Page 8 PROBLEM #3 (13 Marks ) Crimson Pottery Corporation is authorized to issue 40,000 shares of $7 convertible preferred shares and 300,000 common shares. On January 1, 2020, the accounts contained the following shareholders' equity balances. CPC follows IERS. Preferred Shares (10,000 shares issued) $ 720,000 Common Shares (105,000 shares issued) 1,620,000 Retained Earnings 380,000 During 2020, the following transactions occurred: Feb. 1 Issued 1,000 preferred shares for land. The land had a fair market value of $75,000 July 1 Shareholders of 4,000 preferred shares originally purchased at $71 per share converted their shares into common shares. Each preferred share was convertible into five common shares. Market values on July 1 were preferred shares $73 each and common shares $15 each. Sept 1 Issued 800 preferred shares for a patent. The asking price of the patent was $62,000 Market values on Sept.1 were preferred shares $74 each and the patent's value was not determinable Dec. 1 Shareholders of 2,000 preferred shares originally purchased at $72 per share converted their shares into common shares. Each preferred share was convertible into five shares common shares Market values on Dec 1 were preferred shares $75 each and common shares $17 each Dec 31 Profit for the year was $312,000. No dividends were declared during the year. Instructions: a) Prepare the journal entries to record the above transactions and the closing entry for profit. (5 marks) b) Prepare the shareholders' equity section of the balance sheet at December 31, 2020. (7 marks) c) Calculat, the company's return on equity for 2020. (1 marks) Answer on Page 10 Page 9 a) Debit Credit Accounts Date feb1 land b)