Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders equity accounts of Morrow Enterprises Inc., with balances on

Question:

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. Assume that Morrow Enterprises had net income for the year ended December 31, 20Y5, of $1,125,000.
4. Prepare the Stockholders’ Equity section of the December 31, 20Y5, balance sheet using Method 1 of Exhibit 8.

Method 1 of Exhibit 8.