Determine RETAINED EARNINGS given the following: Power Drive Corporation has the

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

Explanation / Answer

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

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