Question

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

Common stock—$20 par value, 100,000 shares authorized, 55,000 shares issued and outstanding	$	1,100,000
Paid-in capital in excess of par value, common stock		70,000
Retained earnings		430,000
Total stockholders' equity	$	1,600,000

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 $2 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 $2 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.

Prepare journal entries to record each of these transactions for 2017.

No	Date	General Journal	Debit	Credit
1	Jan 01	Treasury stock, Commonselected answer correct	90,000selected answer correct	not attempted
		Cashselected answer correct	not attempted	90,000selected answer correct
2	Jan 05	Retained earningsselected answer correct	101,000selected answer correct	not attempted
		Common dividend payableselected answer correct	not attempted	101,000selected answer correct
3	Feb 28	Common dividend payableselected answer correct	101,000selected answer correct	not attempted
		Cashselected answer correct	not attempted	101,000selected answer correct
4	Jul 06	Cashselected answer correct	selected answer incorrect	not attempted
		Treasury stock, Commonselected answer correct	not attempted	selected answer incorrect
		Paid-In capital, Treasury stockselected answer correct	not attempted	selected answer incorrect
5	Aug 22	Cashselected answer correct	selected answer incorrect	not attempted
		Paid-In capital, Treasury stockselected answer correct	selected answer incorrect	not attempted
		Retained earningsselected answer correct	selected answer incorrect	not attempted
		Treasury stock, Commonselected answer correct	not attempted	selected answer incorrect
6	Sep 05	Common dividend payableselected answer incorrect	selected answer incorrect	not attempted
		Cashselected answer incorrect	not attempted	selected answer incorrect
7	Oct 28	Common dividend payableselected answer correct	selected answer incorrect	not attempted
		Cashselected answer correct	not attempted	selected answer incorrect
8	Dec 31	Income summaryselected answer correct	selected answer incorrect	not attempted
		Retained earningsselected answer correct	not attempted	selected answer incorrect

Prepare a statement of retained earnings for the year ended December 31, 2017. (Amounts to be deducted should be indicated by a minus sign.)

	KOHLER CORPORATION Statement of Retained Earnings For Year Ended December 31, 2017 not attempted not attempted not attempted not attempted 0 not attempted not attempted not attempted not attempted not attempted $0

Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2017.

	KOHLER CORPORATION Stockholders' Equity Section of the Balance Sheet December 31, 2017 not attempted not attempted not attempted not attempted Total contributed capital 0 not Total stockholders' equity

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
Date	General Journal	Debit	Credit
1-Jan	Treasury stock, Common	90,000		=4500*20
	Cash		90,000
5-Jan	Retained earnings	101,000		=(55000-4500)*2
	Common dividend payable		101,000
28-Feb	Common dividend payable	101,000
	Cash		101,000
6-Jul	Cash	40,512		=1688*24
	Treasury stock, Common		33,760	=1688*20
	Paid-in capital, Treasury stock		6,752
22-Aug	Cash	47,804		=2812*17
	Paid-in capital, Treasury stock	6,752
	Retained earnings	1,684
	Treasury stock, Common		56,240	=2812*20
5-Sep	Retained earnings	110,000		=55000*2
	Common dividend payable		110,000
28-Oct	Common dividend payable	110,000
	Cash		110,000
31-Dec	Income summary	408,000
	Retained earnings		408,000
2
	KOHLER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31, 2017
	Retained earnings, Dec. 31, 2016	430,000
	Add: Net income	408,000
		838,000
	Less: Cash dividends declared	-211,000
	Less: Treasury stock reissuances	-1,684
	Retained earnings, Dec. 31, 2017	625,316
3
	KOHLER CORPORATION
	Stockholders' Equity Section of the Balance Sheet
	December 31, 2017
	Common stock - $20 par value	1,100,000
	Paid-in capital in excess of par value, common stock	70,000
	Total contributed capital	1,170,000
	Retained earnings	625,316
	Total stockholders' equity	1,795,316