(Analysis and Classification of Equity Transactions) Ohio Company was formed on July 1, 2003. It was authorized to issue 300,000 shares of $10 par value common stock and 100,000 shares of 8%

$25 par value, cumulative and nonparticipating preferred stock. Ohio Company has a July 1–June 30 fiscal year.

The following information relates to the stockholders’ equity accounts of Ohio Company.

Common Stock Prior to the 2005–06 fiscal year, Ohio Company had 110,000 shares of outstanding common stock issued as follows.

1. 95,000 shares were issued for cash on July 1, 2003, at $31 per share.

2. On July 24, 2003, 5,000 shares were exchanged for a plot of land which cost the seller $70,000 in 1997 and had an estimated market value of $220,000 on July 24, 2003.

3. 10,000 shares were issued on March 1, 2004, for $42 per share.

During the 2005–06 fiscal year, the following transactions regarding common stock took place.

November 30, 2005 Ohio purchased 2,000 shares of its own stock on the open market at $39 per share.

Ohio uses the cost method for treasury stock.

December 15, 2005 Ohio declared a 5% stock dividend for stockholders of record on January 15, 2006, to be issued on January 31, 2006. Ohio was having a liquidity problem and could not afford a cash dividend at the time. Ohio’s common stock was selling at $52 per share on December 15, 2005.

June 20, 2006 Ohio sold 500 shares of its own common stock that it had purchased on November 30, 2005, for $21,000.

Preferred Stock Ohio issued 50,000 shares of preferred stock at $44 per share on July 1, 2004.

Cash Dividends Ohio has followed a schedule of declaring cash dividends in December and June, with payment being made to stockholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2006, are shown below.

No cash dividends were declared during June 2006 due to the company’s liquidity problems.
Retained Earnings As of June 30, 2005, Ohio’s retained earnings account had a balance of $690,000. For the fiscal year ending June 30, 2006, Ohio reported net income of $40,000.
Instructions Prepare the stockholders’ equity section of the balance sheet, including appropriate notes, for Ohio Company as of June 30, 2006, as it should appear in its annual report to the shareholders.

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Declaration Date Common Stock Preferred Stock 12/15/04 $0.30 per share $1.00 per share 6/15/05 $0.30 per share $1.00 per share 12/15/05 $1.00 per share