Question

Part 1:

Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 20Y8, 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.

a. Issued 15,000 shares of $20 par common stock at $30, receiving cash.

Description	Debit	Credit

b. Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash.

Description	Debit	Credit

c. Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually.

Description	Debit	Credit

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. Journalize the common stock and the preferred stock entries separately.

Description	Debit	Credit
Common stock
Preferred stock

e. Paid the cash dividends declared in (d).

Description	Debit	Credit

f. Purchased 8,000 shares of treasury common stock at $33 per share.

Description	Debit	Credit

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.

Description	Debit	Credit

h. Paid the cash dividends to the preferred stockholders.

Description	Debit	Credit

i. Sold, at $38 per share, 2,600 shares of treasury common stock purchased in (f).

Description	Debit	Credit

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.

Description	Debit	Credit

Part 2:

Note: You must complete part 1 before part 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 below were taken from the records of Equinox Products Inc.

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		21,000
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
Bonds payable, 5%, due in 10 years		500,000
Cash		282,850
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		700,000
Income tax payable		44,000
Interest receivable		1,200
Inventory (December 31, 20Y8), 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
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, 20Y8		8,197,220
Store buildings and equipment		12,560,000
Treasury stock (5,400 shares of common stock at cost of $33 per share)		178,200

1. Prepare an income statement. Deductions in the Other Revenue and Expense section should be entered as negative amounts.

Equinox Products Inc. Income Statement For the Year Ended December 31, 20Y8
Sales
Expenses:
Selling expenses:
Total selling expenses
Administrative expenses:
Total administrative expenses
Total operating expenses
Income from operations
Other revenue and expense:
Total other revenue and expense
Income before income tax
Income tax
Net income

2. Prepare a retained earnings statement. Decreases in equity should be entered as negative amounts by using a minus sign.

Equinox Products Inc. Retained Earnings Statement For the Year Ended December 31, 20Y8

3. Prepare a balance sheet. Accounts that cause decreases in assets should be entered as negative amounts by using a minus sign.

Equinox Products Inc. Balance Sheet December 31, 20Y8
Assets
Current assets:
Total current assets
Property, plant and equipment:
Total property, plant and equipment
Intangible assets:
Total assets
Liabilities
Current liabilities:
Total current liabilities
Total liabilities
Stockholders’ Equity
Paid-in capital:
Total paid-in capital
Total stockholders’ equity
Total liabilities and Stockholders’ Equity

Answer 1

	Part 1:
	Ref.	Description					Debit	Credit
	a.	Cash				(15000*30)	450000
		Common stock				(15000*20)		300000
		Excess of issue price over par—common stock				(Plug)		150000
		(Common stock issued)
	b.	Cash				(4000*100)	400000
		Preferred stock				(4000*80)		320000
		Excess of issue price over par—preferred stock				(Plug)		80000
		(Preferred stock issued)
	c.	Cash			(500000*104%)		520000
		Premium on bonds payable			(520000-500000)			20000
		Bonds payable						500000
		(Issue of bonds at premium)
	d.	Cash dividends for common stock				(100000*0.50)	50000
		Dividend payable						50000
		(Dividend declared on common stock)
		Cash dividends for preferred stock				(20000*1)	20000
		Dividend payable						20000
		(Dividend declared on preferred stock)
	e.	Dividend payable			(50000+20000)		70000
		Cash						70000
		(Dividend paid)
	f.	Treasury stock				(8000*33)	264000
		Cash						264000
		(Treasury stock purchased)
	g.	Cash dividends for preferred stock				(20000*1)	20000
		Dividend payable						20000
		(Dividend declared on preferred stock)
	h.	Dividend payable					20000
		Cash						20000
		(Dividend paid)
	i.	Cash				(2600*38)	98800
		Treasury stock				(2600*33)		85800
		Paid-in capital from sale of treasury stock				(Plug)		13000
		(Treasury stock sold)
	j.	Interest expense			(12500-1000)		11500
		Premium on bonds payable			(20000/10)*(6/12)		1000
		Cash			(500000*5%*6/12)			12500
		(Interest on bond paid)
	Part 2:
1			Equinox products Inc.
			Income statement
						$	$
	Sales						5313000
	Less: Cost of goods sold						3700000
	Gross profit						1613000
	Expenses:
	Selling expenses:
	Advertising expense					150000
	Delivery expense					30000
	Sales commissions					185000
	Sales salaries expense					385000
	Depreciation expense—store buildings and equipment					100000
	Store supplies expense					21000
	Miscellaneous selling expense					14000
	Total selling expenses						885000

30000 50000 170000 10000 7500 267500 1152500 460500 Administrative expenses: Depreciation expense-office buildings and equipment Office rent expense Office salaries expense Office supplies expense Miscellaneous administrative expense Total administrative expenses Total operating expenses Income from operations Other revenue and expense: Interest expense Interest revenue Total other revenue and expense Income before income tax Income tax Net income Equinox products Inc. Retained earnings statement -21000 30000 9000 469500 140500 329000 Beginning balance Add: Net income 8197220 329000 8526220 255120 8271100 (155120+100000) Less: Cash dividends Ending balance

Balance sheet 282850 545000 8450 536550 778000 1200 27400 1626000 Assets Current assets: Cash Accounts receivable Allowance for doubtful accounts Accounts receivable,net Inventory Interest receivable Prepaid expenses Total current assets Property,plant and equipment: Store building and equipment Accumulated depreciation Store building and equipment, net value Office buildings and equipment Accumulated depreciation Office buildings and equipment, net value Total property, plant and equipment Intangible assets: Goodwill Total assets 12560000 4126000 8434000 4320000 1580000 2740000 11174000 700000 13500000

194300 44000 238300 500000 19000 519000 757300 Liabilities Current liabilities: Accounts payable Income tax payable Total current liabilities Long-term liabilities: Bonds payable Premium on bonds payable Total liabilities Stockholder's equity Paid-in capital: Preferred 5% stock Excess of issue price over par Paid-in capital,preferred stock Common stock Excess of issue price over par Paid-in capital,common stock From sale of treasury stock Total paid-in capital Retained earnings Treasury stock Total stockholder's equity Total liabilities and stockholder's equity 1600000 150000 1750000 2000000 886800 2886800 13000 4649800 8271100 178200 12742700 13500000

Note: Statement of stockholder's equity Paid-in Paid-in Paid-in capital in capital capital in excess of from sale excess of par- par- of Preferred Preferred Common Common treasury Retained Treasury stock stock stock stock stock earnings stock Total Balances, January 1 1280000 70000 1700000 736800 08197220 0 11984020 Issued common stock 300000 150000 450000 Issued preferred stock 320000 80000 400000 Net income 329000 329000 Cash dividends (155120+100000) -255120 -255120 Sale of treasury stock 13000 -85800 98800 Purchase of treasury stock 264000 -264000 Balances, December 31 1600000 150000 2000000 886800 13000 8271100 178200 12742700