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 57,000 additional shares of $1 par value common stock for $54 per share. May 10 Purchases 5,200 shares of treasury stock for $57 per share. June 1 Declares a cash dividend of $1.60 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 2,600 shares of treasury stock purchased on May 10 for $62 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, $4,700,000; and Retained Earnings, $2,200,000. Net income for the year ended December 31, 2021, is $620,000.

Required: Prepare the statement of stockholders' equity for Power Drive Corporation for the year ended December 31, 2021.

Answer 1

Solution:

Power Drive corp Statement of stockholder equity for the year ended December 31,2021
	Common stock	Additional paid in capital	Retained earnings	Treasury stock	Total stockholder's equity
Balance January 1	$100,000	$4,700,000	$2,200,000		$7,000,000
Issued common stock	$57,000	$3,021,000			$3,078,000
Purchase treasury stock				($296,400)	($296,400)
Cash dividends			($242,880)		($242,880)
Sale of treasury stock		$13,000		$148,200	$161,200
Net income			$620,000		$620,000
Balance December 31	$157,000	$7,734,000	$2,577,120	($148,200)	$10,319,920

Working:

Cash dividends =(100,000+57,000 -5,200)*1.60

=151,800*1.60

=242,880

Sale of treasury stock:

Additional paid in capital = 2,600 *(62 -57)

=2,600*5

=13,000

Treasury stock = 2,600*57

=148,200

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