Question

Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, Year 1, 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.
	16	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 this transaction as two separate entries.
	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 quarterly cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock had been issued.
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.

Record on journal page 11:

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.
	7	Sold, at $38 per share, 2,600 shares of treasury common stock purchased on Jun. 8.
	14	Received a dividend of $0.60 per share from the Solstice Corp. investment on Jun. 1.
	29	Sold 1,000 shares of Solstice Corp. at $45, including commission.
	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.
	31	Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income.
	31	The fair value for Solstice Corp. stock was $39.02 per share on December 31, Year 1. The investment is adjusted to fair value, using a valuation allowance account. Assume that 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 ACCOUNTSEquinox 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

	REVENUE
410	Sales
611	Dividend Revenue
621	Interest Revenue
631	Income of Pinkberry Co. investment
641	Gain on Sale of Investment

	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 Investment

Journal

1. Journalize the selected transactions. Refer to the Chart of Accounts for exact wording of account titles. Scroll down for journal page 11.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
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PAGE 11

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
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Answer 1

Page 10:

Date	Account title and Explanation	Debit	Credit
Jan 3	Cash [15,000 x $30]	$450,000
	Common stock [15,000 x $20 par]		$300,000
	Paid-in capital in excess of par-Common		$150,000
	[To record issuance of common stock]
Feb 15	Cash [4,000 x $100]	$400,000
	Preferred stock [4,000 x $80 par]		$320,000
	Paid-in capital in excess of par-Preferred		$80,000
	[To record issuance of preferred stock]
May 1	Cash [$500,000 x $1.04]	$520,000
	Bonds payable		$500,000
	Premium on bonds payable		$20,000
	[To record issuance of bonds]
May 16	Retained earnings	$70,000
	Dividends payable-Common [100,000 x $0.50]		$50,000
	Dividends payable-Preferred [20,000 x $1.00]		$20,000
	[To record declaration of cash dividends]
May 26	Dividends payable-Common	$50,000
	Dividends payable-Preferred	$20,000
	Cash		$70,000
	[To record payment of cash dividends]
June 1	Investments-Solstice Corp. Stock	$300,150
	Cash [(7500 x $40) + $150]		$300,150
	[To record purchase of investments]
June 8	Treasury stock [8,000 x $33 cost]	$264,000
	Cash		$264,000
	[To record purcahse of own shares]
June 22	Investment in Pinkberry Co. Stock	$960,000
	Cash		$960,000
	[To record equity investment]
June 30	Retained earnings	$66,000
	Dividends payable-Common [(100,000-8,000 treasury) x $0.50]		$46,000
	Dividends payable-Preferred [20,000 x $1.00]		$20,000
	[To record declaration of cash dividends]
July 11	Dividends payable-Common	$46,000
	Dividends payable-Preferred	$20,000
	Cash		$66,000
	[To record payment of cash dividends]
Aug 27	Cash	$27,000
	Investment in Pinkberry Co. Stock		$27,000
	[To record dividend received from equity investment]

Page 11:

Date	Account title and Explanation	Debit	Credit
Oct 1	Investments-Dream Inc. Bonds	$90,000
	Interest receivable	$375
	Cash		$90,375
	[To record investment in bonds]
Oct 7	Cash [2,600 x 38]	$98,800
	Treasury stock [2,600 x $33 cost]		$85,800
	Paid-in capital from treasury stock]
Oct 14	Cash [7,500 x $0.60]	$4,500
	Dividend revenue		$4,500
	[To record dividend revenue]
Oct 29	Cash [1,000 x $45]	$45,000
	Investments-Solstice Corp. Stock [(1,000/7,500) x $300,150]		$40,020
	Gain on Sale of Investment		$4,980
	[To record sale of investments]
Oct 31	Interest expense	$11,500
	Premium on bonds payable (20,000 /20 periods]	$1,000
	Cash [$500,000 x 5% x (6/12)]		$12,500
	[To record interest payament and premium amortization]
Dec 31	Interest receivable	$1,125
	Interest revenue [$90,000 x 5% x (3/12)]		$1,125
	[To record accrued interest revenue]
Dec 31	Income of Pinkberry Co. investment [(40,000/125,000) x $240,000]	$76,800
	Investment in Pinkberry Co. Stock		$76,800
	[To record equity income ]
Dec 31	Valuation Allowance for Available-for-Sale Investments [(6500/7500) x $300,150 ] - (6500 x $39.02)]	$6,500
	Investments-Solstice Corp. Stock		$6,500
	[To adjust available for sale investment's cost to fair value]