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: B. The firm hires 45 workers and earns a $1,200.00 Economic Profit
Explanation:
If the Market Equilibrium rate is $105 then the company should hire 45 workers as shown in the table.
If they did that, revenue would be $7,425
Expenses would be wages and fixed costs:
= Wages + fixed costs
= (45 workers * wage rate) + 1,500
= (45 * 105) + 1,500
= $6,225
Economic profit would be:
= 7,425 - 6,225
= $1,200
