(Accounting for equity transactions and preparing the shareholders’ equity sec- tion of the balance sheet, LO 2, 3) You are provided with the following information from the equity section of Aurora Ltd.’s balance sheet on December 31, 2005:

During the year ended December 31, 2006, the following occurred (events are recorded in the order they occurred during the year):
i. Semi-annual dividend on common stock of $100,000 was declared and paid.
ii. 100,000 shares of common stock were issued for $1,500,000.
ili. 20,000 shares of preferred stock were issued for $500,000.
iv. 10,000 shares of common stock were issued in exchange for capital assets.
The capital assets received had a list price on the vendor’s price list of $190,000.
v. Preferred dividends were declared and paid, $100,000.
vi. 10% stock dividend was declared on the outstanding common shares.
vii. Net income was $1,250,000.
viii. Semi-annual dividend on common stock of $100,000 was declared. The dividend will be paid in January 2008.
Required:

a. Prepare the journal entries required to record the above events.

b. Prepare the shareholders’ equity section of Aurora Ltd.’s balance sheet on December 31, 2007.

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Preferred stock-Authorized, 100,000 shares, outstanding 30,000 $ 750,000 Common stock-Authorized, unlimited, outstanding 200,000 600,000 Retained earnings 4,555,000