Solution:
Power Drive Corporation has the following beginning balances in its stockholders’ equity accounts on January 1, 2012:
Common Stock, $100,000;
Additional Paid-in Capital - common stock $4,830,000;
Retained Earnings, $2,520,000.
March 1 Issues 55,500 additional shares of $1 par value common stock for $67 per share.
Dr Cash 3,718,500
Cr Common stock 55,500
Cr Paid-in Capital 3,663,000
At this point there are 175,500 common shares outstanding
May 10 Repurchases 11,000 shares of treasury stock for $89 per share.
Dr Treasury stock 979,000
Cr Cash 979,000
At this point there are 164,500 common shares outstanding
June 1 Declares a cash dividend of $1.50 per share to all stockholders of record on June 15.
Dr Cash dividend 246,750 (164,500 x $1.50)
Cr Dividend payable 246,750
July 1 Pays the cash dividend declared on June 1.
Dr Dividend payable 246,750
Cr CAsh 246,750
October 21 Reissues 3,000 shares of treasury stock purchased on May 10 for $95 per share.
Dr Cash 285,000
Cr Treasury stock 267,000 (3,000 x cost of $89)
Cr Additional paid-in capital - treasury stock 18,000
At this point there are 167,500 common shares outstanding
Stockholders' equity
Common stock - 175,500 shares of $1 par issued, 167,500 outstanding $175,500
Additional paid-in capital - common stock $8,493,000
Additional paid-in capital - treasury stock $18,000
retained earnings $2,803,250
less Treasury stock (8,000 shares) $712,000
Stockholders' equity $10,777,750
