Question

Required:

1.

After all of the transactions for the year ended December 31, 2016, 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, 2016, 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. 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 investments 4,980 Income from 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 2024 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, 2016), 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 886,800 -Preferred 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, 2016 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)

Answer 1

Income Statement for the Year ended Dec 31, 2016
Sales		5254000
Less:Cost of merchandise sold		-3700000
Gross margin		1554000
Less: Operating Expenses:
Sales commissions	185,000
Sales salaries expense	385,000
Store supplies expense	21,000
Advertising expense	150,000
Delivery expense	30,000
Miscellaneous selling expense	14,000
Depreciation expense-Office Bldgs& equipment	30,000
Depreciation expense-Store Bldgs& equipment	100,000
Miscellaneous administrative expense	7,500
Office rent expense	50,000
Office salaries expense	170,000
Office supplies expense	10,000	-1152500
Operating Income		401500
Add: Non-Operating items
Income from Pinkberry Co.investment	76,800
Dividend Revenue	4,500
Gain on sale of equipment	4,980
Interest revenue	2,720
Interest expense	(21,000)	68,000
Income before Tax		469500
Less:Income tax expense		-140500
Net Income after tax		329000
Less Preferrred dividend		-100000
Income available to Common Stockholders		229000
No.of common stock O/s		100000
Earnings Per Share 229000/100000=		2.29

Retained Earnings as at Dec 31,2016
Retained earnings, Januar 1, 2016	9,319,725
Add: Net Income after tax-2016	329000
Less:Dividends to
Cash dividends for common stock	(155,120)
Cash dividends for preferred stock	(100,000)
Closing Balance	9,393,605

Balance sheet as at Dec 31. 2016
Assets
Current Assets:
Cash	246,000
Accounts Receivables                                                545000
Less: Allownce for doubtful acccounts               ( 8450)	536,550
Merchandse inventory (Dec 31, 2016) at lower of cost (FIFO) or market	778,000
Prepaid expenses	27,400
Interest receivable	1,125
Investment in Pinkberry Co stock (equity method)	1,009,300
Available for sale investments (at cost)	247,130
Total Current assets			2,845,505
Fixed Assets:
Office buildings and equipment	4,320,000
Less: Accumulated Depn. Office Bldgs.& Equipment	(1,580,000)	2,740,000
Store buildings and equipment	12,560,000
Less: Accumulated Depn. Store Bldgs.& Equipment	(4,126,000)	8,434,000
Investment in Dream Inc bonds (long term)		90,000
Goodwill		500,000	11,764,000
Total Fixed Assets
Total Assets			14,609,505
Liabilities
Liabilities & Stockholders' Equity
Liabilites
Current Liabilities:
Accounts Payable	194,300
Income tax payabe	44,000
Total current liabilties		238,300
Long-term Liabilities:
Bonds payable, 5% due 2024	500,000
Premium of bonds payable	19,000
Total Long-term Liabilities		519,000
Total Liabilites			757,300
Stockholders' Equity
Commonstock $20 par (400000 shares authorised ;100,000 shares issued 94,600 outstanding	2,000,000
Excess of issue price over par - common stock	886,800
Preferred 5% stock, $80 par (30,000 shares authoriseed; 20,000 shares issued)	1,600,000
Excess of issue price over par - preferred stock	150,000
Treasury stock (5,400 shares of common stock at cost of $33 per share)	(178,200)
Paid in capital from sale of treasury stock	13,000
Equity		4,471,600
Retained Earnings	9,393,605
Unrealised gan (loss) on available for sale investments	(6,500)
Valuation allowance for available for sale investments	(6,500)
Retained Earnings as at Dec 31,2016		9,380,605
Total Stockholders' Equity			13,852,205
Total Liabilities & Stockholders' Equity			14,609,505