Problem 1 (20 points): The Lyster Company lists the following stockholders equity items on 12/31/16

8% preferred stock, $100 par, 50,000 shares authorized

10,000 shares issued $1,000,000

Common stock, $10 par, 500,000 shares authorized,

200,000 shares issued 2,000,000

Paid-in Capital in excess of par- Preferred 500,000

Paid-in Capital in excess of par- Common 800,000

Retained Eamings 700,000

Less: Treasury stock (4,000 shares at cost) (60,000)

Total Stockholders' Equity $4,940,000

During 2017, Lyster engaged in the following transactions alecting stockholders equity

(1) On 1/1/17, Lyster established a stock option plan giving certain employees the right to purchase 20,000 shares of Lyster common stock at a price of $15. The market price of the common stock on the date of grant was $19, and the fair value of each option is $2. The options may be exercised any time after 1/1/17, and the executives must be in Johnson's employ at the time of exercise. The service period is considered to be two years.

(2) On 3/10, reacquired 1,000 shares of common stock by purchase at a price of $19 per share.

(3) On 3/15, declared its first quarterly dividend on the preferred stock and a dividend of $.10 per share on its common stock to stockholders of record on 3/31 The didend was paid on 4/10

(4) Not wanting to deplete its cash reserves for the expected quarterly diidend, on 6/15, decared a preferred stock dividend and a property dividend payable on 7/15 to common stockholders of record on 630 The didend consists of 19,700 shares of Baxter Corporation common stock which has a book value of $1.20 per share. On 6/15, the stock is selling for $1.80 per share.

(5) On 9/ 15, declared the third quarterly preferred didend and a 1% stock didend to common stockholders of record on 9/30, to be distributed 10/15. The market price of Lysters common stock on 9/1 is $20

(6) On 10/31, reissued 3,000 shares of treasury stock for $20 per share. Lyster uses the FIFO cost flow

(7) On 11/1, sold 1,000 shares of common stock to a supplier for $20

(8) On 12/15, declared the fourth quarter's dividend on preferred stock and a $.10 per share diidend on

(9) Net income for 2017 was $450,000 belfore any adjustments you may have made above that affect assumption for its treasury stock the common stock. Diidends are payable 1/15/10 to shareholders of record on 12/31/12 income. The market price of the common stock at 12/31/17 was $21.25 per share, and the market of the prefemed stock was $110. The average price of the common stock during 2017 was $19.60

Required:

a) Prepare all journal entries required in 2017 as a result of the transactions listed abowe

b) Prepare, in good form, the statement of retained eamings for Lyster as of 12/31/17

c) Prepare, in good form, the stockholders equity section for Lyster as of 12/31/17