Problem A.PAYBACK INC. was organized on Jan. 1, 2020 and was authorized to issue share capital as follows: 200,000 shares of 10% preferred stock at P100 par and 50,000 shares of ordinary stock at P50 par.

During the year, the following transactions were completed:

• Received subscription for 10,000 preferred shares at P125 and 20,000 ordinary shares at P60. Both subscriptions were payable 50% upon subscription and the balance due within 30 days.
• Received the final payment on subscription made. Issued shares of stock to the subscribers.
• Reacquired 2,500 shares at P55.
• The holders of the preferred stocks converted 3,000 of their own shares into ordinary on a share to share basis.
• Sold the 1,500 treasury stocks at P62.
• Received 2000 shares as donation from a major shareholder.
• Sold the 2000 donated shares at P54 per share.
• Retired the 600 treasury shares.
• Retired 400 ordinary shares at P40 per share.
• Net income for the year amounted to P750,000.
• Appropriated retained earnings for reserve on treasury shares.

Required:

• Prepare journal entries to record the all the transactions above.
• Prepare the shareholders equity section for the year ended Dec. 31, 2020