The Young Corporation has been operating successfully for several years. It is authorized to issue 24,000 shares of no-par common stock and 6,000 shares of 8%, $100 par preferred stock. The Contributed Capital section of its January 1, 2007 balance sheet is as follows:

8% preferred stock, $100 par ........ $190,000

Common stock, no par ........... 184,000

Premium on preferred stock ........ 15,200

$389,200

Part a. A stockholder has raised the following questions:

1. What is the legal capital of the corporation?

2. At what average price per share has the preferred stock been issued?

3. How many shares of common stock have been issued (the common stock has been issued at an average price of $23 per share)?

Part b. The company engaged in the following transactions in 2007:

Mar. 2 Received a subscription to 400 shares of the 8% preferred stock. The total subscription price is $122 per share and the contract requires a $10 per share down payment. The remaining balance must be paid within 60 days or the stock subscription is defaulted. In the case of default, 20% of the down payment on the defaulted shares is forfeited, and the remainder is returned to the defaulting subscribers.

Apr. 5 Sold 900 shares of common stock for $34 per share.

Apr. 13 Issued 400 shares of common stock in exchange for land. The stock is currently selling at $33 per share.

Apr. 30 Received remaining subscription balance (from March 2) owed on 350 shares of preferred stock and issued the stock.

May 4 Returned 80% of their down payment to defaulting subscribers and canceled the related account balances.

June 1 Reacquired 500 shares of common stock at $36 per share. The company uses the cost method to account for treasury stock.

Oct. 19 Issued for $27,000 a combination of 500 shares of common stock and 100 shares of preferred stock. The common and preferred stock are currently selling for $35 and $125 per share, respectively.

Nov. 16 Reissued the 500 shares of treasury stock at $38 per share.

Dec. 31 Distributed an $8 per share dividend on all preferred stock outstanding and a $2 per share dividend on all common stock outstanding on this date (debit Retained Earnings and credit Cash for each dividend).

Required

1. Answer the questions in part a.

2. Prepare journal entries to record the transactions in part b.

3. Prepare the contributed capital section of Young’s December 31, 2007 balance sheet.