Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 20Y5, were as follows: 1. Journalize the selected transactions. If no entry is required, select "No entry required" from the dropdown. 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 Cash fill in the blank 2 fill in the blank 3 Common Stock fill in the blank 5 fill in the blank 6 Paid-In Capital in Excess of Par-Common Stock fill in the blank 8 fill in the blank 9 b. Issued 4,000 shares of $80 par preferred $1 stock at $100, receiving cash. Description Debit Credit Cash fill in the blank 11 fill in the blank 12 Preferred Stock fill in the blank 14 fill in the blank 15 Paid-In Capital in Excess of Par-Preferred Stock fill in the blank 17 fill in the blank 18 c. Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually. Description Debit Credit Cash fill in the blank 20 fill in the blank 21 Bonds Payable fill in the blank 23 fill in the blank 24 Premium on Bonds Payable fill in the blank 26 fill in the blank 27 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 Cash Dividends fill in the blank 29 fill in the blank 30 Cash Dividends Payable fill in the blank 32 fill in the blank 33 Common stock Cash Dividends fill in the blank 35 fill in the blank 36 Cash Dividends Payable fill in the blank 38 fill in the blank 39 Preferred stock e. Paid the cash dividends declared in (d). Description Debit Credit Cash Dividends Payable fill in the blank 41 fill in the blank 42 Cash fill in the blank 44 fill in the blank 45 f. Purchased 4% bonds issued by Solstice Corp. as an available-for-sale investment for $300,150. Description Debit Credit Available-for-Sale Investments-Solstice Corp. Bonds fill in the blank 47 fill in the blank 48 Cash fill in the blank 50 fill in the blank 51 g. Purchased 8,000 shares of treasury common stock at $33 per share. Description Debit Credit Treasury Stock fill in the blank 53 fill in the blank 54 Cash fill in the blank 56 fill in the blank 57 h. Purchased 40,000 shares of Pinkberry Co.’s common stock directly from the founders for $24 per share. Pinkberry has 125,000 shares issued and outstanding. Description Debit Credit Investment in Pinkberry Co. Stock fill in the blank 59 fill in the blank 60 Cash fill in the blank 62 fill in the blank 63 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 Cash Dividends fill in the blank 65 fill in the blank 66 Cash Dividends Payable fill in the blank 68 fill in the blank 69 j. Paid the cash dividends to the preferred stockholders. Description Debit Credit Cash Dividends Payable fill in the blank 71 fill in the blank 72 Cash fill in the blank 74 fill in the blank 75 k. Received $27,500 dividend from Pinkberry Co. investment in (h). Description Debit Credit Cash fill in the blank 77 fill in the blank 78 Investment in Pinkberry Co. Stock fill in the blank 80 fill in the blank 81 r. Pinkberry Co. reported total earnings of $240,000. Equinox Products recorded its share of Pinkberry Co. net income using the equity method. Description Debit Credit Investment in Pinkberry Co. Stock fill in the blank 131 fill in the blank 132 Income from Pinkberry Co. fill in the blank 134 fill in the blank 135 s. The Solstice Corp. bonds have a fair value of $253,630 on December 31, 20Y5. Valuation Allowance for Available-for-Sale Investments had a balance of zero on January 1, 20Y5. Debit Credit Unrealized Gain (Loss) on Available-for-Sale Investments fill in the blank 137 fill in the blank 138 Valuation Allowance for Available-for-Sale Investments fill in the blank 140 fill in the blank 141
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Comprehensive Problem 4
Part 1:
Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 20Y5, were as follows:
1. Journalize the selected transactions.
If no entry is required, select "No entry required" from the dropdown. 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 |
|---|---|---|
| Cash | fill in the blank 2 | fill in the blank 3 |
| Common Stock | fill in the blank 5 | fill in the blank 6 |
| Paid-In Capital in Excess of Par-Common Stock | fill in the blank 8 | fill in the blank 9 |
b. Issued 4,000 shares of $80 par preferred $1 stock at $100, receiving cash.
