Context Corporation reports the following components of stockholders’ equity on December 31, 2005:

Context Corporation reports the following components of stockholders’ equity on December 31, 2005:

Common stock—$10 par value, 50,000 shares authorized,

20,000 shares issued and outstanding _______ $200,000

Contributed capital in excess of par value, common stock _____ 30,000

Retained earnings _________________ 135,000

Total stockholders’ equity  ________   $365,000

In year 2006, the following transactions affected its stockholders’ equity accounts:

Jan. 1        Purchased 2,000 shares of its own stock at $20 cash per share.

Jan. 5        Directors declared a $2 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.

Feb. 28      Paid the dividend declared on January 5.

July 6        Sold 750 of its treasury shares at $24 cash per share.

Aug. 22     Sold 1,250 of its treasury shares at $17 cash per share.

Sept. 5      Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.

Oct. 28      Paid the dividend declared on September 5.

Dec. 31      Closed the $194,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Required:

1.  Prepare journal entries to record these transactions for 2006.

2.  Prepare a statement of retained earnings for the year ended December 31, 2006.

3.  Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2006.