Early in the year Debra Deal and several friends organized a corporation called Markup, Inc. The corporation was authorized to issue 100,000 shares of $100 par value, 5 percent cumulative preferred stock and 100,000 shares of $1 par value common stock. The following transactions (among others) occurred during the year:

Jan. 7 Issued for cash 30,000 shares of common stock at $10 per share. The shares were issued to Deal and four other investors.

Jan. 12 Issued an additional 1,000 shares of common stock to Deal in exchange for her services in organizing the corporation. The stockholders agreed that these services were worth $12,000.

Jan. 18 Issued 4,000 shares of preferred stock for cash of $400,000.

July 5 Acquired land as a building site in exchange for 10,000 shares of common stock. In view of the appraised value of the land and the progress of the company, the directors agreed that the common stock was to be valued for purposes of this transaction at $12 per share.

Nov. 25 The first annual dividend of $5 per share was declared on the preferred stock to be paid December 11.

Dec. 11 Paid the cash dividend declared on November 25.

Dec. 31 After the revenue and expenses were closed into the Income Summary account, that amount indicated a net income of $810,000.

Instructions

a. Prepare journal entries in general journal form to record the above transactions. Include entries at December 31 to close the Income Summary account and the Dividends account.

b. Prepare the stockholders’ equity section of the Markup, Inc., balance sheet at December 31.