Power Drive Corporation designs and produces a line of golf equipment and golf a

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 51,000 additional shares of $1 par value common stock for $48 per share. May 10 Repurchases 4,600 shares of treasury stock for $51 per share. June 1 Declares a cash dividend of $1.30 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 2,300 shares of treasury stock purchased on May 10 for $56 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, $4,100,000; and Retained Earnings, $1,600,000. Net income for the year ended December 31, 2018, is $560,000 Required: Prepare the statement of stockholders' equity for Power Drive Corporation for the year ended December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.) POWER DRIVE CORPORATION Statement of Stockholders' Equity For the Year Ended December 31, 2018 Additional Total Retained Paid-in CapitalEarnings Common Stock Treasury Stock Stockholders Balance, January 1 Issued common stock Purchase treasury stock Dividends Sale of treasury stock Net income Balance, December 31 100,000 $ 4,100,000$ 1,600,00o 0|$ 5,800,000 | S 100,000 4,100,000 1,600,000 0$ 5,800,000

Explanation / Answer

Statement of Stockholders Equity

Power Drive corporation

For the year Ended December 31, 2018

$51000

(51000*$1)

$2397000

(51000*$47)

-$234600

(4600*$51)

-$190320

(146400*$1.3)

October 21, Reissue of treasury stock

(Note 4)

$11500

(2300*$5)

$117300

(2300*$51)

Working Notes

Note 1) Issue of common stock

Price = $48

Par value = $1

Additional Paid in value = ($48-$1) = $47

Note 2) Treasury stock is deducted since it is bought back by company from its issued common stock

Note 3) Numbet of shares for which dividend declared

Note 4 - Treasury stock reissued @ $56

Treasury stock bought back price = $51

Additional Paid in capital = ($56-$51) = $5

Particulars Common stock Additional Paid in Capital Retained Earnings Treasury Stock Total Stockholders' Equity Balance, January 1 $100000 $4100000 $1600000 $0 $5800000 March 1, Issue of common stock (Note 1)

$51000

(51000*$1)

$2397000

(51000*$47)

$0 $0 $2448000 May 10, Purchase treasury Stock (Note 2) $0 $0 $0

-$234600

(4600*$51)

-$234600 June 1, Dividend Declared (Note 3) $0 $0

-$190320

(146400*$1.3)

$0 -$190320

October 21, Reissue of treasury stock

(Note 4)

$0

$11500

(2300*$5)

$0

$117300

(2300*$51)

$128800 Net Income (Given) $0 $0 $560000 $0 $560000 Balance, December 31 $151000 $6508500 $1969680 -$117300 $8511880

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