Selected transactions completed by Jordan Products Inc. during the fiscal year ending December 31, 2010, were as follows:

a. Issued 14,500 shares of $30 par common stock at $48, receiving cash.

b. Issued 8,000 shares of $120 par preferred 6% stock at $130, receiving cash.

c. Issued $8,000,000 of 10-year, 7% bonds at 110, with interest payable semiannually.

d. Declared a dividend of $0.65 per share on common stock and $1.80 per share on preferred stock. On the date of record, 120,000 shares of common stock were outstanding, no treasury shares were held, and 22,500 shares of preferred stock were outstanding.

e. Paid the cash dividends declared in (d).

f. Purchased 12,000 shares of Avocado Corp. at $31 per share, plus a $2,400 brokerage commission. The investment is classified as an available-for-sale investment.

g. Purchased 9,500 shares of treasury common stock at $52 per share.

h. Purchased 340,000 shares of Amigo Co. stock directly from the founders for $21 per share. Amigo has 1,000,000 shares issued and outstanding. Jordan Products Inc. treated the investment as an equity method investment.

i. Declared a 2% stock dividend on common stock and a $1.80 cash dividend per share on preferred stock. On the date of declaration, the market value of the common stock was $55 per share. On the date of record, 120,000 shares of common stock had been issued, 9,500 shares of treasury common stock were held, and 22,500 shares of preferred stock had been issued.

j. Issued the stock certificates for the stock dividends declared in (h) and paid the cash dividends to the preferred stockholders.

k. Received $272,000 dividend from Amigo Co. investment in (h).

l. Purchased $86,000 of Game Gear Inc. 10-year, 6% bonds, directly from the issuing company at par value, plus accrued interest of $950. The bonds are classifed as a held-to-maturity long-term investment.

m. Sold, at $59.50 per share, 3,800 shares of treasury common stock purchased in (g).

n. Received a dividend of $1.45 per share from the Avacodo Corp. investment in (f).

o. Sold 2,000 shares of Avocado Corp. at $32.80, 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 was determined using the straight-line method.

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

r. Amigo Co. recorded total earnings of $478,000. Jordan Products recorded equity earnings for its share of Amigo Co. net income.

s. The fair value for Avocado Corp. stock was $28.50 per share on December 31, 2010. The investment is adjusted to fair value using a valuation allowance account.

Assume the 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, 2010, had been posted [including the transactions recorded in part (1) and all adjusting entries], the data below and on the following page were taken from the records of Jordan Products Inc.

a. Prepare a multiple-step income statement for the year ended December 31, 2010, concluding with earnings per share. In computing earnings per share, assume that the average number of common shares outstanding was 120,000 and preferred dividends were $162,000. (Round earnings per share to the nearest cent.)

b. Prepare a retained earnings statement for the year ended December 31, 2010.

c. Prepare a balance sheet in report form as of December 31, 2010.

Income statement data:

Advertising expense $ 125,000

Cost of merchandise sold 3,240,000

Delivery expense 29,000

Depreciation expense'office buildings and equipment 26,000

Depreciation expense'store buildings and equipment 95,000

Dividend revenue 17,400

Gain on sale of investment 3,200

Income from Amigo Co. investment 162,520

Income tax expense 306,700

Interest expense 384,000

Interest revenue 1,650

Miscellaneous administrative expense 7,500

Miscellaneous selling expense 13,750

Office rent expense 50,000

Office salaries expense 140,000

Office supplies expense 10,000

Sales 5,580,000

Sales commissions 182,000

Sales salaries expense 345,000

Store supplies expense 22,000

Transcribed Image Text:

Retained earnings and balance sheet data: Accounts payable 195,000 543,000 1,580,000 4,126,000 8,150 312,000 8,000,000 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, 7% due 2020 Cash 240,000 Common stock, $30 par (400,000 shares authorized; 122,210 shares issued, 116,510 outstanding) 3,666,300 Dividends: 316,310 162,000 121,550 Cash dividends for common stock Cash dividends for preferred stock Stock dividends for common stock Goodwill Income tax payable 510,000 40,000 1,290 7,030,520 86,000 Interest receivable Investment in Amigo Co. stock (equity method) Investment in Game Gear Inc. bonds (long term) Merchandise inventory (December 31, 2010), at lower of cost (FIFO) or market Office buildings and equipment Paid-in capital from sale of treasury stock Paid-in capital in excess of par-common stock Paid-in capital in excess of par-preferred stock Preferred 6% stock, $120 par (30,000 shares authorized; 22,500 shares issued) Premium on bonds payable Prepaid expenses Retained earnings, January 1, 2010 Store buildings and equipment Treasury stock (5,700 shares of common stock at cost of $52 per share) Unrealized gain (loss) on available-for-sale investments 780,000 4,320,000 28,500 842,000 150,000 2,700,000 760,000 26,500 4,420,800 12,560,000 296,400 (27,000) (27,000) Valuation allowance for available-for-sale investments