Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders' equity accounts of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows:

Common Stock, $20 stated value (500,000 shares authorized,

375,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,500,000

Paid-In Capital in Excess of Stated Value-Common Stock . . . . . . . . . . . . . . . . . . 825,000

Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,600,000

Treasury Stock (25,000 shares, at a cost of $18 per share) . . . . . . . . . . . . . . . . . . . 450,000

The following selected transactions occurred during the year:

Jan. 22. Paid cash dividends of $0.08 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $28,000.

Apr. 10. Issued 75,000 shares of common stock for $24 per share.

June 6. Sold all of the treasury stock for $26 per share.

July 5. Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $25 per share.

Aug. 15. Issued the certificates for the dividend declared on July 5.

Nov. 23. Purchased 30,000 shares of treasury stock for $19 per share.

Dec. 28. Declared a $0.10-per-share dividend on common stock.

31. Closed the two dividends accounts to Retained Earnings.

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; Stock Dividends; Cash Dividends.

2. Journalize the entries to record the transactions and post to the eight selected accounts.

3. Prepare a retained earnings statement for the year ended December 31, 20Y5.

4. Prepare the Stockholders' Equity section of the December 31, 20Y5, balance sheet using Method 1 of Exhibit 8.

Exhibit 8: Stockholders' Equity Section of a Balance Sheet

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Telex Inc. Balance Sheet December 31, 20Y7 Stockholders Equity Paid-in capital: Preferred 10% stock, $50 par (2,000 shares authorized and issued) Excess over par... $100,000 10,000 Paid-in capital, preferred stock. 110,000 Common stock, $20 par (50,000 45,000 shares issued) Excess over par shares authorized, $900,000 190,000 Method 1 1,090,000 From sale of treasury stock $1,202,000 350,000 1,552,000 (27,000) 1,525,000 Retained earnings Total Treasury stock (600 shares at cost) Total stockholders equity Stockholders Equity Contributed capital: Preferred 10% stock, $50 par (2,000 shares authorized and 100,000 Common stock, $20 par (50,000 shares authorized, 45,000 shares issued) Additional paid-in capital 900,000 202,000 Method 2 Total contributed capital $1,202,000 50,000 1,552,000 (27,000) $1,525,000 Retained earnings.. Total Treasury stock (600 shares at cost)... Total stockholders'equity