Problem: The balance sheet of Hiland Travel Company at December 31, 2006, reported 100,000 shares of no-par common stock authorized, with 30,000 shares issued and a Common Stock balance of $180,000. Retained Earnings had a balance of $141,500. During 2007, the Company completed the following transactions:
Feb 20
• Purchased 4,000 shares of the Company’s own common stock for the treasury at $5 per share.
Apr 30
• Distributed a 20% stock dividend on the 26,000 shares of outstanding common stock. The market value of Hiland Travel common stock was $10 per share.
July 1
• Issued $500,000 face value, 10%, 10-year bonds for $463,000, resulting in a yield rate of 12%.
Sep 16
• Sold 2,800 shares of treasury stock for $12 per share.
Dec 19
• Split the no-par common stock 2 for 1 by issuing two new no-par shares for each old no-par share previously issued. Prior to the split, the Company had issued 35,200 shares.
Dec 31
• Earned net income of $117,000 during the year. Closed net income to Retained Earnings.
Directions:
1. Record the transactions in the general journal. Explanations are not required.
2. Prepare the stockholders’ equity section of Hiland Travel’s balance sheet at December 31, 2007.