| Description | Debit | Credit |
|---|---|---|
| Cash | fill in the blank 11 | fill in the blank 12 |
| fill in the blank 14 | fill in the blank 15 | |
| Paid-In Capital in Excess of Par-Preferred Stock | fill in the blank 17 | fill in the blank 18 |
c. Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually.
| Description | Debit | Credit |
|---|---|---|
| Cash | fill in the blank 20 | fill in the blank 21 |
| Bonds Payable | fill in the blank 23 | fill in the blank 24 |
| Premium on Bonds Payable | fill in the blank 26 | fill in the blank 27 |
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 |
|---|---|---|
| Cash Dividends | fill in the blank 29 | fill in the blank 30 |
| Cash Dividends Payable | fill in the blank 32 | fill in the blank 33 |
| Common stock | ||
| Cash Dividends | fill in the blank 35 | fill in the blank 36 |
| Cash Dividends Payable | fill in the blank 38 | fill in the blank 39 |
| Preferred stock |
e. Paid the cash dividends declared in (d).
| Description | Debit | Credit |
|---|---|---|
| Cash Dividends Payable | fill in the blank 41 | fill in the blank 42 |
| Cash | fill in the blank 44 | fill in the blank 45 |
f. Purchased 4% bonds issued by Solstice Corp. as an available-for-sale investment for $300,150.
| Description | Debit | Credit |
|---|---|---|
| Available-for-Sale Investments-Solstice Corp. Bonds | fill in the blank 47 | fill in the blank 48 |
| Cash | fill in the blank 50 | fill in the blank 51 |
g. Purchased 8,000 shares of treasury common stock at $33 per share.
| Description | Debit | Credit |
|---|---|---|
| fill in the blank 53 | fill in the blank 54 | |
| Cash | fill in the blank 56 | fill in the blank 57 |
h. Purchased 40,000 shares of Pinkberry Co.’s common stock directly from the founders for $24 per share. Pinkberry has 125,000 shares issued and outstanding.
| Description | Debit | Credit |
|---|---|---|
| Investment in Pinkberry Co. Stock | fill in the blank 59 | fill in the blank 60 |
| Cash | fill in the blank 62 | fill in the blank 63 |
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 |
|---|---|---|
| Cash Dividends | fill in the blank 65 | fill in the blank 66 |
| Cash Dividends Payable | fill in the blank 68 | fill in the blank 69 |
j. Paid the cash dividends to the preferred stockholders.
| Description | Debit | Credit |
|---|---|---|
| Cash Dividends Payable | fill in the blank 71 | fill in the blank 72 |
| Cash | fill in the blank 74 | fill in the blank 75 |
k. Received $27,500 dividend from Pinkberry Co. investment in (h).
| Description | Debit | Credit |
|---|---|---|
| Cash | fill in the blank 77 | fill in the blank 78 |
| Investment in Pinkberry Co. Stock | fill in the blank 80 | fill in the blank 81 |
r. Pinkberry Co. reported total earnings of $240,000. Equinox Products recorded its share of Pinkberry Co. net income using the equity method.
| Description | Debit | Credit |
|---|---|---|
| Investment in Pinkberry Co. Stock | fill in the blank 131 | fill in the blank 132 |
| Income from Pinkberry Co. | fill in the blank 134 | fill in the blank 135 |
s. The Solstice Corp. bonds have a fair value of $253,630 on December 31, 20Y5. Valuation Allowance for Available-for-Sale Investments had a balance of zero on January 1, 20Y5.
| Debit | Credit | |
|---|---|---|
| Unrealized Gain (Loss) on Available-for-Sale Investments | fill in the blank 137 | fill in the blank 138 |
| Valuation Allowance for Available-for-Sale Investments | fill in the blank 140 |
fill in the blank 141 |
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