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(Solved): Comprehensive Problem 4 Part 2: Note: You must complete part 1 before part 2. After all of th ...



Comprehensive Problem 4

Part 2:

Note: You must complete part 1 before part 2.

After all of the transactions for the year ended December 31, 20Y2, 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.

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 investment 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 20Y4 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
Investment in Dream Inc. bonds (long term) 90,000
Merchandise inventory (December 31, 20Y2), 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 stock 886,800
Excess of issue price over par—preferred stock 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, 20Y2 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)

On your own paper, in the working papers, or using a spreadsheet, prepare the following:

a. Prepare a multiple-step income statement for the year ended December 31, 20Y2, 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.) Save your calculations and enter the requested amounts below.

b. Prepare a retained earnings statement for the year ended December 31, 20Y2. Save your calculations and enter the requested amounts below.

c. Prepare a balance sheet in report form as of December 31, 20Y2. Save your calculations and enter the requested amounts below.

If required, only use the minus sign to indicate loss before income tax, net loss, or a deficit balance in retained earnings.

Gross profit 1554000
Total selling expenses 885000
Total administrative expenses 267500
Total operating expenses 1152500
Income from operations 401500
Net other expenses and income ?
Income tax 140500
Net income 329000
Earnings per common share (rounded to the nearest cent) ?
Retained earnings, January 1, 20Y2 9319725
Total current assets 1842705
Investment in Dream Inc. bonds 90000
Total property, plant, and equipment 11174000
Total assets 14616005
Total current liabilities 238300
Net long-term liabilities 519000
Total liabilities ?
Total paid-in capital preferred 5% stock ?
Total paid-in capital common stock, $20 par ?
Total paid-in capital ?
Retained earnings, December 31, 20Y2 ?
Total stockholders' equity 13858705


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Answer 1:Following is the required income statement:ParticularsAmount ($)Amount ($)Sales5,254,000Less: Cost of goods manufactured(3,700,000)Gross prof
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