Note: You must complete Comprehensive Problem 4 (Part A) before completing Comprehensive Problem 4 (Part B).

Required:

2.

After all of the transactions for the year ended December 31, Year 1, 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, Year 1, 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. Enter all amounts as positive numbers EXCEPT in the Other income and expenses. In that section only, enter amounts that represent other expenses as negative numbers using a minus sign. (Round earnings per share to the nearest cent.)

B.

Prepare a retained earnings statement for the year ended December 31, Year 1.*

C.

Prepare a balance sheet in report form as of December 31, Year 1.*

*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 investment	4,980
Income of 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$194,300Accounts receivable545,000Accumulated depreciationoffice buildings and equipment1,580,000Accumulated depreciationstore buildings and equipment4,126,000Allowance for doubtful accounts8,450Available-for-sale investments (at cost)260,130Bonds payable, 5%, due 20Y2500,000Cash246,000Common stock, $20 par (400,000 shares authorized; 100,000 shares issued, 94,600 outstanding)2,000,000Dividends: Cash dividends for common stock155,120 Cash dividends for preferred stock100,000Goodwill500,000Income tax payable44,000Interest receivable1,125Investment in Pinkberry Co. stock (equity method)1,009,300Investments-Dream Inc. bonds (long term)90,000Merchandise inventory (December 31, Year 1), at lower of cost (FIFO) or market778,000Office buildings and equipment4,320,000Paid-in capital from sale of treasury stock13,000Excess of issue price over par: -Common stock886,800 -Preferred stock150,000Preferred 5% stock, $80 par (30,000 shares authorized; 20,000 shares issued)1,600,000Premium on bonds payable19,000Prepaid expenses27,400Retained earnings, January 1, Year 19,319,725Store buildings and equipment12,560,000Treasury stock (5,400 shares of common stock at cost of $33 per share)178,200Unrealized gain (loss) on available-for-sale investments(6,500)Valuation allowance for available-for-sale investments(6,500)

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 20Y2	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
Investments-Dream Inc. bonds (long term)	90,000
Merchandise inventory (December 31, Year 1),
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 stock	886,800
-Preferred stock	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, Year 1	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)

Income Statement

1.

A.

Prepare a multiple-step income statement for the year ended December 31, Year 1, 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. Enter all amounts as positive numbers EXCEPT in the Other income and expenses. In that section only, enter amounts that represent other expenses as negative numbers using a minus sign. 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.

1
2
3
4
5	Selling expenses:
6
7
8
9
10
11
12
13	Administrative expenses:
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31	Earnings per common share

Retained Earnings Statement

2.

B.

Prepare a retained earnings statement for the year ended December 31, Year 1.

	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

Balance Sheet

2.

C.

Prepare a balance sheet in report form as of December 31, Year 1. 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 than 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