On January 5, 2010, Mackey Corporation received a charter granting the right to issue 5,000 shares of $100 par, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $10 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 Loney 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 $160,000; and land with an appraised value of $270,000.

July 29 Purchased 1,800 shares of common stock at $17 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.

(a) Record the journal entries for the transactions listed above.

(b) Prepare the stockholders' equity section of Mackeys Corporation's balance sheet as of December 31, 2010.

(c) Please explain how "Retained Earnings-Preferred Dividends" is calculated.