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Penn Company was formed on July 1, 2015.It was authorized to issue 300,000 shares of $10 par value common stock and 100,000 shares of 8% $25 parvalue, cumulative and nonparticipating preferred stock. Penn Company has a July 1-June 30 fiscal year.The following information relates to the stockholders’ equity accounts of Penn Company.Common StockPrior to the 2017-2018 fiscal year, Penn Company had 110,000 shares of outstanding common stock issuedas follows.1. 85,000 shares were issued for cash on July 1, 2015, at $31 per share.2. On July 24, 2015, 5,000 shares were exchanged for a plot of land which cost the seller $70,000 in 2006and had an estimated fair value of $220,000 on July 24, 2015.3. 20,000 shares were issued on March 1, 2016, for $42 per share.During the 2017-2018 fiscal year, the following transactions regarding common stock took place.November 30, 2017 Penn purchased 2,000 shares of its own stock on the open market at $39 per share.Penn uses the cost method for treasury stock.December 15, 2017 Penn declared a 5% stock dividend for stockholders of record on January 15, 2015,to be issued on January 31, 2018. Penn was having a liquidity problem and couldnot afford a cash dividend at the time. Penn’s common stock was selling at $52 pershare on December 15, 2017.June 20, 2015 Penn sold 500 shares of its own common stock that it had purchased on November30, 2017, for $21,000.Penn issued 40,000 shares of common stock at $44 per share on July 1, 2016. Teacher asked for this to be change to common stockCash DividendsPenn has followed a schedule of declaring cash dividends in December and June, with payment beingmade to stockholders of record in the following month. The cash dividends which have been declared sinceinception of the company through June 30, 2018, are shown below.Declaration Date Common – Stock Preferred Stock12/15/16 $0.30 per share – $1.00 per share6/15/17 $0.30 per share – $1.00 per share12/15/17 — – $1.00 per shareNo cash dividends were declared during June 2018 due to the company’s liquidity problems.Retained EarningsAs of June 30, 2017, Penn’s retained earnings account had a balance of $690,000. For the fiscal year endingJune 30, 2018, Penn reported net income of $40,000.InstructionsPrepare the stockholders’ equity section of the balance sheet, including appropriate notes, for PennCompany as of June 30, 2018, as it should appear in its annual report to the shareholders.