Question
Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2014, were as follows: 1. Journalize the selected transactions. If no
Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2014, were as follows:
1. Journalize the selected transactions.
If no entry is required, select "No entry required" from the dropdown and leave the amount boxes blank. 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 |
|---|---|---|
| SelectCashCommon StockNo entry requiredPaid-In Capital in Excess of Par-Common StockRetained EarningsItem 1 | ||
| SelectCashCommon StockNo entry requiredRetained EarningsTreasury StockItem 4 | ||
| SelectAccounts PayableCashNo entry requiredPaid-In Capital in Excess of Par-Common StockPreferred StockItem 7 |
b. Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash.
| Description | Debit | Credit |
|---|---|---|
| SelectCashNo entry requiredPaid-In Capital in Excess of Par-Preferred StockPreferred StockRetained EarningsItem 10 | ||
| SelectCommon StockNo entry requiredPreferred StockRetained EarningsTreasury StockItem 13 | ||
| SelectCashCommon StockNo entry requiredPaid-In Capital in Excess of Par-Preferred StockRetained EarningsItem 16 |
c. Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually.
| Description | Debit | Credit |
|---|---|---|
| SelectBonds PayableCashNo entry requiredPremium on Bonds PayableRetained EarningsItem 19 | ||
| SelectBonds PayableCashCommon StockDiscount on Bonds PayableNo entry requiredItem 22 | ||
| SelectCashDiscount on Bonds PayableNo entry requiredPaid-In Capital in Excess of Par-Common StockPremium on Bonds PayableItem 25 |
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 |
|---|---|---|
| SelectCashCash Dividends PayableCash DividendsNo entry requiredTreasury StockItem 28 | ||
| SelectCashCash Dividends PayableCash DividendsNo entry requiredTreasury StockItem 30 | ||
| Common stock | ||
| SelectCashCash Dividends PayableCash DividendsNo entry requiredTreasury StockItem 32 | ||
| SelectCashCash Dividends PayableCash DividendsNo entry requiredTreasury StockItem 34 | ||
| Preferred stock |
e. Paid the cash dividends declared in (d).
| Description | Debit | Credit |
|---|---|---|
| SelectCashCash Dividends PayableCash DividendsNo entry requiredTreasury StockItem 36 | ||
| SelectCashCash Dividends PayableCash DividendsNo entry requiredTreasury StockItem 38 |
f. Purchased 7,500 shares of Solstice Corp. at $40 per share, plus a $150 brokerage commission. The investment is classified as a short-term (an available-for-sale) investment. The total payment would include the brokerage commission. This will raise the stock unit price slightly, so price would be higher than $40 per share. You will be using this new price per share to calculate the gain or loss when you sell this stock.
| Description | Debit | Credit |
|---|---|---|
| SelectCashDiscount on Bonds PayableInvestments-Solstice Corp.No entry requiredTreasury StockItem 40 | ||
| SelectCashCommon StockInvestments-Solstice Corp.No entry requiredPremium on Bonds PayableItem 42 |
g. Purchased 8,000 shares of treasury common stock at $33 per share.
| Description | Debit | Credit |
|---|---|---|
| SelectCashCommon StockNo entry requiredPaid-in Capital from Sale of Treasury StockTreasury StockItem 44 | ||
| SelectCashCommon StockNo entry requiredPaid-in Capital from Sale of Treasury StockTreasury StockItem 46 |
h. Purchased 40,000 shares of Pinkberry Co. stock directly from the founders for $24 per share. Pinkberry has 125000 shared issued and outstanding. Equinox Products Inc. treated the investment as a long-term (an equity method) investment on the balance sheet.
| Description | Debit | Credit |
|---|---|---|
| SelectCashCommon StockInvestment in Pinkberry Co. StockNo entry requiredStock DividendsItem 48 | ||
| SelectCashCash Dividends PayableCommon StockNo entry requiredInvestment in Pinkberry Co. StockStock Dividends DistributableItem 50 |
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 |
|---|---|---|
| SelectCommon StockCash DividendsNo entry requiredStock DividendsStock Dividends DistributableItem 52 | ||
| SelectCashCash Dividends PayableCommon StockNo entry requiredTreasury StockItem 54 |
j. Paid the cash dividends to the preferred stockholders.
