Question

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

Common stock—$10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding	$	400,000
Paid-in capital in excess of par value, common stock		60,000
Retained earnings		270,000
Total stockholders' equity	$	730,000

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

Jan.		2		Purchased 4,000 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 1,500 of its treasury shares at $24 cash per share.
Aug.		22		Sold 2,500 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 $388,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

1. Prepare journal entries to record each of these transactions.

• 1. Record the purchase of 4,000 shares of its own common stock for $20 cash per share.

• 2. Record the declaration of a cash dividend of $2 per share.

• 3. Record the payment of the cash dividend.

• 4. Record the reissue of 1,500 shares of the treasury stock for $24 cash per share.

• 5. Record the reissue of 2,500 shares of the treasury stock for $17 cash per share.

• 6. Record the declaration of a cash dividend of $2 per share.

• 7. Record the payment of the cash dividend.

• 8. Record the entry to close the $388,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

2. 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

3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 201

	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	80,000		=4000*20
	Cash		80,000
5-Jan	Retained earnings	72,000		=(40000-4000)*2
	Common dividend payable		72,000
28-Feb	Common dividend payable	72,000
	Cash		72,000
6-Jul	Cash	36,000		=1500*24
	Treasury stock, Common		30,000	=1500*20
	Paid-in capital, Treasury stock		6,000
22-Aug	Cash	42,500		=2500*17
	Paid-in capital, Treasury stock	6,000
	Retained earnings	1,500
	Treasury stock, Common		50,000	=2500*20
5-Sep	Retained earnings	80,000		=40000*2
	Common dividend payable		80,000
28-Oct	Common dividend payable	80,000
	Cash		80,000
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	270,000
	Add: Net income	388,000
		658,000
	Less: Cash dividends declared	-152,000
	Less: Treasury stock reissuances	-1,500
	Retained earnings, Dec. 31, 2019	504,500
3
	KOHLER CORPORATION
	Stockholders' Equity Section of the Balance Sheet
	December 31, 2019
	Common stock - $10 par value	400,000
	Paid-in capital in excess of par value, common stock	60,000
	Total contributed capital	460,000
	Retained earnings	504,500
	Total stockholders' equity	964,500