Question

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

Common stock—$15 par value, 100,000 shares authorized, 55,000 shares issued and outstanding	$	825,000
Paid-in capital in excess of par value, common stock		60,000
Retained earnings		460,000
Total stockholders' equity	$	1,345,000

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

Jan.		1		Purchased 6,000 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 2,250 of its treasury shares at $24 cash per share.
Aug.		22		Sold 3,750 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. (1-8)
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

Requirement

In the books of Kohler Corporation

Journal Entries

for the yr ended 2017

Date

Particulars

DR $ Amount

CR $ Amount

1/1/207

Treasury Stock Common

120000

Calculation of Common Stock dividend

To Cash (6000 shares @20 )

120000

(Number of Shares O/S-Number of shares repurchased)*Cash Dividend Per share

to record purchase of

(55000-6000)*4

own shares of common stock

5/1/2017

Retained Earnings

196000

To Common Dividend Payable

196000

to record the declaration of

dividend on common stock

28/2/2017

Common Dividend Payable

196000

To Cash

196000

to record the payment of

dividend on common stock

6/6/2017

Cash -2250 shares @ $24 /share

54000

To Treasury Stock-2250 shares @20/share

45000

To Paid in Capital Treasury Stock

9000

to record the reissue of treasury

stock

22/8/2017

Cash 3750 shares @17 /share

63750

Paid in capital -treasury stock

9000

Retained Earnings

2250

To Treasury Stock 3750 shares @20 /share

75000

to record the reissue of treasury

stoock

5/9/2017

Retained Earnings A/C

220000

Calculation of Common Stock dividend

To Common Dividend Payable

220000

(Number of Shares O/S as on 5 feb +issue of repurchased)*Cash Dividend Per share

to record the declaration of

(49000+2250+3750)*4

dividend on common Stock

28/10/2017

Common Dividend Payable

220000

To Cash

220000

To record the payment of

dividend on common stock

31/12/2017

Income Summary

408000

To Retained Earnings

408000

To record the closure of net

income to retained earnings

2

Requirement

Kohler Corporation

Statement of Retained Earnings

For the yr ended 31st Dec 2017

Retained Earnings as on 31st Dec 2016

$460,000

Add Net Income

$408,000

$868,000

Less cash dividend declared

($416,000)

(196000+220000)

Less Treasury Stock Reissued

($2,250)

Retained Earnings as on 31st Dec 2017

$449,750

3

Requirement

Kohler Corporation

Stockholder Equity Section of the Balance Sheet

Dec 31st 2017

Common Stock $15 per share

$825,000

Paid in capital excess of par value

$60,000

Total Contributed Capital

$885,000

Retained Earnings

$449,750

Total Stockholders Equity

$1,334,750