Tarrant Corporation was organized in 2011 to operate a financial consulting business. The charter authorized the following capital stock: common stock, par value $10 per share, 11,500 shares. During the first year, the following selected transactions were completed:

a. Sold and issued 5,600 shares of common stock for cash at $20 per share.

b. Sold and issued 1,000 shares of common stock for cash at $25 per share.

c. At year-end, the accounts reflected a $6,000 loss. Because a loss was incurred, no income tax expense was recorded.

Required:

1. Give the journal entry required for each of these transactions.

2. Prepare the stockholders’ equity section as it should be reported on the year-end balance sheet.

3. Can the company pay dividends at this time? Explain.