Chapter 11, Problem 11.5E

Reporting Stockholders’ Equity and Determining Dividend Policy

Tarrant Corporation was organized this year to operate a financial consulting business. The charter authorized the following stock: common stock, par value $10 per share, 11,500 shares authorized. During the year, the following selected transactions were completed:

1. a. Sold 5,600 shares of common stock for cash at $20 per share.
2. b. Sold 1,000 shares of common stock for cash at $25 per share.
3. c. At year-end. the accounts reflected income of $12,000. No dividends were declared.

Required:

1. 1. Provide the journal entries required to record the sale of common stock in (a) and (b).
2. 2. Prepare the stockholders’ equity section of the balance sheet at the end of the year.