Baron Corporation was authorized by its charter to issue 80,000 shares of 12%, $100 par cumulative preferred stock and 200,000 shares of $1 par value common stock. In its first year of operations, Baron had the following transactions. (1) Sold 50,000 shares of common stock for $300,000 on January 1. (2) Sold 3,000 shares of preferred stock for $360,000 on January 1. (3) Earned $185,000 for the sale of their merchandise of which $135,000 was on credit. (4) Had expenses of $122,500 in connection with selling the merchandise. All expenses were paid in cash. (5) Purchased 5,000 shares of outstanding common stock for $8.00 per share for the treasury. (6) Declared a dividend of $.20 per share of common stock and for the amount due the preferred stock. (7) Paid the required dividends. Required: (a) Prepare the necessary journal entries. (b) Prepare the stockholders' equity section of the balance sheet.