Question

Problem 11-2A Cash dividends, treasury stock, and statement of retained earnings LO C3, P2, P3

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

Common stock—$25 par value, 100,000 shares authorized, 40,000 shares issued and outstanding	$	1,000,000
Paid-in capital in excess of par value, common stock		70,000
Retained earnings		370,000
Total stockholders' equity	$	1,440,000

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

Jan.		1		Purchased 4,500 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 1,688 of its treasury shares at $24 cash per share.
Aug.		22		Sold 2,812 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 $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.

Answer 1

KOHLER CORPORATION
General journal for the year ended Dec.31,2017
Date	Account Title	Debit	Credit
Jan.1	Treasury Stock	90000
	Cash		90000
	(Purchase of 4,500 shares of own stock @$20 per share)
Jan.5	Dividend	142000
	Dividend Payable		142000
	(Cash dividend on 35,500 shares @$4 per share)
Feb.28	Dividend Payable	142000
	Cash		142000
	(Cash dividend decleared on Ja.5 paid)
July.6	Cash	40032
	Treasury Stock		33360
	Paid-in-capital in excess of par, common stock		6672
	(Sale of 1,688 shares of treasry stock @$24 per share)
Aug.22	Cash	47804
	Paid-in-capital in excess of par, common stock	8436
	Treasury Stock		56240
	(Sale of 2,812 shares of treasry stock @$17 per share)
Sept.5	Dividend	160000
	Dividend Payable		160000
	(Cash dividend on 40,000 shares @$4 per share)
Oct.28	Dividend Payable	160000
	Cash		160000
	(Payment of cadh dividend declared on Sept.5)
Dec.31	Income Summary	388000
	Retained Earnings		388000
	(Closing of income sumaryto retained earnings)
Dec.31	Retained Earnings	302000
	Dividend		302000
	(Closing of dividend account to retained earnings)
	KOHLER CORPORATION
	Statement of Retained Earnings
	for the year ended December 31, 2017
	Balance as at January 1, 2017	370000
	Net income for the year	388000
	Dividend paid during the year	-302000
	Balance as at December 31, 2017	456000
	KOHLER CORPORATION
	Balance Sheet (partial)
	Stockhloders' equity section
	Paid up capital
	Common stock, $25 par , 100,000 shares authorised	1000000
	40,000 shares issued and outstanding
	Paid -in-capital inexcess of par value, common stock	68236
	Retained earnings	456000
	Total Stockholders' equity	1524236