Question

Kohler Corporation reports the following components of stockholders’ equity on December 31, 2016: 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 60,000 Retained earnings 400,000 Total stockholders' equity $ 1,210,000 In year 2017, the following transactions affected its stockholders’ equity accounts. Jan. 1 Purchased 6,000 shares of its own stock at $15 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 2,250 of its treasury shares at $19 cash per share. Aug. 22 Sold 3,750 of its treasury shares at $12 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 $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.

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Answer 1

1)

Date	Account titles and explanation	Debit	Credit
Jan 1	Treasury stock (6000*$15)	$90000
	Cash		$90000
	(To record treasury stock purchased)
Jan 5	Retained earnings	$176000
	Common dividend payable (50000-6000)*$4		$176000
	(To record cash dividend declared)
Feb 28	Common dividend payable	$176000
	Cash		$176000
	(To record cash dividend paid)
Jul 6	Cash (2250*$19)	$42750
	Treasury stock (2250*$15)		$33750
	Paid in capital from sale of Treasury stock (42750-33750)		$9000
	(To record treasury stock sold)
Aug 22	Cash (3750*$12)	$45000
	Paid in capital from sale of Treasury stock	$9000
	Retained earnings (56250-45000-9000)	$2250
	Treasury stock (3750*$15)		$56250
	(To record treasury stock sold)
Sep 5	Retained earnings	$200000
	Common dividend payable (50000-6000+2250+3750)*$4		$200000
	(To record cash dividend declared)
Oct 28	Common dividend payable	$200000
	Cash		$200000
	(To record cash dividend paid)
Dec 31	Income summary	$428000
	Retained earnings		$428000
	(To record net transferred to retained earnings)

2)

KOHLER CORPORATION
Statement of retained earnings
For the year ended December 31, 2017
Beginning retained earnings	$400000
Add: Net income	428000
	828000
Less: Cash dividend (176000+200000)	(376000)
Less: Treasury stock	(2250)
Ending retained earnings	$449750

3)

KOHLER CORPORATION
Statement of Stockholders' Equity Section of the balance sheet
December 31, 2017
Common stock—$15 par value	$750000
Paid-in capital in excess of par value, Common stock	60000
Total contributed capital	810000
Retained earnings 400,000	449750
Total stockholders' equity	$1259750