Question

Power Drive Corporation designs and produces a line of golf equipment and golf apparel. Power Drive has 100,000 shares of common stock outstanding as of the beginning of 2024. Power Drive has the following transactions affecting stockholders' equity in 2024.

March 1 Issues 65,000 additional shares of $1 par value common stock for $62 per share.
May 10 Purchases 6,000 shares of treasury stock for $65 per share.
June 1 Declares a cash dividend of $2.00 per share to all stockholders of record on June 15. (Hint: Dividends are not paid on treasury stock.)
July 1 Pays the cash dividend declared on June 1.
October 21 Resells 3,000 shares of treasury stock purchased on May 10 for $70 per share.

Required:
Record each of these transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

The recording of each common stock transaction during 2024 is as follows:

Journal Entry:

March 1 Debit Cash $4,030,000

Credit Common Stock $65,000

Credit Additional Paid-in Capital $3,965,000

(To record the issuance of 65,000 additional shares of $1 par value common stock for $62 per share.)

May 10 Debit Treasury Stock $6,000

Debit Additional Paid-in Capital $384,000

Credit Cash $390,000

(To record the purchase of 6,000 shares of treasury stock for $65 per share.)

June 1 Debit Retained Earnings $318,000

Credit Dividends Payable $318,000

(To record a cash dividend of $2.00 per share to all stockholders of record on June 15.)

July 1 Debit Dividends Payable $318,000

Credit Cash $318,000

October 21 Debit Cash $210,000

Credit Treasury Stock $3,000

Credit Additional Paid-in Capital $207,000

(To record the resale of 3,000 shares of treasury stock purchased on May 10 for $70 per share.)

Transaction Analysis:

Common stock outstanding on January 1, 2024 = 100,000 shares

March 1 Cash $4,030,000 Common Stock $65,000 Additional Paid-in Capital $3,965,000

(To record the issuance of 65,000 additional shares of $1 par value common stock for $62 per share.)

May 10 Treasury Stock $6,000 Additional Paid-in Capital $384,000 Cash $390,000

(To record the purchase of 6,000 shares of treasury stock for $65 per share.)

June 1 Retained Earnings $318,000 Dividends Payable $318,000

(To record a cash dividend of $2.00 per share to all stockholders of record on June 15.)

July 1 Dividends Payable $318,000 Cash $318,000

October 21 Cash $210,000 Treasury Stock $3,000 Additional Paid-in Capital $207,000

(To record the resale of 3,000 shares of treasury stock purchased on May 10 for $70 per share.)