Gamma Corporation was organized in 2009. At December 31,2009, Gamma Corporation’s balance sheet reported the following stockholders’ equity:

Requirements Answer the following questions and make journal entries as needed:
1. What does the 5% mean for the preferred stock? After Gamma Corporation issues preferred stock, how much in annual cash dividends would Gamma Corporation expect to pay on 1,000 shares?
2. At what price per share did Gamma Corporation issue the common stock during 2009?
3. Were first-year operations profitable? Give your reason.

4. During 2010, the company completed the following selected transactions. Journalize each transaction. Explanations are not required.

a. Issued for cash 5,000 shares of preferred stock at par value.

b. Issued for cash 1,000 shares of common stock at a price of \($7\) per share.
5. Prepare the stockholders’ equity section of the Gamma Corporation balance sheet at December 31,2010. Assume net income for the year is \($50,000.

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Stockholders' Equity Paid-in Capital: Preferred Stock, 5%, $10 par, 50,000 shares authorized, none issued Common Stock, $2 par, 100,000 shares authorized, 10,000 shares issued and outstanding Paid-in Capital in Excess of Par Total Paid-in Capital Retained Earnings (deficit) Total Stockholders' Equity $ 0 20,000 30,000 $50,000 (5,000) $45,000