The Mystic Company lists the following stockholders equity items on 12/31/17:

6% 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 Earnings - 700,000

Less: Treasury stock (3,750 shares at cost) - (60,000)

Total Stockholders Equity - $4,940,000

During 2018, Mystic engaged in the following transactions affecting stockholders equity:

(1) On 1/1/18, Mystic established a stock option plan giving certain employees the right to purchase 20,000 shares of Mystic common stock at a price of $20. The market price of the common stock on the date of grant was $22, and the fair value of each option is $3. The options may be exercised any time after 1/1/18, and the executives must be in Johnsons employ at the time of exercise. The service period is considered to be two years.

(2) On 3/10, reacquired 1,250 shares of common stock by purchase at a price of $23 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 dividend was paid on 4/10.

(4) Not wanting to deplete its cash reserves for the expected quarterly dividend, on 6/15, Mystic declared a preferred stock dividend and a property dividend payable on 7/15 to common stockholders of record on 6/30. The dividend consists of 19,475 shares of Baxter Corporation common stock, which has a book value of $2.20 per share. On 6/15, the stock is selling for $2.50 per share.

(5) On 9/15, declared the third quarterly preferred dividend and a 1% stock dividend to common stockholders of record on 9/30, to be distributed 10/15. The market price of Mystics common stock on 9/1 is $24.50.

(6) On 10/31, reissued 3,000 shares of treasury stock for $25 per share. Mystic uses the FIFO cost flow assumption for its treasury stock.

(7) On 11/1, sold 1,000 shares of common stock to a supplier for $25.

(8) On 12/15, declared the fourth quarters dividend on preferred stock and a $.10 per share dividend on the common stock. Dividends are payable 1/15/19 to shareholders of record on 12/31/18.

(9) Net income for 2018 was $475,000 before any adjustments you may have made above that affect income. The market price of the common stock at 12/31/18 was $25.75 per share, and the market price of the preferred stock was $110. The average price of the common stock during 2018 was $24.00.

Required:

a) Prepare all journal entries required in 2018 as a result of the transactions listed above.

b) Prepare, in good form, the statement of retained earnings for Mystic as of 12/31/18.

c) Prepare, in good form, the stockholders equity section for Mystic as of 12/31/18.