Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 2016, were as follows: Record on journal page 10: Jan. 3 Issued 15,000 shares of $20 par common stock at $30, receiving cash. Feb. 15 Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash. May 1 Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually. 16 Declared a 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. Journalize this transaction as a single entry. 26 Paid the cash dividends declared on May 16. Jun. 1 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. 8 Purchased 8,000 shares of treasury common stock at $33 per share. 22 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. 30 Declared a $1.00 cash dividend per share on preferred stock. On the date of record, 20,000 shares of preferred stock were outstanding. Jul. 11 Paid the cash dividends declared on Jul. 11 to the preferred stockholders. Aug. 27 Received $27,500 dividend from Pinkberry Co. investment of Jun. 22. Record on journal page 11: Oct. 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. 7 Sold, at $38 per share, 2,600 shares of treasury common stock purchased on Jun. 8. 14 Received a dividend of $0.60 per share from the Solstice Corp. investment on Jun. 1. 29 Sold 1,000 shares of Solstice Corp. at $45, including commission. 31 Recorded the payment of semiannual interest on the bonds issued on May 1 and the amortization of the premium for six months. The amortization is determined using the straight-line method. Dec. 31 Accrued interest for three months on the Dream Inc. bonds purchased on Oct. 1. 31 Pinkberry Co. recorded total earnings of $240,000. Equinox Products recorded equity earnings for its share of Pinkberry Co. net income. 31 The fair value for Solstice Corp. stock was $39.02 per share on December 31, 2016. The investment is adjusted to fair value, using a valuation allowance account. Assume Valuation Allowance for Available-for-Sale Investments had a beginning balance of zero. Required: 1. Journalize the selected transactions. Refer to the Chart of Accounts for exact wording of account titles. 2. After all of the transactions for the year ended December 31, 2016, 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. A. Prepare a multiple-step income statement for the year ended December 31, 2016, 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, 2016.* C. Prepare a balance sheet in report form as of December 31, 2016. * * Read the instructions above each financial statement carefully. They may contain specific instructions for completing the statement. 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 investments 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 depreciationoffice buildings and equipment 1,580,000 Accumulated depreciationstore buildings and equipment 4,126,000 Allowance for doubtful accounts 8,450 Available-for-sale investments (at cost) 260,130 Bonds payable, 5%, due 2024 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, 2016), 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 886,800 -Preferred 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, 2016 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) CHART OF ACCOUNTS Equinox Products Inc. General Ledger ASSETS 110 Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 131 Merchandise Inventory 132 Interest Receivable 133 Prepaid Expenses 141 Investments-Solstice Corp. 142 Investment in Pinkberry Co. Stock 143 Investment in Dream Inc. Bonds 144 Valuation Allowance for Available-for-Sale Investments 181 Store Buildings and Equipment 182 Accumulated Depreciation-Store Buildings and Equipment 183 Office Buildings and Equipment 184 Accumulated Depreciation-Office Buildings and Equipment 191 Goodwill LIABILITIES 211 Accounts Payable 221 Income Tax Payable 225 Cash Dividends Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 311 Preferred Stock 312 Paid-in Capital in Excess of Par-Preferred Stock 321 Common Stock 322 Paid-in Capital in Excess of Par-Common Stock 331 Retained Earnings 341 Cash Dividends 351 Treasury Stock 352 Paid-in Capital from Sale of Treasury Stock 361 Unrealized Gain (Loss) on Available-for-Sale Investments REVENUE 410 Sales 611 Dividend Revenue 621 Interest Revenue 631 Income from Pinkberry Co. 641 Gain on Sale of Investments EXPENSES 511 Cost of Merchandise Sold 512 Bad Debt Expense 520 Sales Salaries Expense 521 Sales Commissions 522 Office Salaries Expense 531 Advertising Expense 532 Delivery Expense 537 Store Supplies Expense 538 Office Supplies Expense 539 Office Rent Expense 541 Income Tax Expense 551 Depreciation Expense-Store Equipment 552 Depreciation Expense-Office Equipment 591 Miscellaneous Selling Expense 592 Miscellaneous Administrative Expense 710 Interest Expense 731 Loss on Sale of Investments Labels Current assets Current liabilities December 31, 2016 For the Year Ended December 31, 2016 Intangible assets Investments Less dividends Long-term liabilities Operating expenses Other income and expenses Paid-in capital Add dividends Property, plant, and equipment Amount Descriptions Available-for-sale investments Decrease in retained earnings Excess of issue price over par Gross profit Income before income tax Income from operations Increase in retained earnings Miscellaneous selling expense Net income Net loss Retained earnings, January 1, 2016 Retained earnings, December 31, 2016 Sales commissions Sales salaries expense Store supplies expense Total administrative expenses Total assets Total (before treasury stock) Total current assets Total current liabilities Total liabilities Total liabilities and stockholders equity Total long-term liabilities Total investments Total operating expenses Total paid-in capital Total property, plant, and equipment Total selling expenses Total stockholders equity Unamortized premium Unamortized discount 1. Journalize the selected transactions. Refer to the Chart of Accounts for exact wording of account titles. Scroll down for journal page 11. PAGE 10 JOURNAL DATE DESCRIPTION POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PAGE 11 JOURNAL DATE DESCRIPTION POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2. A. Prepare a multiple-step income statement for the year ended December 31, 2016, 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.) Refer to the Chart of Accounts for exact wording of account titles. Refer to the Labels and Amount Descriptions for exact wording of text entries. Equinox Products, Inc. Income Statement 1 2 3 4 5 Selling expenses: 6 7 8 9 10 11 12 13 14 Administrative expenses: 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Earnings per common share 2. B. Prepare a retained earnings statement for the year ended December 31, 2016. Refer to the Chart of Accounts for exact wording of account titles. Refer to the Labels and Amount Descriptions for exact wording of text entries. You will need to enter the word Less or Add as necessary. Equinox Products, Inc. Retained Earnings Statement 1 2 3 4 5 6 7 2. C. Prepare a balance sheet in report form as of December 31, 2016. You are not required to present the details of Preferred and Common Stock (i.e., number of shares authorized, issued and outstanding). Refer to the Chart of Accounts for exact wording of account titles. Refer to the Labels and Amount Descriptions for exact wording of text entries. Less , Deduct, Add and colons will appear automatically. Available-for-sale investments should be reported as a single asset on the balance sheet, regardless of how many accounts exist in the ledger for such assets. Recall that current assets are to be reported in order of liquidity. Available-for-sale investments are considered to be more liquid that accounts receivable. Report fixed assets and paid-in capital accounts in account-number order. Omit the description of bonds and stocks (i.e., percentage rates, due date, number of shares, etc.) Enter all amounts as positive numbers, with one exception: If an unrealized loss has occurred, it must be reported as a negative amount on the balance sheet. Equinox Products, Inc. Balance Sheet 1 Assets 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Liabilities 26 27 28 29 30 31 32 33 34 35 Stockholders Equity 36 37 38 39 40 41 42 43 44 45 46 47 48