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 2021. Power Drive has the following transactions affecting stockholders' equity in 2021. March 1 Issues 56,000 additional shares of $1 par value common stock for $53 per share. May 10 Purchases 5,100 shares of treasury stock for $56 per share. June 1 Declares a cash dividend of $1.55 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 2,550 shares of treasury stock purchased on May 10 for $61 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, $4,600,000; and Retained Earnings, $2,100,000. Net income for the year ended December 31, 2021, is $610,000. Required: Prepare the stockholders' equity section of the balance sheet for Power Drive Corporation as of December 31, 2021.
2 answers:
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Answer:
a. Contribution from Berry = $6,000
b-1. Contribution from Hammond = $22,556
b-2. Disbursement shall be:
Anderson = $8,889
Berry = $3,667
c. Amount to be received by Anderson on Liquidation = $11,500
Explanation:
As for the provided information we have,
Capital balances
Anderson 40% $20,000
Berry 30% $12,000
Hammond 20% $17,000 (Deficit)
Winwood 10% $25,000 (Deficit)
a. Total deficit in this case will be = Share of Hammond + Winwood = $17,000 + $25,000 = $42,000
Berry's share =
Since Berry's current balance = $12,000
Contribution required = $18,000 - $12,000 = $6,000
b-1. Total deficit of Winwood = $25,000
Hammond share =
Hammond's current balance = - $17,000
Thus, contribution from Hammond = $5,556 + $17,000 = $22,556
b-2. Total deficit balance = $17,000 + $25,000 = $42,000
Total sufficient balance = $20,000 + $12,000 = $32,000
Net deficit balance = $42,000 - $32,000 = $10,000
Anderson share in Deficit of Winwood =
Thus, net capital of Anderson = $20,000 - $11,111 = $8,889
Berry's share in deficit of Winwood =
Thus, net capital from Berry = $12,000 - $8,333 = $3,667
c. Total deficit from Hammond = $17,000
Anderson share =
Anderson's current balance = $20,000
Amount extra contributed by Anderson = $20,000 - $8,500 = $11,500
Thus, Anderson will receive $11,500 on liquidation.
Final Answer
a. Contribution from Berry = $6,000
b-1. Contribution from Hammond = $22,556
b-2. Disbursement shall be:
Anderson = $8,889
Berry = $3,667
c. Amount to be received by Anderson on Liquidation = $11,500