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1. (15 points) Star Hollow Company has 20,000 authorized shares of common stock, $2 par, and also 20,000 authorized shares of preferred stock, $10 par.

Required:

Record journal entries for the following separate transactions. Analyze and record each transaction separately.

a. On January 1, 2020, Star Hollow sold 1,200 shares of common stock and 600 shares of preferred stock for a lump sum of $36,900. The common stock had been selling during the current week at $25 per share, and the preferred at $12 per share. Round amounts to the nearest dollar.

b. On January 1, 2020, Star Hollow issued 540 shares of preferred stock for used equipment. The equipment had been appraised at $7,200, and the book value recorded by the seller was $3,600. A reliable determinable fair value on the preferred stock has not been established.

c. Assume that the 60,000 shares of preferred stock are callable for $12 per share at the option of the issuer, Star Hollow. After issuing 1,500 shares of callable preferred stock on January 1, 2020, for $12, Star Hollow recalled 300 shares of preferred stock on June 30, 2020, for $12. Record the entries for Star Hollow on January 1, 2020, and on June 30, 2020.

d. Assume that each of the 60,000 shares of preferred stock is convertible into 2 shares of common stock at the option of the stockholder. After issuing 1,500 shares of convertible preferred stock on January 1, 2020 for $12, 300 shares of preferred stock were converted into common stock on June 30, 2020. Record the entries for Star Hollow on January 1, 2020, and on June 30, 2020, assuming that the fair value of the preferred stock was $16 per share on June 30, 2020.

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