Hamby Corporation received a charter that authorized the issuance of 100,000 shares of \(\$ 10\) par common stock and 50,000 shares of \(\$ 50\) par, 6 percent cumulative preferred stock. Hamby Corporation completed the following transactions during its first two years of operation.

Required

a. Prepare journal entries for these transactions for 2011 and 2012 and post them to T-accounts.

b. Prepare the balance sheets at December 31, 2011 and 2012.

c. What is the number of common shares outstanding at the end of 2011? At the end of 2012? How many common shares had been issued at the end of 2011? At the end of 2012? Explain any differences between issued and outstanding common shares for 2011 and for 2012.

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2011 12 Jan. 5 Sold 10,000 shares of the $10 par common stock for $28 per share. Sold 1,000 shares of the 6 percent preferred stock for $70 per share. Sold 40,000 shares of the $10 par common stock for $40 per share. During the year, earned $170,000 in cash revenue and paid $110,000 for cash. operating expenses. Apr. 5 Dec. 31 31 Declared the cash dividend on the outstanding shares of preferred stock for 2011. The dividend will be paid on February 15 to stockholders of record on January 10, 2012. 31 Closed the revenue, expense, and dividend accounts to the retained earnings account. 2012 Feb. 15 Paid the cash dividend declared on December 31, 2011. Mar. 3 Sold 10,000 shares of the $50 par preferred stock for $78 per share. May 5 Purchased 500 shares of the common stock as treasury stock at $43 per share.