Question

Comprehensive Problem 4 (Part A)

Instructions

Chart of Accounts

Journal

Instructions

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

Record on journal page 10:

Jan.3Issued 15,000 shares of $20 par common stock at $30, receiving cash.Feb.15Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash.May1Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually.16Declared 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.26Paid the cash dividends declared on May 16.Jun.8Purchased 8,000 shares of treasury common stock at $33 per share.30Declared 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.11Paid the cash dividends to the preferred stockholders.

Record on journal page 11:

Oct.7Sold, at $38 per share, 2,600 shares of treasury common stock purchased on Jun. 8.31Recorded 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.

Required:1.Journalize the selected transactions. Refer to the Chart of Accounts for exact wording of account titles. Note: on May 16 record the declaration of dividends for common shares and the declaration of dividends for preferred shares as two separate entries.

Comprehensive Problem 4

Instructions

Chart of Accounts

Labels and Amount Descriptions

Income Statement

Retained Earnings Statement

Balance Sheet

Instructions

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

Required:1.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. Enter all amounts as positive numbers EXCEPT in the Other revenue and expense section. In that section only, enter amounts that represent other expenses as negative numbers using a minus sign.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. ** Read the instructions above each financial statement carefully. They may contain specific instructions for completing the statement.

Income Statement data:

Advertising expense$ 150,000Cost of goods sold3,700,000Delivery expense30,000Depreciation expense-office buildings and equipment30,000Depreciation expense-store buildings and equipment100,000Income tax expense140,500Interest expense21,000Interest revenue30,000Miscellaneous administrative expense7,500Miscellaneous selling expense14,000Office rent expense50,000Office salaries expense170,000Office supplies expense10,000Sales5,313,000Sales commissions185,000Sales salaries expense385,000Store supplies expense21,000

Retained earnings and balance sheet data:

Accounts payable$ 194,300Accounts receivable545,000Accumulated depreciation—office buildings and equipment1,580,000Accumulated depreciation—store buildings and equipment4,126,000Allowance for doubtful accounts8,450Bonds payable, 5%, due in 10 years500,000Cash282,850Common stock, $20 par (400,000 shares authorized; 100,000 shares issued, 94,600 outstanding)2,000,000Dividends:Cash dividends for common stock155,120 Cash dividends for preferred stock100,000Goodwill700,000Income tax payable44,000Interest receivable1,200Inventory (December 31, 20Y8), at lower of cost (FIFO) or market778,000Office buildings and equipment4,320,000Paid-in capital from sale of treasury stock13,000Excess of issue price over par: -Common886,800 -Preferred150,000Preferred 5% stock, $80 par (30,000 shares authorized; 20,000 shares issued)1,600,000Premium on bonds payable19,000Prepaid expenses27,400Retained earnings, January 1, 20Y88,197,220Store buildings and equipment12,560,000Treasury stock (5,400 shares of common stock at cost of $33 per share)178,200

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)
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)
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)
6-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)
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)
**	Semiannual Interest
	($500000*5%*1/2)	125000
	Less: Amortization Premium($20000/10)*1/2	1000
	Interest Expense	11500
	Equinox Products Inc.
	Income Statement
	Sales		$                                    53,13,000.00
	Cost of goods sold		$                                    37,00,000.00
	Gross Profit		$                                    16,13,000.00
	Operating Expenses
	Selling Expenses
	Sales Salaries Expenses	$     3,85,000.00
	Sales Commission	$     1,85,000.00
	Advertisement Expenses	$     1,50,000.00
	Depreciation Expense=Store Building	$     1,00,000.00
	Delivery Expense	$         30,000.00
	Store Supplies Expense	$         21,000.00
	Miscellaneous Selling Expenses	$         14,000.00	$                                      8,85,000.00
	Administerative Expenses
	Office Salaries Expenses	$     1,70,000.00
	Office Rent Expense	$         50,000.00
	Depreciation Expense-Office Building & Equipment	$         30,000.00
	Office Supplies Expesne	$         10,000.00
	Miscellaneous Administerative   Expenses	$           7,500.00	$                                      2,67,500.00
	Income From Operation		$                                      4,60,500.00
	Interest Revenue	$         30,000.00
	Interest Expense	$       -21,000.00	$                                            9,000.00
	Income Before Income tax		$                                      4,69,500.00
	Income Tax		$                                      1,40,500.00
	Net Income		$                                      3,29,000.00
	Earning Per Share on Common Stock=($329000-$100000)=$229000/100000=		$                                                     2.29