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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