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Equity Transactions and Statement Preparation

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P15-1 (Equity Transactions and Statement Preparation) On January 5, 2007, Drabek Corporation received
a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating preferred
stock, and 50,000 shares of $5 par value common stock. It then completed these transactions.
Jan. 11 Issued 20,000 shares of common stock at $16 per share.
Feb. 1 Issued to Robb Nen Corp. 4,000 shares of preferred stock for the following assets: machinery with a
fair market value of $50,000; a factory building with a fair market value of $110,000; and land with an
appraised value of $270,000.
July 29 Purchased 1,800 shares of common stock at $19 per share. (Use cost method.)
Aug. 10 Sold the 1,800 treasury shares at $14 per share.
Dec. 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend.
Dec. 31 Closed the Income Summary account. There was a $175,700 net income.

Instructions

(a) Record the journal entries for the transactions listed above.
(b) Prepare the stockholders' equity section of Drabek Corporation's balance sheet as of December
31, 2007.

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Solution Summary

Equity transactions and statement preparations for Drabek Corporation are provided.

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