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 2021. Power Drive has the following transactions affecting stockholders' equity in 2021. 0.76 points March 1 Issues 60,000 additional shares of $1 par value common stock for $57 per share. May 10 Purchases 5,500 shares of treasury stock for $60 per share. June 1 Declares a cash dividend of $1.75 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 2,750 shares of treasury stock purchased on May 10 for $65 per share Power Drive Corporation has the following beginning balances in its stockholders' equity accounts on January 1, 2021: Common Stock, $100,000; Additional Paid-in Capital, $5,000,000; and Retained Earnings, $2,500,000. Net income for the year ended December 31, 2021, is $650,000.

Required: Prepare the stockholders' equity section of the balance sheet for Power Drive Corporation as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Power Drive Corporation

Stockholders' Equity Section

December 31, 2021

Paid in capital:

Common Stock $1 par $160,000

(160,000 shares authorized, 157,250

shares outstanding)

Additional paid in capital, $8,360,000

in excess of par value

Additional paid in capital, $13,750

from Treasury Stock

Total paid in capital $8,533,750

Retained earnings $2,879,625

Sub-total $11,413,375

Treasury Stock ($165,000)

Total Stockholders' Equity $11,248,375

Step-by-step explanation:

• beginning balances in its stockholders' equity accounts on January 1, 2021: Common Stock, $100,000 + $60,000
• Additional Paid-in Capital, $5,000,000 + $3,360,000 + $13,750
• Retained Earnings, $2,500,000 + $650,000 - $270,375
• treasury stock $330,000 - $165,000

Net income for the year ended December 31, 2021, is $650,000.

March 1 Issues 60,000 additional shares of $1 par value common stock for $57 per share.

Dr Cash 3,420,000

Cr Common stock 60,000

Cr Additional paid in capital 3,360,000

May 10 Purchases 5,500 shares of treasury stock for $60 per share.

Dr Treasury stock 330,000

Cr Cash 330,000

June 1 Declares a cash dividend of $1.75 per share to all stockholders of record on June 15. (Hint: Dividends are not paid on treasury stock.)

Dr Retained earnings 270,375

Cr Dividends payable 270,375

July 1 Pays the cash dividend declared on June 1.

Dr Dividends payable 270,375

Cr Cash 270,375

October 21 Resells 2,750 shares of treasury stock purchased on May 10 for $65 per share

Dr Cash 178,750

Cr Treasury stock 165,000

Cr Additional paid in capital 13,750