On-line Learning Corporation obtained a charter at the start of 2014 that authorized 52,000 shares of no-par common stock and 23,000 shares of preferred stock, par value $10. The corporation was organized by four individuals who purchased 20,000 shares of the common stock. The remaining shares were to be sold to other individuals at $37 per share on a cash basis. During 2014, the following selected transactions occurred:
a. Collected $20 per share cash from the four organizers and issued 5,000 shares of common stock to each of them.
b. Sold and issued 6,000 shares of common stock to an outsider at $40 cash per share.
c. Sold and issued 7,000 shares of preferred stock at $30 cash per share.

Required:
1. Give the journal entries indicated for each of these transactions.
2. Is it ethical to sell stock to outsiders at a higher price than the amount paid by the organizers?