Question

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. B. Prepare a retained earnings statement for the year ended December 31, 2016.* C. Prepare a balance sheet in report form as of December 31, 2016. * * Read the instructions above each financial statement carefully. They may contain specific instructions for completing the statement.

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)

(Part 1)

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.
	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.
	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 cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock were outstanding.
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, 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.

Answer 1

DATE	DESCRIPTION	DEBIT	CREDIT
Jan 3, 2018	Cash (15000 shares x $30 per share)	$450,000
	Common Stock (15000 shares x $20 per share)		$300,000
	Paid-In Capital in Excess of Par—Common stock		$150,000
Feb 15, 2018	Cash (4000 shares × $100 per share)	$400,000
	Preferred Stock (4000 shares x $80 per share)		$320,000
	Paid-In Capital in Excess of Par—Preferred stock (4000 x ($100-80))		$80,000
May 1, 2018	Cash ($500,000 x 1.04)	$520,000
	Bonds Payable		$500,000
	Premium on Bonds Payable		$20,000
May 16, 2018	Cash Dividends (Common)	$50,000
	Cash Dividends Payable		$50,000
	(100,000 shares × $0.50 per share)
May 16, 2018	Cash Dividends (Preferred)	20000
	Cash Dividends Payable (20,000 shares × $1 per share)		$20,000
May 26, 2018	Cash Dividends Payable	$50,000
	Cash		$50,000
Jun 1, 2016	Available-for-Sale Investments—solostice Corp	$300,150
	Cash (7500 shares × $40 per share) + $150		$300,150
Jun 8, 2016	Treasury Stock	$264,000
	Cash(8000 shares × $33 per share)		$264,000
Jun 22, 2016	Investment in pinkberry Co. Stock.	960000
	Cash (40,000 shares × $24 per share)		$960,000
Jun 30, 2016	Cash Dividends (20,000 shares x $1 per share)	$20,000
	Cash Dividends Payable		$20,000
Jul 11, 2016	Cash Dividends Payable	$20,000
	Cash		$20,000
Aug 27, 2016	Cash	$27,500
	Investment in pinkberry Co. Stock.		$27,500
Oct 1, 2016	Investments—Dream Inc. Bonds	$90,000
	Interest Receivable	$375
	Cash		$90,375
Oct 7, 2016	Cash (2,600 shares × $38 per share)	$98,800
	Treasury Stock (2,600 shares × $33 per share)		$85,800
	Paid-In Capital from Sale of Treasury Stock		$13,000
Oct 14, 2016	Cash (4500 shares × $.60 per share)	$4,500
	Dividend Revenue		$4,500
Oct 29, 2016	Cash (1000 shares x $45)	$45,000
	Gain on Sale of Investment		$4,980
	Available-for-Sale Investments—Slostice Corp (1,000 shares × ($300,150/7500 shares)		$40,020
Oct 31, 2016	Interest Expense	$11,500
	Premium on Bonds Payable (amortization premium [($20,000/10 years)× ½]	1000
	Cash (Semiannual interest payment ($500,000 × 5% × ½)		$12,500
Dec 31, 2016	Interest Receivable	$1,125
	Interest Revenue		$1,125
	Interest accrued for three months = $90,000 x 5% x 3/12
Dec 31, 2016	Investment in pinkberry Co. Stock.	$76,800
	Income From pinkberry co.(40,000/125,000 x $240,000)		$76,800
Dec 31, 2016	Unrealized Gain (Loss) on Available-for-Sale Investments	6370
	Valuation Allowance for Available-for-Sale investments (6500 shares × ($40 – $39.02)		$6,370