss) on Available-for-Sale Investments	REVENUE 410 Sales 611 Dividend Revenue 621 Interest Revenue 631 Income of Pinkberry Co. Investment 641 Gain on Sale of Investments EXPENSES 511 Cost of Merchandise Sold 512 Bad Debt Expense 520 Sales Salaries Expense 521 Sales Commissions 522 Office Salaries Expense 531 Advertising Expense 532 Delivery Expense 537 Store Supplies Expense 538 Office Supplies Expense 539 Office Rent Expense 541 Income Tax Expense 551 Depreciation Expense-Store Buildings and Equipment 552 Depreciation Expense-Office Buildings and Equipment 591 Miscellaneous Selling Expense 592 Miscellaneous Administrative Expense 710 Interest Expense 731 Loss on Sale of Investments

2.	B. Prepare a retained earnings statement for the year ended December 31, Year 1. • Refer to the Chart of Accounts for exact wording of account titles. • Refer to the Labels and Amount Descriptions for exact wording of text entries. • You will need to enter the word “Less” or “Add” as necessary.

Equinox Products Inc.

Retained Earnings Statement

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Answer 1

Equinox Products Inc Multiple Step Income statement For the year ended December 31 Amount ($) Amount ($) Amount ($) Revenue Sales Less: Cost of merchandise sold Gross Profit (A) 52,54,000 37,00,000 $ 15,54,000 1,50,000 14,000 1,85,000 3,85,000 21,000 1,00,000 Less: Operating expenses Selling expenses - Advertising expense - Miscellaneous selling expense - Sales Commissions - Sales Salaries expense - Sales Supplies expense - Depreciation expenses (Store buildings and Equipment) Interest expenses General and administrative expenses - Delivery expense - Depreciation expenses (Offce buildings and Equipment) - Miscellaneous administrative expense - Office Rent expense - Office Salaries expense - Office Supplies expense 8,55,000 21,000 30,000 30,000 7,500 50,000 1,70,000 10,000 2,97,500 Total Operating expenses (B) 11,73,500 Net operating Income(A-B) $ 3,80,500 Non operating or other items Dividend Revenue Gain on Sale of Investments Interest Revenue Net Income before tax Less: Income tax expenses Net Income after tax 4,500 4,980 2,720 $ $ 12,200 3,92,700 1,40,500 2,52,200 $

Equinox Products Statement of Retained earnings As on December 31 Opening balance Add: Net income Add: Income of Pinkberry Co. investment Less: Cash Dividend - Common Stock - Preferred Stock Closing balance on 31.12.2016 $ 93,19,725 2,52,200 76,800 1,55,120 1,00,000 2,55,120 $ 93,93,605

Equinox Products Balance Sheet As on December 31 Amount ($) Amount ($) Amount ($) 2,46,000 5,45,000 8,450 Assets Current Assets Cash Accounts receivable Less: allowance for doubtful accounts Merchandise Inventory Interest Receivable Available for Sale Investments (at cost) Less: Valuation allowance for available-for-sale investments Prepaid Expense Total current Assets 5,36,550 7,78,000 1,125 2,60,130 6,500 2,53,630 27,400 18,42,705 Investmemts Investment in Pinkberry Co. stock (equity method) Investments-Dream Inc. bonds (long term) Total Investments 10,09,300 90,000 10,99,300 Property, plant and equipment Office Buildings and Equipment, cost Less: Accumlated Depreciation Office Buildings and Equipment, net 43,20,000 15,80,000 27,40,000 Store Buildings and Equipment, cost Less: Accumlated Depreciation Store Buildings and Equipment, net 1,25,60,000 41,26,000 84,34,000 Intangible Assets Goodwill 5,00,000 Total Assets $1,46,16,005

Liabilities and Stakeholder's equity Current Liabilities Account payable Premium on Bond Payable Income Tax payable Total current liabilities 1,94,300 19,000 44,000 2,57,300 Non current liabilities Bonds payable Total liabilities 5,00,000 7,57,300 20,00,000 Stakeholder's equity Common Stock, $ 20 par (400,000 shares authorized; 100,000 shares issued, 94,600 outstanding) Additional paid in capital Common Stock 8,86,800 28,86,800 16,00,000 1,50,000 Preferred 5% stock, $80 par (30,000 shares authorized; 20,000 shares issued) Additional paid in capital Preferred Stock Total paid in Capital Retained earnings Additional paid in capital-TS Less: Treasury Stock (5,400 shares of common stock at cost of $33 per share) Unrealized gain (loss) on available-for-sale investments Total Stakeholder's equity Total Liabilities and Stakeholder's equity 17,50,000 46,36,800 93,93,605 13,000 (1,78,200) (6,500) 1,38,58,705 $1,46,16,005