Question

Kohler Corporation reports the following components of stockholders’ equity at December 31, 2018.

Common stock—$15 par value, 100,000 shares authorized, 50,000 shares issued and outstanding	$	750,000
Paid-in capital in excess of par value, common stock		70,000
Retained earnings		400,000
Total stockholders' equity	$	1,220,000

During 2019, the following transactions affected its stockholders’ equity accounts.

Jan.		2		Purchased 5,000 shares of its own stock at $15 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 1,875 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 $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 $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.
2. Prepare a statement of retained earnings for the year ended December 31, 2019.
3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2019.

Journal entry worksheet

Note: Enter debits before credits.

	Date General Journal Debit Credit Jan 02

Prepare a statement of retained earnings for the year ended December 31, 2019. (Amounts to be deducted should be indicated by a minus sign.)

	KOHLER CORPORATION Statement of Retained Earnings For Year Ended December 31, 2019

Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2019.

	KOHLER CORPORATION Stockholders' Equity Section of the Balance Sheet December 31, 2019 Total contributed capital Total stockholders' equity

Answer 1

1
Date	General Journal	Debit	Credit
2-Jan	Treasury stock, Common	75,000		=5000*15
	Cash		75,000
5-Jan	Retained earnings	90,000		=(50000-5000)*2
	Common dividend payable		90,000
28-Feb	Common dividend payable	90,000
	Cash		90,000
6-Jul	Cash	35,625		=1875*19
	Treasury stock, Common		28,125	=1875*15
	Paid-in capital, Treasury stock		7,500
22-Aug	Cash	37,500		=3125*12
	Paid-in capital, Treasury stock	7,500
	Retained earnings	1,875
	Treasury stock, Common		46,875	=3125*15
5-Sep	Retained earnings	100,000		=50000*2
	Common dividend payable		100,000
28-Oct	Common dividend payable	100,000
	Cash		100,000
31-Dec	Income summary	388,000
	Retained earnings		388,000
2
	KOHLER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31, 2019
	Retained earnings, Dec. 31, 2018	400,000
	Add: Net income	388,000
		788,000
	Less: Cash dividends declared	-190,000
	Less: Treasury stock reissuances	-1,875
	Retained earnings, Dec. 31, 2019	596,125
3
	KOHLER CORPORATION
	Stockholders' Equity Section of the Balance Sheet
	December 31, 2019
	Common stock - $15 par value	750,000
	Paid-in capital in excess of par value, common stock	70,000
	Total contributed capital	820,000
	Retained earnings	596,125
	Total stockholders' equity	1,416,125