Concept explainers
Selected transactions completed by Equinox Products Inc. during the fiscal year ended
December 31, 2016, were as follows:
a. Issued 15,000 shares of $20 par common stock at $30, receiving cash.
b. Issued 4, 000 shares of $80 par preferred 5% stock at $100, receiving cash.
c. Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually.
d. Declared a quarterly dividend of $0.50 per share on common stock and $1.00 per share on
e. Paid the cash dividends declared in (d).
f. 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.
g. Purchased 8,000 shares of
h. 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.
i. 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.
j. Paid the cash dividends to the preferred stockholders.
k. Received $27,500 dividend from Pinkberry Co. investment in (h).
l. Purchased $90,000 of Dream Inc. 10-year, 5% bonds, directly from the issuing company, at their face amount plus accrued interest of $37 5. The bonds are classified as a held-to-maturity long -term investment.
m. Sold, at $38 per share, 2,600 shares of treasury common stock purchased in (g).
n. Received a dividend of $0 .60 per share from the Solstice Corp. investment in (f).
o. Sold 1,000 shares of Solstice Corp. at $45, including commission.
p. Recorded the payment of semiannual interest on the bonds issue d in (c) and the amortization of the premium for six months. The amortization is determined using the straight-line method .
q. Accrued interest for three months on the Dream Inc. bonds purchased in (I).
r. Pinkberry Co. recorded total earnings of $240 ,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income.
s. 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 h ad a beginning balance of zero.
Instructions
1. Journalize the selected transactions.
2. After all of the transaction s for the year ended December 31, 201 6, had been poste d [including the transactions recorded in part (1) and all
a. Prepare a multiple-step in come statement for the year ended December 31, 201 6, 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. ( Round earnings per share to the nearest cent.)
b. Prepare a
c. Prepare a
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Chapter 15 Solutions
Working Papers, Chapters 1-17 for Warren/Reeve/Duchac's Accounting, 26th and Financial Accounting, 14th
- Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2016, were as follows: a. Issued 15,000 shares of 20 par common stock at 30, receiving cash. b. Issued 4,000 shares of 80 par preferred 5% stock at 100, receiving cash. c. Issued 500,000 of 10-year, 5% bonds at 104, with interest payable semiannually. d. 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. e. Paid the cash dividends declared in (d). f. 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. g. Purchased 8,000 shares of treasury common stock at 33 per share. h. 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. i. 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. j. Paid the cash dividends to the preferred stockholders. k. Received 27,500 dividend from Pinkberry Co. investment in (h). l. 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 heldtomaturity long-term investment. m. Sold, at 38 per share, 2,600 shares of treasury common stock purchased in (g). n. Received a dividend of 0.60 per share from the Solstice Corp. investment in (f). o. Sold 1,000 shares of Solstice Corp. at 45, including commission. p. Recorded the payment of semiannual interest on the bonds issued in (c) and the amortization of the premium for six months. The amortization is determined using the straight-line method. q. Accrued interest for three months on the Dream Inc. bonds purchased in (l). r. Pinkberry Co. recorded total earnings of 240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income. s. 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. Instructions 1. Journalize the selected transactions. 2. 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. (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.arrow_forwardAt December 31, 2017, the Shalom Company reported the following extract from the company’s balance sheet. Preferred stock, 6%, $40 par, 1,000,000 shares authorized, none issued $ 0 Common stock, $4 par, 600,000 shares authorized, 100,000 shares issued and outstanding 400,000 Paid-in capital in excess of par—common 120,000 Retained earnings 60,000 During 2018, the company completed the following selected transactions: Issued for cash 25,000 shares of preferred stock at par value. Issued for cash 40,000 shares of common stock at a price of $10 per share. Net income for the year was $240,000, and the company declared no dividends. As her friend, Leslie now seeks your advice. REQUIRED: Prepare the Stockholders Equity Section of the company’s balance sheet at December 31, 2018 based on the information presented.arrow_forwardTowson Corp., was organized on January 2, 2018. During the first year of operation, Towson issued 60,000 shares of $2 par value common stock at a price of $50 cash per share. On December 31, 2018, Towson reported Net Income of $250,000 and paid $50,000 cash dividends. Use this information to determine the dollar amounts that Towson will report on its year end Balance Sheet for Paid in Capital Common Stock in Excess to par.arrow_forward
