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.  

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.

Required:

Prepare the stockholders’ equity section of the balance sheet for Power Drive Corporation as of December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Balance Sheet
Stockholders' Equity Section
December 31,2018
Stockholders' Equity:
Common Stock	165000
Additional Paid ­in Capital	9480000
Total Paid ­in Capital	9645000
Retained Earnings	3382000
Treasury Stock	-195000
Total Stockholders' Equity	12832000
Workings:
Statement of Stockholders' Equity
For the Year Ended December 31, 2018
	Common Stock	Additional Paid­ in Capital	Retained Earnings	Treasury Stock	Total Stockholders' Equity
Balance, January 1	100000	5500000	3000000		8600000
Issued common stock	65000	3965000			4030000
Purchase treasury stock				-390000	-390000
Cash dividends			-318000		-318000
Sale of treasury stock		15000		195000	210000
Net income			700000		700000
Balance, December 31	165000	9480000	3382000	-195000	12832000
Cash dividends	318000	=(100000+65000-6000)*2