The shareholders' equity accounts of Freeman Inc. at January 2, 2011, are as follows:

The following transactions occurred during the year:
March 10 Purchased a building for \(\$ 1,000,000\). The seller agreed to receive 14,000 preferred shares and 15,000 common shares of Freeman in exchange for the building. The preferred shares were trading in the market at \(\$ 50\) per share on that day.
July 1 Declared a semi-annual cash dividend of \(\$ 0.50\) per common share and the required amount of dividends on preferred shares, payable on August 1, 2011, to shareholders of record on July 21,2011 . The annual dividend of \(\$ 2\) per preferred share had not been paid in either 2010 or 2011.

August 1 Paid the cash dividend declared on July 1 to both common and preferred shareholders.
December 31 Determined that profit for the year was \(\$ 385,000\).
Required:
1. Prepare journal entries to record the above transactions.
2. Prepare the shareholders' equity section of Freeman's statement of financial position as at December 31, 2011.

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Preferred shares, no par value, cumulative, 6,000 shares issued Common shares, no par value, 250,000 shares issued Retained earnings $300,000 500,000 600,000