(Treasury Stock—Cost Method—Equity Section Preparation) Constantine Company has the following stockholders’ equity accounts at December 31, 2006.

Instructions

(a) Prepare entries in journal form to record the following transactions, which took place during 2007.
(1) 240 shares of outstanding stock were purchased at $97 per share. (These are to be accounted for using the cost method.)
(2) A $20 per share cash dividend was declared.
(3) The dividend declared in No. 2 above was paid.
(4) The treasury shares purchased in No. 1 above were resold at $102 per share.
(5) 500 shares of outstanding stock were purchased at $103 per share.
(6) 330 of the shares purchased in No. 5 above were resold at $96 per share.

(b) Prepare the stockholders’ equity section of Constantine Company’s balance sheet after giving effect to these transactions, assuming that the net income for 2007 was $94,000. State law requires restriction of retained earnings for the amount of treasury stock.

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Common Stock-$100 par value, authorized 8,000 shares Retained Earnings $480,000 294,000