Question

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

Common stock—$10 par value, 100,000 shares authorized, 55,000 shares issued and outstanding	$550,000
Paid-in capital in excess of par value, common stock	70,000
Retained earnings	460,000
Total stockholders' equity	$1,080,000

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 $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 1,500 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 $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 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.

KOHLER CORPORATION Statement of Retained Earnings For Year Ended December 31, 2017 Retained earnings, Dec. 31, 2016selected answer correct $460,000selected answer correct Add: Net incomeselected answer correct 388,000selected answer correct 848,000 Less: Treasury stock reissuancesselected answer correct Less: Cash dividends declaredselected answer correct Retained earnings, Dec. 31, 2017selected answer correct $469,750

KOHLER CORPORATION
Stockholders' Equity Section of the Balance Sheet
December 31, 2017
Common stock - $10 par valueselected answer correct	$550,000selected answer correct
Paid-in capital in excess of par value, common stockselected answer correct
Total contributed capital	550,000
Retained earningsselected answer correct
Total stockholders' equity

Answer 1

1.

Date	Account Titles	Debit	Credit
Jan. 1	Treasury Stock	$         100,000
	Cash		$         100,000
Jan. 5	Cash Dividend / Retained Earnings	$         102,000
	Dividend Payable		$         102,000
Feb. 28	Dividend Payable	$         102,000
	Cash		$         102,000
Jul. 6	Cash	$           43,500
	Treasury Stock		$           37,500
	Paid in Capital from Treasury Stock		$             6,000
Aug. 22	Cash	$           55,000
	Paid in Capital from Treasury Stock	$             6,000
	Retained Earnings	$             1,500
	Treasury Stock		$           62,500
Sep. 5	Cash Dividend / Retained Earnings	$         110,000
	Dividend Payable		$         110,000
Oct. 28	Dividend Payable	$         110,000
	Cash		$         110,000
Dec. 31	Income Summary	$         388,000
	Retained Earnings		$         388,000
Dec. 31	Retained Earnings	$         212,000
	Cash Dividend		$         212,000

2.

KOHLER CORPORATION
Statement of Retained Earnings
For Year Ended December 31, 2017
Retained earnings, Dec. 31, 2016	$         460,000
Add: Net income	$         388,000
	$         848,000
Less: Treasury stock reissuance	$            (1,500)
Less: Cash dividends declared	$       (212,000)
Retained earnings, Dec. 31, 2017	$         634,500

3.

KOHLER CORPORATION
Stockholders' Equity Section of the Balance Sheet
December 31, 2017
Common stock - $10 par values	$         550,000
Paid-in capital in excess of par value, common stock	$           70,000
Total contributed capital	$         620,000
Retained earning	$         634,500
Total stockholders' equity	$     1,254,500