P14.6 (LO 2, 3, 4) Groupwork (Treasury Shares—Equity Section Preparation) Washington Company has the following equity accounts at December 31, 2025.

Share Capital—Ordinary—$100 par value, authorized 8,000 shares $480,000 Retained Earnings 294,000 Instructions

a. Prepare entries in journal form to record the following transactions, which took place during 2026.

1. 280 ordinary shares 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 were purchased at $105 per share.

6. 350 of the shares purchased in No. 5 above were resold at $96 per share.

b. Prepare the equity section of Washington Company’s statement of financial position after giving effect to these transactions, assuming that the net income for 2026 was $94,000. Country law requires restriction of retained earnings for the amount of treasury shares.