| Description | Debit | Credit |
|---|---|---|
| SelectCashCash Dividends PayableCommon StockNo entry requiredRetained EarningsStock Dividends DistributableItem 56 | ||
| SelectCashCash DividendsCash Dividends PayableCommon StockNo entry requiredStock DividendsItem 58 |
k. Received $27,500 dividend from Pinkberry Co. investment in (h). Since this stock is a long-term investment the dividend payment will reduce the investment. So, credit Investment in Pinkberry in your journal entry,
| Description | Debit | Credit |
|---|---|---|
| SelectCashCash DividendsCommon StockInvestment in Pinkberry Co. StockNo entry requiredItem 60 | ||
| SelectCashDividend RevenueInvestment in Pinkberry Co. StockNo entry requiredTreasury StockItem 62 |
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 long-term (held-to-maturity long-term) investment on the balance sheet. Be aware of the accrued interest in this purchase. You will be paying the interest at the time of purchase. But it will be treated as your interest receivable. However it will not be your revenue.
| Description | Debit | Credit |
|---|---|---|
| SelectBonds PayableCashCommon StockInvestments-Dream Inc. BondsNo entry requiredItem 64 | ||
| SelectBonds PayableCashInterest ReceivableNo entry requiredPreferred StockItem 67 | ||
| SelectBonds PayableCashInterest ReceivableInvestments-Dream Inc. BondsNo entry requiredItem 70 |
m. Sold, at $38 per share, 2,600 shares of treasury common stock purchased in (g).
| Description | Debit | Credit |
|---|---|---|
| SelectCashCommon StockNo entry requiredPaid-In Capital from Sale of Treasury StockTreasury StockItem 73 | ||
| SelectCashNo entry requiredRetained EarningsTreasury StockPaid-in Capital in Excess of Par-Common StockItem 76 | ||
| SelectCashCommon StockDividends RevenueNo entry requiredPaid-In Capital from Sale of Treasury StockItem 79 |
n. Received a dividend of $0.60 per share from the Solstice Corp. investment in (f). Since this stock is treated as a short-term investment and Equinox does not own more than 20% of the stock, treat the dividend as revenue and not a reduction to the investment.
| Description | Debit | Credit |
|---|---|---|
| SelectCashCash DividendsInvestments-Solstice Corp.Dividend RevenueNo entry requiredItem 82 | ||
| SelectCashCash DividendsDividend RevenueInvestments-Solstice Corp.No entry requiredItem 84 |
o. Sold 1,000 shares of Solstice Corp. at $45, including commission.Remember you calculated the new price per share for this stock at the time of purchase. Your gain or loss will be based on the calculated cost.
| Description | Debit | Credit |
|---|---|---|
| SelectCashCash DividendsGain on Sale of InvestmentInvestments-Solstice Corp.Loss on Sale of InvestmentNo entry requiredItem 86 | ||
| SelectCashCash DividendsGain on Sale of InvestmentNo entry requiredTreasury StockItem 89 | ||
| SelectCashInvestments-Solstice Corp.Loss on Sale of InvestmentNo entry requiredRetained EarningsItem 92 |
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 |
|---|---|---|
| SelectBonds PayableCashDiscount on Bonds PayableInterest ExpenseNo entry requiredItem 95 | ||
| SelectBonds PayableCashDiscount on Bonds PayableNo entry requiredPremium on Bonds PayableItem 98 | ||
| SelectBonds PayableCashDiscount on Bonds PayableNo entry requiredPremium on Bonds PayableItem 101 |
q. Accrued interest for three months on the Dream Inc. bonds purchased in (l). Although the interest has not been received yet, but since it has been accrued it will be treated as revenue.
| Description | Debit | Credit |
|---|---|---|
| SelectCashInterest ReceivableInterest RevenueInvestments-Dream Inc.No entry requiredItem 104 | ||
| SelectCashInterest ReceivableInterest RevenueInvestments-Dream Inc.No entry requiredItem 106 |
r. Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income.The journal entry for this transaction will include an increase to the investment in Pinkberry and a credit to Income from Pinkberry. This income is identified on the Income Statement Date.
| Description | Debit | Credit |
|---|---|---|
| SelectCashInvestment in Pinkberry Co. StockIncome from Pinkberry Co.No entry requiredTreasury StockItem 108 | ||
| SelectCashCommon StockIncome from Pinkberry Co.Investment in Pinkberry Co. StockNo entry requiredItem 110 |
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Internal Auditing Assurance & Advisory Services
Authors: Urton L. Anderson, Michael J. Head, Sridhar Ramamoorti, Cris Riddle, Mark Salamasick, Paul J. Sobel
4th Edition
0894139878, 978-0894139871
