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 2018. Power Drive has the following transactions affecting stockholders' equity in 2018. March 1 Issues 65,000 additional shares of $1 par value common stock for $62 per share. May 10 Repurchases 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 Reissues 3,000 shares of treasury stock purchased on May 10 for $70 per share.

Record each of these transactions.

Answer 1

Solution:

Journal Entries

Date	General Journal	Debit	Credit
March.1	Cash (65,000 Shares x Issue Price $62)	$4,030,000
	Common Stock (65,000 Shares x Par Value $1)		$65,000
	Additional Paid in Capital - Common Stock (Bal.fig.)		$3,965,000
May.10	Treasury Stock (6,000 Shares x Cost $65)	$390,000
	Cash		$390,000
June.1	Retained Earnings	$318,000
	Dividend Payable (159,000 Shares x $2)		$318,000
	(Number of Shares Outstanding as on June 1 = Beg 100,000 + 65,000 New Issued - 6,000 Treasury = 159,000 Shares)
June.15	No Entry is required on record date
July.1	Dividend Payable	$318,000
	Cash		$318,000
Oct.21	Cash (3,000 Shares x Issue Price $70)	$210,000
	Treasury Stock (3,000 Shares x Cost $65)		$195,000
	Additional Paid in Capital from Treasury Stock (Bal.fig.)		$15,000

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