Question

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

Common stock—$25 par value, 100,000 shares authorized, 55,000 shares issued and outstanding	$	1,375,000
Paid-in capital in excess of par value, common stock		70,000
Retained earnings		430,000
Total stockholders' equity	$	1,875,000

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

Jan.		1		Purchased 5,500 shares of its own stock at $25 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 2,063 of its treasury shares at $29 cash per share.
Aug.		22		Sold 3,437 of its treasury shares at $22 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 $428,000 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

1
Date	General Journal	Debit	Credit
1-Jan	Treasury stock, Common	137,500		=5500*25
	Cash		137,500
5-Jan	Retained earnings	297,000		=(55000-5500)*6
	Common dividend payable		297,000
28-Feb	Common dividend payable	297,000
	Cash		297,000
6-Jul	Cash	59,827		=2063*29
	Treasury stock, Common		51,575	=2063*25
	Paid-in capital, Treasury stock		8,252
22-Aug	Cash	75,614		=3437*22
	Paid-in capital, Treasury stock	8,252
	Retained earnings	2,059
	Treasury stock, Common		85,925	=3437*25
5-Sep	Retained earnings	330,000		=55000*6
	Common dividend payable		330,000
28-Oct	Common dividend payable	330,000
	Cash		330,000
31-Dec	Income summary	428,000
	Retained earnings		428,000
2
	KOHLER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31, 2017
	Retained earnings, Dec. 31, 2016	430,000
	Add: Net income	428,000
		858,000
	Less: Cash dividends declared	(627,000)
	Less: Treasury stock reissuances	(2,059)
	Retained earnings, Dec. 31, 2017	228,941
3
	KOHLER CORPORATION
	Stockholders' Equity Section of the Balance Sheet
	December 31, 2017
	Common stock - $25 par value	1,375,000
	Paid-in capital in excess of par value, common stock	70,000
	Total contributed capital	1,445,000
	Retained earnings	228,941
	Total stockholders' equity	1,673,941