The annual report for Malibu Beachwear reported the following transactions affecting stockholders’ equity:
a. Purchased $ 350,000 of common stock now held in treasury.
b. Declared cash dividends in the amount of $ 260,000.
c. Paid the dividends in (b).
d. Issued 100,000 new shares of $ 0.10 par value common shares for $ 2 per share.
e. Closed the Dividends account.
1. Indicate the effect (increase, decrease, or no effect) of each of these transactions on total assets, liabilities, and stockholders’ equity.
2. Prepare journal entries to record each of these events.
3. Prepare a statement of stockholders’ equity, assuming the following opening balances: Common Stock, $ 12,500; Additional Paid-In Capital, $ 190,000; Retained Earnings, $ 150,000; and Treasury Stock, $ 0. Net income for the current year was $ 270,000.