- Accounting Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2018: Common shares outstanding throughout the year Convertible preferred shares (convertible into 40 million shares of common) Convertible 10% bonds (convertible into 14.5 million shares of common) Henderson-Niles's net income for the year ended December 31, 2018, is $620 million. The income tax rate is 40%. Henderson- Niles paid dividends of $2 per share on its preferred stock during 2018. Required: Compute basic and diluted earnings per share for the year ended December 31, 2018. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) $ 100 million 70 million 1,100 million.arrow_forwardMadison Company earned net income of $75,000 during the year ended December 31, 2018. On December 20, Madison declared the annual cash dividend on its 8% preferred stock (par value, $150,000) and a $0.50 per share cash dividend on its common stock (45,000 shares). Madison then paid the dividends on January 10, 2019. Prepare the journal entries to record the declaration and the distribution of the dividends.arrow_forwardThe following activities relate to Merrill Company during the years 2018 and 2019: 2018: Feb. 15 Merrill purchased 10,000 shares of Hendershot Equipment stock for $40 per share. Dec. 1 Merrill received an $0.80-per-share cash dividend from Hendershot Equipment. Dec. 31 Hendershot Equipment common stock had a closing market price of $97 per share. Hendershot’s 2018 net income was $120,000. 2019: July 1 Merrill sold all 10,000 shares of Hendershot Equipment stock for $42 per share. Additional information: Hendershot Equipment had 50,000 shares of common stock outstanding on January 1, 2018. Required: Prepare journal entries to record the transactions assuming: a.) The securities are classified as FVTOCI financial assets-equity. b.)The equity method is used. Show the amounts that would be reported on the financial statements of Merrill Company at December 31, 2018, under each assumption. Can Merrill use the equity method to account for its investment in Hendershot Equipment?arrow_forward
- On January 1, 2017, Browning Corporation had 75,000 shares of $1 par value common stock issued and outstanding. During the year, the following transactions occurred: Mar. 1 Issued 90,000 shares of common stock for $675,000. June 1 Declared a cash dividend of $2.00 per share to stockholders of record on June 15. June 30 Paid the $2.00 cash dividend. Dec. 1 Purchased 5,000 shares of common stock for the treasury for $18 per share. Dec. 15 Declared a cash dividend on outstanding shares of $2.50 per share to stockholders of record on December 31. Net income for 2017 amounted to $951,000.Prepare journal entries to record the above transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Creditarrow_forwardCarlyon Company listed the following items in its December 31, 2018, financial statements: Investment in Man Company bonds $24,000 Dividends payable: preferred 4,000 Dividends payable: common 50,000 Preferred stock, 8%, $100 par 100,000 Common stock, $10 par 500,000 Additional paid-in capital on preferred stock 20,000 Additional paid-in capital on common stock 262,500 Retained earnings 270,000 During 2019, the following transactions occurred: Feb. 2 Paid the semiannual dividends declared on December 15, 2018. Mar. 5 Declared a property dividend, payable to common shareholders on April 5 in Man Company bonds being held to maturity. The bonds (which have a book value of $24,000) have a current market value of $30,000. Apr. 5 Paid the property dividend. July 6 Declared a $4 per share semiannual cash dividend on preferred stock and a $1.10 per share semiannual dividend on common stock, to be paid on August 17. Aug. 17 Paid the cash dividends. Oct. 15…arrow_forwardUsing the following information, the journal entry to record the March 5, 2016 transaction will be: January 1, Pacific Corporation reacquires 2,000 2016: shares of its $10 par common stock for $44 per share. March 5, 2016: A) B) Cash Cash Cash Cash Pacific reissues 1,000 of the above mentioned shares for $50 per share. Treasury Stock Investment income on treasury stock Treasury Stock Paid in capital, treasury stock Treasury Stock Paid in capital, treasury stock Treasury Stock Gain on sale of treasury stock 50,000 50,000 50,000 50,000 44,000 6,000 10,000 40,000 44,000 6,000 44,000 6,000arrow_forward
- Carlyon Company listed the following items in its December 31, 2018, financial statements: Investment in Man Company bonds $21,000 Dividends payable: preferred 4,000 Dividends payable: common 50,000 Preferred stock, 8%, $100 par 100,000 Common stock, $10 par 500,000 Additional paid-in capital on preferred stock 20,000 Additional paid-in capital on common stock 262,500 Retained earnings 270,000 During 2019, the following transactions occurred: Feb. 2 Paid the semiannual dividends declared on December 15, 2018. Mar. 5 Declared a property dividend, payable to common shareholders on April 5 in Man Company bonds being held to maturity. The bonds (which have a book value of $21,000) have a current market value of $32,000. Apr. 5 Paid the property dividend. July 6 Declared a $4 per share semiannual cash dividend on preferred stock and a $1.10 per share semiannual dividend on common stock, to be paid on August 17. Aug. 17 Paid the cash dividends. Oct. 15…arrow_forwardMocha Company earned net income of $110,000 during the year ended December 31, 2018. On December 15, Mocha declared the annual cash dividend on its 3% preferred stock (par value, $125,000) and a $1.00 per share cash dividend on its common stock (62,000 shares). Mocha then paid the dividends on January 4, 2019. Read the requirements. Requirement 1. Journalize for Mocha the entry declaring the cash dividends on December 15, 2018. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Date Accounts and Explanation 2018 Dec. 15 Debit 2019 Jan. 4. Requirement 2. Journalize for Mocha the entry paying the cash dividends on January 4, 2019. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Date Accounts and Explanation Credit Debit Creditarrow_forwardAt December 31, 2016, the financial statements of Hollingsworth Industries included the following: Net income for 2016 $560 million Bonds payable, 10%, convertible into 36 million shares of common stock $300 million Common stock: Shares outstanding on January 1 400 million Treasury shares purchased for cash on September 1 30 million Additional data: The bonds payable were issued at par in 2014. The tax rate for 2016 was 40%. Required: Compute basic and diluted EPS for the year ended December 31, 2016.arrow_forward
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