Aerotronics Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ equity accounts of Aerotronics Enterprises Inc., with balances on January 1, 2007, are as follows:

Common Stock, $10 stated value (100,000 shares authorized,

60,000 shares issued) ................$600,000

Paid-In Capital in Excess of Stated Value .........150,000

Retained Earnings ...................497,750

Treasury Stock (7,500 shares, at cost) ............120,000

The following selected transactions occurred during the year:

Jan. 19 Paid cash dividends of $0.60 per share on the common stock. The dividend had been properly recorded when declared on December 28 of the preceding fiscal year for $31,500.

Feb. 2 Sold all of the treasury stock for $150,000.

Mar. 15Issued 20,000 shares of common stock for $480,000.

July 30 Declared a 2% stock dividend on common stock, to be capitalized at the market price of the stock, which is $25 a share.

Aug. 30 Issued the certificates for the dividend declared on July 30.

Oct. 10 Purchased 5,000 shares of treasury stock for $105,000.

Dec. 30 Declared a $0.50-per-share dividend on common stock.

In addition, net income was $182,500 for the 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.