Alpha Corporation was organized in 2011. At December 31, 2011, Alpha Corporation’s balance sheet reported the following stockholders’ equity:

Stockholders’ Equity

Paid-in Capital:

Preferred Stock, 7%, $5 par, 30,000 shares authorized,

none issued.....................$ 0

Common Stock, $1 par, 120,000 shares authorized,

10,000 shares issued and outstanding........... 10,000

Paid-in Capital in Excess of Par—Common......... 42,000

Total Paid-in Capital.................. $52,000

Retained Earnings (deficit) ................. (3,000)

Total Stockholders’ Equity................ $49,000

Requirements

Answer the following questions and make journal entries as needed:

1. What does the 7% mean for the preferred stock? After Alpha Corporation issues preferred stock, how much in annual cash dividends would Alpha Corporation expect to pay on 1,000 shares?

2. At what average price per share did Alpha Corporation issue the common stock during 2011?

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

4. During 2012, the company completed the following selected transactions.Journalize each transaction. Explanations are not required.

a. Issued for cash 2,000 shares of preferred stock at par value.

b. Issued for cash 2,100 shares of common stock at a price of $9 per share.

5. Prepare the stockholders’ equity section of the Alpha Corporation balance sheet at December 31, 2012. Assume net income for the year is $82,000.