Reference no: EM132915070

Prince Observation incorporated on May 1, 2020, and was authorized to issue 500,000 common shares and 100,000, 5% non-participating, convertible preferred shares. During the remainder of 2020, the company entered into the following transactions:

1. Issued 32,000 common shares in exchanged for $640,000.
2. Issued 5,000 preferred shares in exchange for $70,000.
3. Repurchased 3,000 common shares for $25 per share in the open market.

The company entered into no other transactions that affected shareholders' equity during 2020.

Problem 1: Provide the journal entries for each of the transactions

1. 2 bar for issued common shares
2. 2 bar for issued preferred shares
3. 3 bar for the last one

Problem 2: Prince Observation generated $758,000 in net income in 2020 and did not declare any dividends during 2020. Prepare the shareholders' equity section of the statement of financial position as of December 31, 2020.