Question

In: Accounting

2. Kohler Corporation reports the following components of stockholders’ equity on December 31, 2016: Common stock—$15...

2. Kohler Corporation reports the following components of stockholders’ equity on December 31, 2016:

Common stock—$15 par value, 100,000 shares authorized,
45,000 shares issued and outstanding
$675,000
Paid-in capital in excess of par value, common stock 60,000
Retained earnings 430,000
Total stockholders' equity $1,165,000


In year 2017, the following transactions affected its stockholders’ equity accounts.

Jan. 1 Purchased 5,500 shares of its own stock at $15 cash per share.
Jan. 5 Directors declared a $4 per share cash dividend payable on February 28 to the February 5 stockholders of record.
Feb. 28 Paid the dividend declared on January 5.
July 6 Sold 2,063 of its treasury shares at $19 cash per share.
Aug. 22 Sold 3,437 of its treasury shares at $12 cash per share.
Sept. 5 Directors declared a $4 per share cash dividend payable on October 28 to the September 25 stockholders of record.
Oct. 28 Paid the dividend declared on September 5.
Dec. 31 Closed the $428,000 credit balance (from net income) in the Income Summary account to Retained Earnings.


Required:

1. Prepare journal entries to record each of these transactions for 2017.
2. Prepare a statement of retained earnings for the year ended December 31, 2017.
3. Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2017.


Solutions

Expert Solution

1
Date General Journal Debit Credit
1-Jan Treasury stock, Common 82,500 =5500*15
Cash 82,500
5-Jan Retained earnings 158,000 =(45000-5500)*4
Common dividend payable 158,000
28-Feb Common dividend payable 158,000
Cash 158,000
6-Jul Cash 39,197 =2063*19
Treasury stock, Common 30,945 =2063*15
Paid-in capital, Treasury stock 8,252
22-Aug Cash 41,244 =3437*12
Paid-in capital, Treasury stock 8,252
Retained earnings 2,059
Treasury stock, Common 51,555 =3437*15
5-Sep Retained earnings 180,000 =45000*4
Common dividend payable 180,000
28-Oct Common dividend payable 180,000
Cash 180,000
31-Dec Income summary 428,000
Retained earnings 428,000
2
KOHLER CORPORATION
Statement of Retained Earnings
For Year Ended December 31, 2017
Retained earnings, Dec. 31, 2016 430,000
Add: Net income 428,000
858,000
Less: Cash dividends declared (338,000)
Less: Treasury stock reissuances (2,059)
Retained earnings, Dec. 31, 2017 517,941
3
KOHLER CORPORATION
Stockholders' Equity Section of the Balance Sheet
December 31, 2017
Common stock - $15 par value 675,000
Paid-in capital in excess of par value, common stock 60,000
Total contributed capital 735,000
Retained earnings 517,941
Total stockholders' equity 1,252,941

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