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

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

Description Debit Credit

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

s. 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.

Description Debit Credit

debit credit

cash 520000

bonds payable 500000

premium on bonds payable 20000

De on Cmm a PCo P Cap Cast P PCa 2000 PP Prmmn Bns P as Cas Dde Payble so comm Ca Case Ds Pet P 2900 a Cas P Cas The tf w ham N y C ry Ce o e o dt acoun ur an whthe invet igcnt the i nder th the op of the pe nd ofthe p n Any pote or los recogaed y the e aunt r e ny whle te The y hsn hn the uce the he the m he n om tin C Pr cae P a Py ce ane w Cast C t P T y e P C y se- Cah w Cash Cp P c 0h z Description Debit (S) Credit (S) (a) Cash 450000 300000 Common Stock Paid-in Capital in Excess of Par-Common Stock 150000 400000 (b) Cash Preferred Stock 320000 Paid-in Capital in Excess of Par-Preferred Stock 80000 (c) Cash 520000 Bonds Payable 500000 Premium on Bonds Payable 20000 (d) Cash Dividends 50000 Cash Dividends Payable 50000 Common stock Cash Dividends 20000 Cash Dividends Payable 20000 Preferred stock (e) Cash Dividends Payable 70000 Cash 70000 (f) Investments in Solstice Corp. Stock 300150 Cash 300150 The cost of an investment includes acquisition charges such as brokerage, fees and duties Note: Treasury Stock (g) 264000 264000 Cash (h) Investment in Pinkberry Co. Stock 960000 960000 Cash Note: The equity method of accounting is used to account for an organization's investment in another entity (the investee). This method is only used when the investor has significant influence over the investee. Under this method, the investor recognizes its share of the profits and losses of the investee in the periods when these profits and losses are also reflected in the accounts of the investee. Any profit or loss recognized by the investing entity appears in its income statement. Also, any recognized profit increases the investment recorded by the investing entity, while a recognized loss decreases the investment (c) Cash 520000 Bonds Payable Premium on Bonds Payable 500000 20000 (d) Cash Dividends 50000 Cash Dividends Payable 50000 Common stock Cash Dividends 20000 Cash Dividends Payable 20000 Preferred stock debit credit cash 520000 bonds payable 500000 premium on bonds payable 20000 De on Cmm a PCo P Cap Cast P PCa 2000 PP Prmmn Bns P as Cas Dde Payble so comm Ca Case Ds Pet P 2900 a Cas P Cas The tf w ham N y C ry Ce o e o dt acoun ur an whthe invet igcnt the i nder th the op of the pe nd ofthe p n Any pote or los recogaed y the e aunt r e ny whle te The y hsn hn the uce the he the m he n om tin C Pr cae P a Py ce ane w Cast C t P T y e P C y se- Cah w Cash Cp P c 0h z Description Debit (S) Credit (S) (a) Cash 450000 300000 Common Stock Paid-in Capital in Excess of Par-Common Stock 150000 400000 (b) Cash Preferred Stock 320000 Paid-in Capital in Excess of Par-Preferred Stock 80000 (c) Cash 520000 Bonds Payable 500000 Premium on Bonds Payable 20000 (d) Cash Dividends 50000 Cash Dividends Payable 50000 Common stock Cash Dividends 20000 Cash Dividends Payable 20000 Preferred stock (e) Cash Dividends Payable 70000 Cash 70000 (f) Investments in Solstice Corp. Stock 300150 Cash 300150 The cost of an investment includes acquisition charges such as brokerage, fees and duties Note: Treasury Stock (g) 264000 264000 Cash (h) Investment in Pinkberry Co. Stock 960000 960000 Cash Note: The equity method of accounting is used to account for an organization's investment in another entity (the investee). This method is only used when the investor has significant influence over the investee. Under this method, the investor recognizes its share of the profits and losses of the investee in the periods when these profits and losses are also reflected in the accounts of the investee. Any profit or loss recognized by the investing entity appears in its income statement. Also, any recognized profit increases the investment recorded by the investing entity, while a recognized loss decreases the investment (c) Cash 520000 Bonds Payable Premium on Bonds Payable 500000 20000 (d) Cash Dividends 50000 Cash Dividends Payable 50000 Common stock Cash Dividends 20000 Cash Dividends Payable 20000 Preferred stock debit credit cash 520000 bonds payable 500000 premium on bonds payable 20000