Gingrich Solutions Ltd.’s articles of incorporation state that it is allowed to issue 90,000 $2.00 preferred shares and 150,000 common shares. In its first year, Gingrich Solutions Ltd. completed the following selected transactions:

2020

Jan. 2 Paid incorporation costs of $2,500 and legal fees of $6,000 to organize as a corporation.

6 Issued 20,000 common shares for equipment with a market value of $175,000.

12 Issued 100 preferred shares to acquire software with a market value of $19,500.

May 22 Issued 5,000 common shares for $7.00 cash per share.

Required

1. Record the transactions in the general journal.

2. Prepare the shareholders’ equity section of the Gingrich Solutions Ltd. balance sheet at December 31, 2020. The ending Retained Earnings balance is $40,000.