Riverbend Inc. was organized in 2019. At December 31, 2019, Riverbend Inc.’s balance sheet reported the following shareholders’ equity account information:

Preferred shares, $4.00, 200,000 shares authorized, none issued ..................... $ 0
Common shares, 1,000,000 shares authorized, 150,000 shares issued
and outstanding .................................................................................................. 225,000
Retained earnings (Deficit) ................................................................................. (50,000)

Required

Answer the following questions and make journal entries as needed:

1. What does the $4.00 mean for the preferred shares? If Riverbend Inc. issues 2,500 preferred shares, how much in cash dividends will it expect to pay?

2. At what average price per share did Riverbend Inc. issue the common shares during 2019?

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

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

Feb. 15 Issued for cash 1,500 preferred shares at $20.00 per share.

April 2 Issued for cash 5,000 common shares at a price of $1.75 per share.

June 1 Issued 100,000 common shares to acquire a building valued at $250,000.

Dec. 31 Net income for the year was $180,000, and the company declared no dividends.

Make the closing entry for net income.

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