Question

Determine RETAINED EARNINGS given the following: Power Drive Corporation has the following beginning balances in its stockholders’ equity accounts on January 1, 2018: Common Stock, $100,000; Additional Paid-in Capital, $5,500,000; and Retained Earnings, $3,000,000. Net income for the year ended December 31, 2018, is $700,000. A. Mar 1: Issued 65,000 additional shares of $1 par value common stock for $62 per share B. May 10: Repurchases 6,000 shares of treasury stock for $65 per share C. Jun 1: Declares a cash dividend of $2.00 per share to all stockholders of record June 15 (Dividends not paid on treasury stock) D. Jul 1: Pays the cash dividend declared on Jun 1 E. Oct 21: Reissues 3,000 shares of treasury stock purchased May 10 for $70 per share

Answer 1

Dividend amount on June1:
Number of shares outstanding on Jan1				100000
Add: Issued on Mar 1				65000
Less: Purchased as treasury stock				6000
Number of shares outstanding on June 1				159000
Dividend per share				2
Amount of Dividend				318000
Balance of Retained earnings:
Beginning balance in Retained earnings				3,000,000
Add: Net income earned				700,000
				3,700,000
Less: Dividend paid				318000
Ending balance in Retained earnings				3,382,000