Analyze and record stock transactions and prepare equity section of balance sheet.
The following information pertains to the equity accounts of Fragrant Soap Company Inc.
1. Contributed capital on January 1, 2007, consisted of 70,000 issued and outstanding shares of common stock with par value of $0.50; additional paid-in capital in excess of par of $350,000; and retained earnings of $500,000.
2. During the first quarter of 2007, Fragrant Soap Company issued an additional 10,000 shares of common stock for $6 per share.
3. On June 15, the company declared a 2-for-1 stock split.
4. On September 30, the company distributed a 10% stock dividend. The market price of the stock on that date was $5 per share.
5. On October 1, the company declared a dividend of $0.25 per share to be paid on October 31.
6. Near the end of the year, the company's CEO decided the company should buy 1,000 shares of its own stock. At that time, the stock was trading for $6 per share in the stock market.
7. Net income for 2007 was $49,500.
Required
a. Show how each of the transactions would affect the accounting equation.
b. Prepare the shareholders' equity section of the balance sheet at December 31, 2007.