Question

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

Common stock—$20 par value, 100,000 shares authorized, 45,000 shares issued and outstanding	$	900,000
Paid-in capital in excess of par value, common stock		70,000
Retained earnings		460,000
Total stockholders' equity	$	1,430,000

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

Jan.		1		Purchased 4,000 shares of its own stock at $25 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 1,500 of its treasury shares at $29 cash per share.
Aug.		22		Sold 2,500 of its treasury shares at $22 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.

Next Visit question map

Question10of15Total10 of 15

Prev

Answer 1

Solution:

Requirement:1

Date	Account Titles and Explanation	Debit	Credit
Jan. 1	Treasury Stock	$       100,000
	Cash		$        100,000
	(To record Treasury Stock purchased)
Jan. 5	Cash Dividend	$       164,000
	Dividend Payable-Common Stock		$        164,000
	( To record dividend declared)
Feb. 28	Dividend Payable-Common Stock	$       164,000
	Cash		$        164,000
	( To record dividend paid)
July. 6	Cash	$         43,500
	Treasury Stock		$           37,500
	Paid-In Capital in excess - Treasury Stock		$             6,000
	(To record treasury stock resold)
Aug. 22	Cash	$         55,000
	Paid-In Capital in excess - Treasury Stock	$           6,000
	Retained Earning	$           1,500
	Treasury Stock		$           62,500
	(To record treasury stock resold)
Sept. 5	Cash Dividend 45000*4]	$       180,000
	Dividend Payable-Common Stock		$        180,000
	( To record dividend declared)
Oct. 28	Dividend Payable-Common Stock	$       180,000
	Cash		$        180,000
	( To record dividend paid)
Dec. 31	Income Summary/Net Income	$       408,000
	Retained Earnings		$        408,000
	( To close income summary account)

Requirement:2

Kohler Corporation
Retained Earnings Statement
For the Year Ended December.31, 2017
Beginning Balance	$         460,000
Add:Net Income	$         408,000
Less:
Dividends (Cash Dividend)	$       (344,000)
Treasury Stock	$            (1,500)
Retained Earnings Closing Balance	$         522,500

Requirement:3

Kohler Corporation
[Stockholders` Equity Section]
For the Year Ended December.31, 2017
Stockholder's equity :
Common Stock	$         900,000
Paid-in capital in excess of par-common stock	$            70,000
Total paid in capital	$         970,000
Retained Earnings	$         522,500
Total stockholder's Equity	$      1,492,500