Twin Lakes incorporated on April 1, 1997, and was authorized to issue 100,000 shares of $5 par value common stock and 10,000 shares of $8, no par preferred stock. During the remain¬ der of 1997 the company entered into the following transactions. 1. Issued 25,000 shares of common stock in exchange for $500,000 in cash. 2. Issued 5,000 shares of preferred stock in exchange for $60,000 in cash. 3. Purchased 3,000 common shares for $15 per share and held them in the form of treasury stock. 4. Sold 1,000 treasury shares for $18 per share on the open market. 5. Issued 1,000 treasury shares to executives who exercised stock options for a reduced price of $5 per share. The company entered into no other transactions that affected stockholders’ equity during 1997. REQUIRED:

a. Prepare entries for each of the transactions.

b. Assume that Twin Lakes generated $500,000 in net income in 1997 and did not declare any dividends during 1997. Prepare the stockholders’ equity section of the balance sheet as of December 31, 1997.