Pineview Co., organized on June 1, 2012, was authorized to issue stock as follows:
• 80,000 shares of preferred 9% stock, convertible, $100 par
• 500,000 shares of common stock, $2.50 stated value During the remainder of Pineview Co.'s fiscal year ended May 31, 2013, the following transactions were completed in the order given:
(a) 30,000 shares of preferred stock were subscribed for at $105, and 90,000 shares of common stock were subscribed for at $26. Both subscriptions were payable 30% upon subscription, the balance in one payment.
(b) The second subscription payment was received, except one subscriber for 6,000 shares of common stock defaulted on payment. The full amount paid by this subscriber was returned, and all of the fully paid stock was issued.
(c) 15,000 shares of common stock were reacquired by purchase at $28. (Treasury stock is recorded at cost.)
(d) Each share of preferred stock was converted into four shares of common stock.
(e) The treasury stock was exchanged for machinery with a fair market value of $430,000.
(f) There was a 2-for-1 stock split, and the stated value of the new common stock is $1.25.
(g) Net income was $83,000. Assume that revenues and expenses have been closed to a temporary account, Income Summary.
Instructions:
1. Give the journal entries to record these transactions. (For net income, give the entry to close the income summary account to Retained Earnings.)
2. Prepare the Stockholders' Equity section as of May 31, 2013.