GPS Enterprises Inc. produces aeronautical navigation equipment. The stockholders' equity accounts of GPS Enterprises Inc., with balances on January 1, 2008, are as follows:

Common Stock, $20 stated value (250,000 shares authorized,

150,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,000,000

Paid-In Capital in Excess of Stated Value . . . . . . . . . . . . . . . . . 600,000

Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,175,000

Treasury Stock (10,000 shares, at cost) . . . . . . . . . . . . . . . . . . . . 280,000

The following selected transactions occurred during the year:

Jan. 12. Paid cash dividends of $0.25 per share on the common stock. The dividend had been properly recorded when declared on December 28 of the preceding fiscal year for $35,000.

Feb. 19. Sold all of the treasury stock for $360,000.

Apr. 3. Issued 40,000 shares of common stock for $1,600,000.

July 30. Declared a 2% stock dividend on common stock, to be capitalized at the market price of the stock, which is $45 per share.

Aug. 30. Issued the certificates for the dividend declared on July 30.

Nov. 7. Purchased 15,000 shares of treasury stock for $600,000.

Dec. 30. Declared a $0.25-per-share dividend on common stock.

31. Closed the credit balance of the income summary account, $350,000.

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, 2008.

4. Prepare the Stockholders' Equity section of the December 31, 2008, balance sheet.