Response to the following problem:
Shoshone Enterprises Inc. manufactures bathroom fixtures. The stockholders' equity accounts of Shoshone Enterprises Inc., with balances on January 1, 2007, are as follows:
Common Stock, $20 stated value (100,000 shares authorized, 75,000 shares issued) $1,500,000
Paid-In Capital in Excess of Stated Value 180,000
Retained Earnings 725,000
Treasury Stock (5,000 shares, at cost) 140,000
The following selected transactions occurred during the year:
Jan. 28 Paid cash dividends of $0.80 per share on the common stock. The dividend had been properly recorded when declared on December 30 of the preceding fiscal year for $56,000.
Mar. 21 Issued 15,000 shares of common stock for $480,000.
May 10 Sold all of the treasury stock for $165,000.
July 1 Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $36 a share.
Aug. 11 Issued the certificates for the dividend declared on July 1.
Oct. 20 Purchased 7,500 shares of treasury stock for $255,000.
Dec. 27 Declared a $0.75-per-share dividend on common stock.
In addition, Shoshone had net income of $269,400 during the current year.
Instructions:
1. Enter the January 1 balances in T-accounts for the stockholders' equity accounts listed. Also prepare T-accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable.
2. Journalize the entries to record the transactions, and post to the six selected accounts.
3. Prepare a retained earnings statement for the year ended December 31, 2007.
4. Prepare the Stockholders' Equity section of the December 31, 2007, balance sheet.