Chapter 15 Investments and Fair Value Accounting 761 Instructions Determine the missing letters in the unclassified balance sheet. Provide appropriate supporting calculations Comprehensive Problem 4 Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, Year 1, were as follows: a. Issued 15,000 shares of $20 par common stock at $30, receiving cash. Issued 4,000 shares of $80 par preferred 5 stock at $100, receiving cash Issued $500,000 of 10-year, 9% bonds at 101, 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). Purchased 7.500 shares of Solstice Corp. at $40 per share plus a $150 brokerage com mission. The investment is classified as an available for sale investment. & 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. 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. 1. Paid the cash dividends to the preferred stockholders. k. Received $27,500 dividend from Pinkberry Co. investment in Ch). 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. 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 (. 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. 4. Accrued interest for three months on the Dream Inc. bonds purchased in . 1. Pinkberry Co, recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income. 5. The fair value for Solstice Corp. stock was $39.02 per share on December 31, Year 1. 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. Instructions 1. Journalize the selected transactions. 2. After all of the transactions for the year ended December 31, Year 1, 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. 2. Prepare a multiple step income statement for the year ended December 31, Year 1 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, Year 1. c. Prepare a balance sheet in report form as of December 31, Year 1. (Continued Chapter 15 Investments and Fair Value Accounting $ 150.000 700.000 30,000 30,000 100.000 4.500 4980 76.800 140.500 21.000 2.720 7.500 14.000 50.000 170,000 10,000 5.254.000 185.000 385.000 21,000 Income statement data Advertising expense Cost of merchandise sold Delivery expense Depreciation expense-office buildings and equipment Depreciation expense-store buildings and equipment Dividend revenue Gain on sale of investment Income from Pinkberry Co. investment Income tax expense Interest expense Interest revenue Miscellaneous administrative expense Miscellaneous selling expense Office rent expense Office salaries expense Office supplies expense Sales Sales commissions Sales salaries expense Store supplies expense Retained earnings and balance sheet data: Accounts payable Accounts receivable Accumulated depreciation-office buildings and equipment Accumulated depreciation-store buildings and equipment Allowance for doubtful accounts Available for sale investments (at cost) Bonds payable, 5%, due 2012 Cash Common stock, 520 par (400,000 shares authorized 100,000 shares issued, 94.600 outstanding) Dividends Cash dividends for common stock Cash dividends for preferred stock Goodwill Income tax payable Interest receivable Investment in Pinkberry Co.stock equity method Investment in Dream Inc. bonds (long term) Merchandise inventory (December 31, Year 1 at lower of cost (FFO) or market Office buildings and equipment Paid in capital from sale of treasury stock Excess of issue price over par--common stock Excess of issue price over par preferred stock Preferred 5 stock, 580 par 30.000 shares authorized 20.000 shares issued] Premium on bonds payable Prepaid expenses Retained earnings, January 1 Year 1 Store buildings and equipment Treasury stock (5.400 shares of common stock at cost of 533 per share] Unrealized gain loss on available for sale investments Valuation allowance for available for sale investments $ 194,300 545,000 1,580,000 4,126.000 8.450 260,130 500.000 246,000 2,000,000 155.120 100.000 500,000 44,000 1,125 1,009,300 90,000 778.000 4.320,000 13.000 886.800 150.000 1.600.000 19.000 27.400 9,319,725 12.560.000 178.200 16,500) 16.500