A condensed balance sheet for Sharp Tax Inc. as of December 31, 2010, follows. Capital stock authorized consists of 750 shares of 8%, $100 par, cumulative preferred stock and 15,000 shares of $50 par common stock.
Information relating to operations of the succeeding three years follows the condensed balance sheet.

2012
Feb. 12 Accumulated depreciation was reduced by $72,000 following an income tax investigation. (Assume that this was an error that qualified as a prior-period adjustment.) Additional income tax of $22,500 for prior years was paid.
Mar. 3 Purchased 300 shares of common stock at $54 per share; treasury stock is recorded at cost, and retained earnings are appropriated equal to such costs.
2013
Aug. 10 All the treasury stock was resold at $59 per share, and the retained earnings appropriation was canceled.
Sept. 12 By vote of the stockholders, each share of the common stock was exchanged by the corporation for four shares of no-par common stock with a stated value of $15.
Instructions:
1. Make the journal entries to record these transactions for the 3-year period ended December 31, 2013. (Assume that revenues and expenses were closed to a temporary account, Income Summary, at the end of each year. Use this account to complete the closing process.)
2. Prepare the Stockholders' Equity section of the balance sheet as it would appear at the end of 2011, 2012, and 2013.

Transcribed Image Text:

Sharp Tax Inc. Condensed Balance Sheet December 31, 2010 Assets Liabilities and Stockholders' Equity Liabilities 8% preferred stock, $100 par Common stock, $50 par Paid-in capital in excess of Retained eamings $120,000 75,000 150,000 30,000 150,000 $525,000 Assets $525,000 Total assets $525,000 Total liabilities and stockholders' equity 2011 2012 2013 Dividends declared on December 20, payable on January 10 of the following year: Preferred stock 8% cash $1.00 cash 50% stock $67,500 8% cash 896 cash Common stock $1.25 cash $1.00 cash Net income for year $39,000 $51,000