ABC Company has the following balances in its shareholders' equity at the beginning of the current year (January 1, 2018)

Preferred shares ($1.50 cumulative*, no par value, 100,000 shares authorized, 5,00 shares issues)

25,000

Common shares (no par value, 8,000 shares)

160,000

Retained earnings

92,000

Total shareholders' equity

277,000

*two years of dividends are in arrears

During the year ended December 31, 2018 the following transactions occurred:

1) On Jan 1 issued 9,000 common shares at $18 per share

2) On July 1, declared a 10% stock dividend on the common shares, market price $18.50 per share. The dividend is to be paid on August 15 to shareholders of record on July 31

3) On August 15, the company paid the stock dividend

4) On September 15, the board of directores declared a 4 to 1 stock split

In 2018 the company had a profit of $85,000

a) Prepare the journal entries for the above transactions.

b) Prepare the shareholders' equity section of the balance sheet at December 31, 2018