Focus Foot Company reported the following amounts in the stockholders’

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E15-18B (Dividends and Stockholders’ Equity Section) Focus Foot Company reported the following
amounts in the stockholders’ equity section of its December 31, 2006, balance sheet.

Preferred stock, 12%, $100 par (100,000 shares
authorized, 25,000 shares issued) $2,500,000
Common stock, $1 par (1,000,000 shares authorized,
300,000 shares issued) 300,000
Additional paid-in capital 950,000
Retained earnings 1,365,000
Total $5,115,000

During 2007, Focus Foot took part in the following transactions concerning stockholders’ equity.

1. Paid the annual 2006 dividend on preferred stock and a $0.50 per share dividend on common stock.
These dividends had been declared on December 31, 2006.

2. Purchased 1,000 shares of its own outstanding common stock for $8 per share. Focus Foot uses the
cost method.

3. Reissued 1,000 treasury shares for land with an appraised value of $9,500. Focus Foot’s common
shares were trading for $8.50 per share.

4. Issued 50,000 shares of common stock at $9 per share.

5. Declared and recorded a 2:1 stock split on the outstanding common stock when the stock is selling
for $10 per share.

6. Declared the annual 2007 dividend on preferred stock and the $0.50 per share dividend on common
stock. These dividends are payable in 2008.

Instructions

(a) Prepare journal entries to record the transactions described above.

(b) Prepare the December 31, 2007, stockholders’ equity section. Assume 2007 net income was $665,000.