Kayla Bites Ltd. began operations on January 1, 2020. During the year, the following transactions affected shareholders' equity:

1. Kayla Bites article of incorporation authorize the issuance of 1 million common shares, and the issuance of 100,000 preferred shares, which pay an annual dividend of $2 per share.

2. A total of 120,000 common shares were issued for $5 a share.

3. A total of 7,500 preferred shares were issued for $14 per share.

4. The company had net income of $125,000 for the year. (Assume sales of $375,000 and total operating expenses of $250,000- prepare closing entries).

5. The company reacquired and canceled 20,000 common shares; the share price was 4$

6. The dividend on the preferred shares was declared.

7. The company reacquired and canceled 5,000 common shares, the share price was $10.

8. The dividend on the preferred shares was paid.

9. A dividend of $0.10 per share was declared on the common shares but was not yet paid.

10. The dividends on the common shares were paid.

11. The company declared 10% stock dividends. The share price was $6.

12. The new common shares were issued.

13. The company declared a 2 for 1 stock split

Required

a. Prepare journal entries to record the above transactions, including the closing entries for net income and dividends declared.

b. Prepare the shareholder's equity section.