Question

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		60,000
Retained earnings		430,000
Total stockholders' equity	$	1,740,000

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

Jan.		1		Purchased 5,000 shares of its own stock at $15 cash per share.
Jan.		5		Directors declared a $6 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 $19 cash per share.
Aug.		22		Sold 3,125 of its treasury shares at $12 cash per share.
Sept.		5		Directors declared a $6 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 $388,000 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

General Journal
Date	Account titles & Explanations				Debit	Credit
1-Jan	Treasury Stock				75000
	Cash	(5000*15)				75,000
5-Jan	Retained earnings				270000
	Dividends payable					270,000
	(50,000-5000)*6
28-Feb	Dividends payable				270,000
	cash					270,000
6-Jul	Cash		(1875*19)		35625
	Treasury stock		(1875*15)			28125
	paid in capital in excess-TS					7500
22-Aug	Cash		(3,125*12)		37500
	paid in capital in excess-TS				7,500
	Retained earnings				1,875
	Treasury stock		(3125*15)			46875
5-Sep	Retained earnings				300,000
	Dividends payable					300,000
	(50,000*6)
28-Oct	Dividends payable				300,000
	cash					300,000
31-Dec	Income summary				388,000
	Retained earnings					388,000
2)	Retained Earnings
	Beginning balance ,Jan 1					430,000
	Add:Net income					388,000
						818,000
	less:Cash dividend					570000
	less:Treasury stock					1,875
	Closing balance ,Dec 31					246,125
3)	Stockholders Equity section
common stock -$20 par value					1,250,000
paid in capital in excess of par value-CS					60,000
total contributed capital					1,310,000
Retained earnings					246,125
total stockholders Equity					1,556,125