This problem continues our accounting for Pure Water, Inc., from Chapter 9 . Pure Water, Inc., has been authorized to sell 600,000 shares of $10 par value common stock and 125,000 shares of $12 par, 9% preferred stock. During the year, Pure Water had the following transactions related to stockholders’ equity:

May 1 Issued 4,250 shares of common stock to Mel Hollingsworth in exchange for $30,000 cash and a truck with a market value of $12,500.

Jun 13 Issued an additional 1,000 shares of common stock to Mel Hollingsworth for $10,000 cash.

Sep 18 Sold 4,000 shares of common stock to investors for $45,000.

Oct 6 Sold 1,700 shares of preferred stock to investors for $30,000.

Oct 22 Purchased 1,800 shares of common stock for $12 per share to hold in the company’s treasury.

Nov 14 Declared a $5,000 dividend payable on December 15 to stockholders on

record on December 1. Used separate payable accounts for preferred and

common dividends.

Dec 15 Paid the dividend.

Dec 21 Sold 200 shares of treasury stock for $18 per share.

Requirements

1. Record the transactions in the journal. Explanations are not required.

2. Prepare the stockholders’ equity section of the balance sheet at December 31, 2012, assuming Pure Water, Inc., earned $134,000 of net income during the year. In addition to the dividends paid on December 15, $6,200 of dividends were paid earlier in the year.