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.

March		1		Issues 55,000 additional shares of $1 par value common stock for $52 per share.
May		10		Purchases 5,000 shares of treasury stock for $55 per share.
June		1		Declares a cash dividend of $1.50 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 2,500 shares of treasury stock purchased on May 10 for $60 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, $4,500,000; and Retained Earnings, $2,000,000. Net income for the year ended December 31, 2021, is $600,000.

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
Balance Sheet (partial)
December 31, 2021
Paid in capital
Contributed capital
Common stock, $1 par ($100,000+$55,000)	$      155,000
Paid in capital In excess of par value, Common stock ($4,500,000+(55,000*$51)	$   7,305,000
Paid in capital from treasury stock (2,500*$5)	$         12,500
Total contributed capital		$   7,472,500
Retained earnings ($2,000,000+$600,000-(150,000*$1.5)		$   2,375,000
Total contributed capital and retained earnings		$   9,847,500
Less: Treasury stock (2,500 common shares)		$    (137,500)
Total stockholders Equity		$   9,710,000

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