Question

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

Common stock—$10 par value, 100,000 shares authorized, 50,000 shares issued and outstanding	$	500,000
Paid-in capital in excess of par value, common stock		80,000
Retained earnings		370,000
Total stockholders' equity	$	950,000

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

Jan.		1		Purchased 5,000 shares of its own stock at $20 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 1,875 of its treasury shares at $24 cash per share.
Aug.		22		Sold 3,125 of its treasury shares at $17 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 $408,000 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.

Answer 1

1)

		Debit	Credit
Jan-01	Treasury stock, Common	$      100,000.00
	Cash		$ 100,000.00
Jan-05	Retained Earnings	$      180,000.00
	Common dividend payable		$ 180,000.00
Feb-28	Common dividend payable	$      180,000.00
	Cash		$ 180,000.00
Jul-06	Cash	$        45,000.00
	Treasury stock, Common		$    37,500.00
	Paid-in capital, Treasury stock		$      7,500.00
Aug-22	Cash	$        53,125.00
	Paid-in capital, Treasury stock	$          7,500.00
	Retained Earnings	$          1,875.00
	Treasury stock, Common		$    62,500.00
Sep-05	Retained Earnings	$      200,000.00
	Common dividend payable		$ 200,000.00
Oct-28	Common dividend payable	$      200,000.00
	Cash		$ 200,000.00
Dec-31	Income Summary	$      408,000.00
	Retained Earnings		$ 408,000.00

2)

KOHLER CORPORATION
Statement of Retained Earnings
For Year Ended December 31, 2016
Retained earnings, Dec. 31, 2015	$370,000
Add: Net income	$408,000
	$778,000
Less: Cash dividends declared	$                          (380,000.00)
Less: Treasury stock reissuances	$                              (1,875.00)
Retained earnings, Dec. 31, 2016	$396,125.00

3)

KOHLER CORPORATION
Stockholders' Equity Section of the Balance Sheet
December 31, 2016
Common stock - $10 par value	$ 500,000.00
Paid-in capital in excess of par value, common stock	$   80,000.00
Total contributed capital	$ 580,000.00
Retained earnings	$ 396,125.00
Total stockholders' equity	$ 976,125.00