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(Solved): Comprehensive Problem 4 Part 1: Selected transactions completed by Equinox Products Inc. during the ...



Comprehensive Problem 4
Part 1:

Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 20Y2, were as follows:

1. Journalize the selected transactions.

If no entry is required, select "No entry required" from the dropdown. For a compound transaction, if an amount box does not require an entry, leave it blank.

a. Issued 15,000 shares of $20 par common stock at $30, receiving cash.

Description Debit Credit

CashCommon StockNo entry requiredPaid-In Capital in Excess of Par-Common StockRetained EarningsCash

450000

CashCommon StockNo entry requiredRetained EarningsTreasury StockCommon Stock

300000

Accounts PayableCashNo entry requiredPaid-In Capital in Excess of Par-Common StockPreferred StockPaid-In Capital in Excess of Par-Common Stock

150000

b. Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash.

Description Debit Credit

CashNo entry requiredPaid-In Capital in Excess of Par-Preferred StockPreferred StockRetained EarningsCash

400000

Common StockNo entry requiredPreferred StockRetained EarningsTreasury StockPreferred Stock

320000

CashCommon StockNo entry requiredPaid-In Capital in Excess of Par-Preferred StockRetained EarningsPaid-In Capital in Excess of Par-Preferred Stock

80000

c. Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually.

Description Debit Credit

Bonds PayableCashNo entry requiredPremium on Bonds PayableRetained EarningsCash

520000

Bonds PayableCashCommon StockDiscount on Bonds PayableNo entry requiredBonds Payable

500000

CashDiscount on Bonds PayableNo entry requiredPaid-In Capital in Excess of Par-Common StockPremium on Bonds PayablePremium on Bonds Payable

20000

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.

Description Debit Credit

CashCash Dividends PayableCash DividendsNo entry requiredTreasury StockCash Dividends

50000

CashCash Dividends PayableCash DividendsNo entry requiredTreasury StockCash Dividends Payable

50000
Common stock

CashCash Dividends PayableCash DividendsNo entry requiredTreasury StockCash Dividends

20000

CashCash Dividends PayableCash DividendsNo entry requiredTreasury StockCash Dividends Payable

20000
Preferred stock

e. Paid the cash dividends declared in (d).

Description Debit Credit

CashCash Dividends PayableCash DividendsNo entry requiredTreasury StockCash Dividends Payable

70000

CashCash Dividends PayableCash DividendsNo entry requiredTreasury StockCash

70000

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.

Description Debit Credit

CashDiscount on Bonds PayableInvestments in Solstice Corp. StockNo entry requiredTreasury StockInvestments in Solstice Corp. Stock

300150

CashCommon StockInvestments in Solstice Corp. StockNo entry requiredPremium on Bonds PayableCash

300150

g. Purchased 8,000 shares of treasury common stock at $33 per share.

Description Debit Credit

CashCommon StockNo entry requiredPaid-in Capital from Sale of Treasury StockTreasury StockTreasury Stock

264000

CashCommon StockNo entry requiredPaid-in Capital from Sale of Treasury StockTreasury StockCash

264000

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.

Description Debit Credit

CashCommon StockInvestment in Pinkberry Co. StockNo entry requiredStock DividendsInvestment in Pinkberry Co. Stock

960000

CashCash Dividends PayableCommon StockNo entry requiredInvestment in Pinkberry Co. StockStock Dividends DistributableCash

960000

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.

Description Debit Credit

Common StockCash DividendsNo entry requiredStock DividendsStock Dividends DistributableCash Dividends

20000

CashCash Dividends PayableCommon StockNo entry requiredTreasury StockCash Dividends Payable

20000

j. Paid the cash dividends to the preferred stockholders.

Description Debit Credit

CashCash Dividends PayableCommon StockNo entry requiredRetained EarningsStock Dividends DistributableCash Dividends Payable

20000

CashCash DividendsCash Dividends PayableCommon StockNo entry requiredStock DividendsCash

20000

k. Received $27,500 dividend from Pinkberry Co. investment in (h).

