Gamma Corporation was organized in 2014. At December 31, 2014, Gamma Corporation's statement of financial position reported the following shareholders' equity:

Shareholders' Equity

Share Capital:

Preferred Shares, $2, 50,000 shares authorized, none issued .................$ 0

Common Shares, 100,000 shares authorized,

10,000 shares issued and outstanding ...........................................50,000

Total Share Capital .................................................................50,000

Retained Earnings (deficit) ........................................................ (50,000)

Total Shareholders' Equity ........................................................$45,000

Requirements

Answer the following questions and make journal entries as needed:

1. What does the $2 mean for the preferred shares? After Gamma Corporation issues preferred shares, how much in annual cash dividends would Gamma Corporation expect to pay on 1,000 shares?

2. At what price per share did Gamma Corporation issue the common shares during 2014?

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

4. During 2015, the company completed the following selected transactions.

Journalize each transaction. Explanations are not required.

a. Issued for cash 5,000 preferred shares at $10 per share.

b. Issued for cash 1,000 common shares at a price of $7 per share.

5. Prepare the shareholders' equity section of the Gamma Corporation statement of financial position at December 31, 2015. Assume net income for the year is $50,000.