On 2009 May 1, Farmington Company received a charter that authorized it to issue:

• 4,000 shares of convertible no-par preferred stock to which a stated value of $ 12 per share is assigned.
• 1,500 shares of $ 400 par value, $ 20 cumulative preferred stock.
• 60,000 shares of no-par common stock to which a stated value of $ 40 is assigned.

May 1 All of the cumulative preferred was issued at $ 204 per share, cash.

2 All of the $ 20 cumulative preferred was exchanged for merchandise inventory, land, and buildings valued at $ 128,000, $ 160,000, and $ 425,000, respectively.

3 Cash of $ 15,000 was paid to reimburse promoters for costs incurred for accounting, legal, and printing services. In addition, 1,000 shares of common stock were issued to the promoters for their services. The value of all of the services (including those paid in cash) was $ 55,000.

1. Prepare journal entries for these transactions.
2. Assume that retained earnings were $ 200,000. Prepare the stockholders equity section of the 2009 May 31, balance sheet.