26.The following is relevant to Equity, Inc. as of December 31, 2007 (beginning of 2008): -Common stock, authorized, issued and outstanding shares are 1,000,000.-Par value of common stock is $1/ share-All of the issued stock originally sold for $10 per share ($1 par and $9 APIC/ share)-Retained earnings is $800,000, and there are no other equity accounts.SUBSEQUENTLY, the following activity took place during the year ended 12/31/08:I.FOR EACH, INSERT THE JOURNAL ENTRY IN THE SPACE PROVIDEDJanuary 1, 2008Received authorization from the Board to issue an additional 500,000 shares.January 15, 2008January 31, 2008Repurchase 200,000 shares at a price of $13 per share.February 28, 2008Sell 100,000 shares held in treasury for $15 per share.March 31, 2008Sell 60,000 shares held in treasury for $7 per share.April 1, 2008Retire 12,000 shares held in treasury. May 1, 2008II.III..Issued an additional 500,000 shares for $10 per share which cost $150,000 in legal and other costs which were paid directly from the proceeds from the stock sales.Declare and pay a dividend to shareholders in the form of bonds held as an investment by the company. The bonds have a fair value on the date declared of $110,000 but are on the books as an investment at their historical cost of $100,000.Assuming that net income for the year was $2 million, prepare the stockholders' equity section of the balance sheet as of December 31, 2008 Show the equity section described above assuming that in addition to the facts above, the company completed a two for one stock split during the year.
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26. SOLUTIONI.Present the journal entry for each date noted above to record the transaction for that date.January 1, 2008NO ENTRYAUTH.ISSUEDTREASURYALSO OK:1,000,0001,000,000-OPENINGCash5,000,000January 15, 2008500,0001/1/2006Common stock500,000Cash4,850,000500,0001/15/2006APIC4,350,000Common stock500,000200,0001/31/2006Cash150,000APIC4,350,000(100,000)2/28/2006(60,000)3/31/2006January 31, 2008(12,000)(12,000)4/1/2006Treasury stcok2,600,000Cash2,600,0001,500,0001,488,00028,0001,460,000February 28, 2008Cash1,500,0001,000,0009,000,000Treasury stock1,300,000500,0004,350,000APIC treasury stock200,00012,000108,0001,488,00013,242,000March 31, 2008Cash420,000Treasury stock780,000APIC treasury stock200,000Retained earnings160,0002,600,0001,300,000200,000April 1, 2008780,000200,000Common stock12,000156,000-APIC108,000364,000Treasury stock156,000Retained earnings36,000May 1, 2008800,000Investments10,000160,000Gain on investments10,00036,000Retained earnings110,000110,000Investments110,0002,000,0002,494,000IICommon stock, $1 par, 1,500,000 shares authorized, 1,488,000 issued and 1,460,000 outstanding1,488,000Additional paid in capital13,242,000Retained earnings2,494,000Total paid in capital and retained earnings17,224,000Less: Cost of Treasury stock, 28,000 shares364,000Total stockholders equity16,860,000III.Common stock, $.50 par, 3,000,000 shares authorized, 2,976,000 issued and 2,920,000 outstanding1,488,000Additional paid in capital13,242,000Retained earnings2,494,000Total paid in capital and retained earnings17,224,000Less: Cost of Treasury stock, 56,000 shares364,000