Question: Major League Apparel has two classes of stock authorized: 5%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2012, its first year of operations: January 2 Issue 100,000 shares of common stock for $60 per share.
February 14 Issue 50,000 shares of preferred stock for $11 per share.
May 8 Repurchase 10,000 shares of its own common stock for $50 per share.
May 31 Reissue 5,000 shares of treasury stock for $55 per share.
December 1 Declare a cash dividend on its common stock of $0.50 per share and a $25,000 (5% of par value) cash dividend on its preferred stock payable to all stockholders of record on December 15. The dividend is payable on December 30. (Dividends are not paid on treasury stock.)
December 30 Pay the cash dividends declared on December 1.
Required: 1. Record each of these transactions.
2. Prepare the stockholders' equity section of the balance sheet as of December 31, 2012. Net income for the year was $480,000.