Question

ower 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 52,000 additional shares of $1 par value common stock for $49 per share. May 10 Purchases 4,700 shares of treasury stock for $52 per share. June 1 Declares a cash dividend of $1.35 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 2,350 shares of treasury stock purchased on May 10 for $57 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, $4,200,000; and Retained Earnings, $1,700,000. Net income for the year ended December 31, 2021, is $570,000. 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

Answer and Explanation:

The preparation of the statement of stockholder equity is presented below:

                                                 Power Drive Corporation    

                                                       Balance sheet  

                                      (Stockholder's Equity Section)    

                                                  At December 31, 2021  

Stockholder's Equity:    

Common stock                               $1,52,000    

Additional Paid - in - Capital          $67,07,750    

Total Paid - in Capital                      $68,59,750    

Retained earnings                          $20,71,145    

Treasury Stock                          -$1,22,200    

Total Stockholder's Equity             $88,08,695  

Workings note    

Paid in capital in excess of par value, Common stock  $24,96,000  

                                                                                       (52000 × $48)  

Paid in capital in from sale of treasury stock                 $11,750  

                                                                                      [2350 × ($57-$52)]  

Total Additional Paid - in - Capital                                 $25,07,750    Now

Dividend declared [(152000 - 4700) × $1.35]         $1,98,855    

Treasury Stock [(4700 - 2350) × $52]                     $1,22,200  

 

Particulars            Beg. Balance    Additions     Deductions   End. Bal

Common stock    $100,000            $52,000                             $152,000

Additional Paid -  $42,00,000       $25,07,750                       $67,07,750

in - Capital

Retained earnings $1,700,000     $570,000     $1,98,855       $20,71,145