Answer:
Power Drive Corporation
Record of Stockholders' Equity Transactions in 2018:
March 1:
Debit Cash Account with $3,538,000
Credit Common Stock with $61,000
Credit Additional Paid-in Capital with $3,477,000
To record issue of 61,000 additional shares of $1 par value common stock for $58 per share.
May 10:
Debit Treasury Stock with $5,600
Debit Additional Paid-in Capital with $336,000
Credit Cash Account with $341,600
To record the repurchase of 5,600 shares of treasury stock for $61 per share.
June 1:
Debit Dividend with $279,720
Credit Dividends Payable with $279,720
To record declaration of a cash dividend of $1.80 per share to all stockholders of record on June 15.
July 1:
Debit Dividends Payable with $279,720
Credit Cash Account with $279,720
To record the payment of the cash dividend.
October 21:
Debit Cash Account with $184,800
Credit Treasury Stock with $2,800
Credit Additional Paid-in Capital with $182,000
To record the reissue of 2,800 shares of treasury stock for $66 per share.
Explanation:
a) The issue of additional 61,000 shares at $58 per share was done at a premium of $57 per share. The premium goes to Additional Paid-in Capital while the par value goes to Common Stock.
b) Treasury Stock represent the repurchase of its outstanding shares by the company. The accounts affected by treasury stock transactions are Treasury Stock, which is a contra account to the Common Stock and the Additional Paid-in Capital with a credit to the Cash Account. When the shares are reissued, these accounts are also involved with opposite entries.
c) Cash dividend is calculated on outstanding shares of record on June 15. The outstanding shares total 155,400 shares (100,000 + 61,000 - 5,600). The dividend is $279,720 (155,400 x $1.80).
d) There are three important dates when dividends are declared. The first is the declaration date (June 1), the second is the record date (June 15), and the third is payment date (July 1). Only stockholders of record on June 15 are entitled to receive the declared dividend.