Description Debit Credit

CashCash DividendsCommon StockInvestment in Pinkberry Co. StockNo entry requiredCash

27500

CashDividend RevenueInvestment in Pinkberry Co. StockNo entry requiredTreasury StockInvestment in Pinkberry Co. Stock

27500

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 held-to-maturity long-term investment.

Description Debit Credit

Bonds PayableCashCommon StockInvestments in Dream Inc. BondsNo entry requiredInvestments in Dream Inc. Bonds

90000

Bonds PayableCashInterest ReceivableNo entry requiredPreferred StockInterest Receivable

375

Bonds PayableCashInterest ReceivableInvestments in Dream Inc. BondsNo entry requiredCash

90375

m. Sold, at $38 per share, 2,600 shares of treasury common stock purchased in (g).

Description Debit Credit

CashCommon StockNo entry requiredPaid-In Capital from Sale of Treasury StockTreasury StockCash

98800

CashNo entry requiredRetained EarningsTreasury StockPaid-in Capital in Excess of Par-Common StockTreasury Stock

85800

CashCommon StockDividends RevenueNo entry requiredPaid-In Capital from Sale of Treasury StockPaid-In Capital from Sale of Treasury Stock

13000

n. Received a dividend of $0.60 per share from the Solstice Corp. investment in (f).

Description Debit Credit

CashCash DividendsInvestments in Solstice Corp. StockDividend RevenueNo entry requiredCash

4500

CashCash DividendsDividend RevenueInvestments in Solstice Corp. StockNo entry requiredDividend Revenue

4500

o. Sold 1,000 shares of Solstice Corp. at $45, including commission.

Description Debit Credit

CashCash DividendsGain on Sale of InvestmentInvestments in Solstice Corp. StockLoss on Sale of InvestmentNo entry requiredCash

45000

CashCash DividendsGain on Sale of InvestmentNo entry requiredTreasury StockGain on Sale of Investment

4980

CashInvestments in Solstice Corp. StockLoss on Sale of InvestmentNo entry requiredRetained EarningsInvestments in Solstice Corp. Stock

40020

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.

Description Debit Credit

Bonds PayableCashDiscount on Bonds PayableInterest ExpenseNo entry requiredInterest Expense

11500

Bonds PayableCashDiscount on Bonds PayableNo entry requiredPremium on Bonds PayablePremium on Bonds Payable

1000

Bonds PayableCashDiscount on Bonds PayableNo entry requiredPremium on Bonds PayableCash

12500

q. Accrued interest for three months on the Dream Inc. bonds purchased in (l).

Description Debit Credit

CashInterest ReceivableInterest RevenueInvestments-Dream Inc.No entry requiredInterest Receivable

1125

CashInterest ReceivableInterest RevenueInvestments-Dream Inc.No entry requiredInterest Revenue

1125

r. Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income.

Description Debit Credit

CashInvestment in Pinkberry Co. StockIncome from Pinkberry Co.No entry requiredTreasury StockInvestment in Pinkberry Co. Stock

76800

CashCommon StockIncome from Pinkberry Co.Investment in Pinkberry Co. StockNo entry requiredIncome from Pinkberry Co.

76800

s. The fair value for Solstice Corp. stock was $39.02 per share on December 31, 20Y2. 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.

Description Debit Credit

CashInvestments in Solstice Corp. StockNo entry requiredUnrealized Gain (Loss) on Available-for-Sale InvestmentsValuation Allowance for Available-for-Sale InvestmentsUnrealized Gain (Loss) on Available-for-Sale Investments

?

CashInvestments in Solstice Corp. StockNo entry requiredUnrealized Gain (Loss) on Available-for-Sale InvestmentsValuation Allowance for Available-for-Sale InvestmentsValuation Allowance for Available-for-Sale Investments

?



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Journal entriesJournal entries are the entries that have a debit and credit balance. These balances represent an increase or a decrease. These are the
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