Sloboda Corporation was established in 2019. At December 31, 2019, Sloboda Corporation’s balance sheet reported the following shareholders’ equity account information:

Preferred shares, $0.20, 50,000 shares authorized, none issued ................ $ 0
Common shares, 100,000 shares authorized, 10,000 shares issued
and outstanding ............................................................................................. 87,500
Retained earnings (Deficit) .......................................................................... (20,000)

Required

1. What does the $0.20 mean in the description of the preferred shares? If Sloboda Corporation issued 4,000 preferred shares, how much in cash dividends will Sloboda Corporation expect to pay per year?

2. At what average price per share did Sloboda Corporation issue the common shares?

3. Were first-year operations profitable? Give your reason.

4. Journalize the share transactions which took place during 2020. Explanations are not required.

Jan. 27 Issued for cash 10,000 preferred shares at $2.50 per share.

Apr. 4 Issued for cash 1,000 common shares at a price of $9.00 per share.

Sep. 15 Issued 25,000 common shares to acquire a building valued at $235,000.

Dec. 31 Net income for the year was $62,500, and the company declared no dividends.

Make the closing entry for net income.

5. Prepare the shareholders’ equity section of the Sloboda Corporation balance sheet at December 31, 2020.