Question

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.

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

Common stock—$25 par value, 100,000 shares authorized, 50,000 shares issued and outstanding	$	1,250,000
Paid-in capital in excess of par value, common stock		70,000
Retained earnings		400,000
Total stockholders' equity	$	1,720,000

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

Jan.		1		Purchased 4,500 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 1,688 of its treasury shares at $24 cash per share.
Aug.		22		Sold 2,812 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 $368,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Answer 1

Date	General journal				Debit	Credit
1-Jan	Treasury stock				90,000
	cash (4500*20)					90,000
5-Jan	Retained earnings				182000
	Dividends payable					182,000
	(50000-4500)*4
28-Feb	Dividends payable				182,000
	cash					182,000
6-Jul	Cash	(1,688*24)			40512
	Treasury stock		(1,688*20)			33760
	paid in capital in excess of Treasury stock					6752
22-Aug	Cash	(2812*17)			47804
	paid in capital in excess of par -TS				6,752
	Retained earnings				1,684
	Treasury stock		(2812*20)			56240
5-Sep	Retained earnings				200000
	Dividends payable (50000*4)					200,000
28-Oct	Dividends payable				200,000
	cash					200,000
31-Dec	Income summary				368,000
	Retained earnings					368,000
	Statement of retained earnings
	opening balance ,jan 1				400,000
	add :Net income				368,000
					768,000
	less:Cash Dividend				382000
	Treasury stock				1,684
	Closing balance,Dec 31				384,316
	Stockholders Equity section of the Balance Sheet
	common stock				1,250,000
	paid in capital in excess of par-CS				70,000
	total contributed capital				1,320,000
	Retained earnings				384,316
	total Stockholders Equity				1,704,316