Question

Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2016, were as follows:

Record on journal page 10:

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.

May 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.

May 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.

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

June 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.

June 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.

July 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.

Then Record on journal page 11 the following:

Oct. 1: Purchased $90,000 of Dream Inc. 10-year, 5% bonds, directly from the issuing company, at their face amount plus accrued interest of $375. The bonds are classified as a held-to-maturity long-term investment.

Oct 7: Sold, at $38 per share, 2,600 shares of treasury common stock purchased on Jun. 8.

Oct 14: Received a dividend of $0.60 per share from the Solstice Corp. investment on Jun. 1.

Oct 29: Sold 1,000 shares of Solstice Corp. at $45, including commission.

Oct 31: Recorded the payment of semiannual interest on the bonds issued on May 1 and the amortization of the premium for six months. The amortization is determined using the straight-line method.

Dec. 31: Accrued interest for three months on the Dream Inc. bonds purchased on Oct. 1.

Dec 31: Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income.

Dec 31: The fair value for Solstice Corp. stock was $39.02 per share on December 31, 2016. The investment is adjusted to fair value, using a valuation allowance account. Assume Valuation Allowance for Available-for-Sale Investments had a beginning balance of zero.

Required: 1. Journalize the selected transactions. Refer to the Chart of Accounts for exact wording of account titles.

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., 142 Investment in Pinkberry Co. ,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. ,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 Equipment ,552 Depreciation Expense-Office Equipment, 591 Miscellaneous Selling Expense ,592 Miscellaneous Administrative Expense ,710 Interest Expense, 731 Loss on Sale of Investments

Answer 1

	Equinox Company
Date	Particular	Amount (Dr)	Amount (Cr)
3-Jan	Cash=(15000*$30)	$     4,50,000.00
	To Common Stock(15000*$20)		$                                      3,00,000.00
	To Paid in capital excess of Par -Common Stock=(15000*$10)		$                                      1,50,000.00
	(Being amount of 15000 shares of $20 par value issued at $30)
15-Feb	Cash=(4000*$100)	$     4,00,000.00
	To Preferred Stock=(4000*$80)		$                                      3,20,000.00
	To Paid in Capital Excess of Par=(4000*$20)		$                                          80,000.00
	(Being amount of 4000 Preferred stock $80 par issued for $100)
1-May	Cash=(500000*104/100)	$     5,20,000.00
	To Bonds Payable=($5000*100/100)		$                                      5,00,000.00
	To Premium on Bonds Payable=($5000*4)		$                                          20,000.00
	(Being amountof $500000 10% bonds issued $104)
16-May	Cash Dividend=(100000*.50)	$         50,000.00
	To Cash Dividend Payable		$                                          50,000.00
	(Being amount of Cash Dividend Payable o 100000 shares @$.50 per share)
16-May	Cash Dividend=(20000*$1)	$         20,000.00
	To Cash Dividend Payable		$                                          20,000.00
	(Being amt of Dividend Paid 20000 Preferred shares @$1 per share
26-May	Cash Dividend Payable=($50000+$20000)	$         70,000.00
	To Cash		$                                          70,000.00
	(Being amount of Cash dividend Paid)
1-Jun	Investments-Solistice Corp.	$     3,00,150.00
	To Cash		$                                      3,00,150.00
	(Being amount of 7500 shares purchased @$40 per share+$150 commission)
8-Jun	Treasury Stock=(8000*$33)	$     2,64,000.00
	To Cash		$                                      2,64,000.00
	(Being amount of Purchased of Treasury Stock 8000 shares @$33 per share)
22-Jun	Investment in Pinkberry-stock	$     9,60,000.00
	To Cash		$                                      9,60,000.00
	(Being amount of Investment in Pinkberry company 40000 shares @24 per share)
30-Jun	Cash Dividend=(20000*$1)	$         20,000.00
	To Cash Dividend Payable
	(Being amount of Cash dividend Payable on preferred stock (20000 shares @$1Per share)		$                                          20,000.00
11-Jul	Cash Dividend Payable	$         20,000.00
	To Cash		$                                          20,000.00
	(Being amount of cash dividend paid)
27-Aug	Cash	$         27,500.00
	To Investment in Pinkberry Company Stock		$                                          27,500.00
	(Being amount of dividend received)
1-Oct	Investment -Dream Inc. Bonds	$         90,000.00
	Investment Receivable	$               375.00
	To Cash		$                                          90,375.00
	(Being amount of purchased 90000,5% Bonds of Dream Inc.)
7-Oct	Cash=(2600*$38)	$         98,800.00
	To Treasury Stock=(2600*$33)		$                                          85,800.00
	To Paid in capital from sale of Treasury Stock(2600*$5)		$                                          13,000.00
	(Being amount of sale of 2600 Tresury Stock $33 per share)
14-Oct	Cash(7500*$.60)	$           4,500.00
	To Dividend Revenue		$                                            4,500.00
	(Being amount of dividend received from the 7500 shares of Solistice Corporation @$.60 per share)
29-Oct	Cash(1000*$45)	$         45,000.00
	To Gain on sale of Investment($45000-$40020)		$                                            4,980.00
	To Investment -Solistice Corp.($300150*1000/7500)		$                                          40,020.00
	(Being amount of sale of 1000 shares of Solistice Corp)
31-Oct	Interest Expense(**)	$         11,500.00
	Preimum on Bonds Payable	$           1,000.00
	To Cash		$                                          12,500.00
	(Beign amount of Interest on Bonds)
31-Dec	Interest Receivable($90000*5%*3/12)	1125
	To Interest Revenue		1125
	(Being amount of Interest accrued for three months)
31-Dec	Investment in Pinkberry Co.-Stock	76800
	To Income from Pinkberry Co.($240000*(40000/125000)		76800
	(Being amount of Income from Pinkberry Co.'s 32% Shares)
31-Dec	Unrealised loss-Avaialble for sale Investment(6500 shares*($39.02-40.02)	6500
	To Valuation allowance-Available for sale Investment		6500
	(Being amount of valuation of 6500 shares at fair value)
	($300150/7500)=40.02
**	Semiannual Interest
	($500000*5%*1/2)	$     1,25,000.00
	Less: Amortization Premium($20000/10)*1/2	$           1,000.00
	Interest Expense	$         11,500.00