The general ledger of Maggio Corporation, a publicly traded company, contained the following shareholders' equity accounts in 2018:

________________________________________________________January 1__December 31

Preferred shares (15,000 and 15,000 shares issued, respectively)..........$ 750,000.......$ 750,000

Common shares (255,000 and 291,500 shares issued, respectively)......3,210,000.......3,857,000

Retained earnings......................................................................................980,000.......1,373,000

A review of the accounting records for the year ended December 31, 2018, reveals the following information:

1. On March 1, 20,000 common shares were sold for $17.50 per share. An unlimited number are authorized.

2. On August 18, a 6% stock dividend was declared for 16,500 common shares when the share price was $18. The stock dividend was distributed on September 25.

3. The preferred shares are $4 cumulative. An unlimited number of preferred shares are authorized. The quarterly preferred shareholders' cash dividend was declared and paid on the last day of each quarter.

4. Net income for the year was $750,000.

5. On December 31, the directors authorized a $200,000 restriction on retained earnings in accordance with a debt covenant.

Instructions

(a) Using T accounts, determine the transactions that explain the movement in the Preferred Shares, Common Shares, Dividends Declared, Stock Dividends Distributable, and Retained Earnings general ledger accounts for the year. (Hint: Although not required, you may find it helpful to prepare journal entries.)

(b) Prepare the shareholders' equity section of the statement of financial position at December 31, including any required note disclosure.