Smiley, Inc., is authorized to sell 1,000,000 shares of $10 par value common stock and 50,000 shares of $100 par value 6 percent preferred stock. As of the end of the current year, the company has actually sold 550,000 shares of common stock at $12 per share and 40,000 shares of preferred stock at $110 per share. In addition, of the 550,000 shares of common that have been sold, 40,000 shares have been repurchased at $60 per share and are currently being held in treasury to be used to meet the future requirements of a stock option plan that the company intends to implement.
a. Prepare the general journal entries required to record all of the above transactions.
b.Prepare the stockholders' equity section of Smiley's balance sheet to reflect the transactions you have recorded.