(Equity Transactions and Statement Preparation) On January 5, 2007, Drabek Corporation received a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $5 par value common stock. It then completed these transactions.

Instructions

(a) Record the journal entries for the transactions listed above.

(b) Prepare the stockholders’ equity section of Drabek Corporation’s balance sheet as of December 31, 2007.

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Jan. 11 Issued 20,000 shares of common stock at $16 per share. Feb. 1 July 29 Aug. 10. Dec. 31 Issued to Robb Nen Corp. 4,000 shares of preferred stock for the following assets: machinery with a fair market value of $50,000; a factory building with a fair market value of $110,000; and land with an appraised value of $270,000. Purchased 1,800 shares of common stock at $19 per share. (Use cost method.) Sold the 1,800 treasury shares at $14 per share. Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend. Dec. 31 Closed the Income Summary account. There was a $175,700 net income.