Question

Kohler Corporation reports the following components of stockholders’ equity on December 31, 2017.

Common stock—$20 par value, 100,000 shares authorized, 45,000 shares issued and outstanding $ 900,000 Paid-in capital in excess of par value, common stock 70,000 Retained earnings 460,000 Total stockholders' equity $ 1,430,000 In year 2018, the following transactions affected its stockholders’ equity accounts. Jan. 1 Purchased 5,500 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 2,063 of its treasury shares at $24 cash per share. Aug. 22 Sold 3,437 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.

Required: 1. Prepare journal entries to record each of these transactions for 2018.

2. Prepare a statement of retained earnings for the year ended December 31, 2018.

3. Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2018.

Answer 1

Ans-1- Preparing journal entries to record each of these transactions for 2018:-

Date	Account Title and Explanation	Debit ($)	Credit ($)
Jan.1	Treasury Stock, Common	$       110,000.00
	Cash		$      110,000.00
	(To record the purchase of treasury stock 5,500*$20)
Jan.5	Retained Earnings	$         79,000.00
	Common dividends payable		$        79,000.00
	(To record the declaration of a cash dividend of $2 per share)
28-Feb	Common dividends payable	$         79,000.00
	Cash		$        79,000.00
	(To record the payment of the cash dividend)
6-Jul	Cash (2063*$24)	$         49,512.00
	Treasury stock, common (2063*$20)		$        41,260.00
	Paid-in capital , Treasury stock (2063*$4)		$          8,252.00
	(To record the reissue of 2063 shares of the treasury stock for $24 cash per share)
22-Aug	Cash (3437*$17)	$         58,429.00
	Paid-in capital, Treasury stock	$          8,252.00
	Retained Earnings	$          2,059.00
	Treasury stock, Common (3437*$20)		$        68,740.00
	(To record the reissue of 3437 shares of the treasury stock for $17 cash per share
Sep. 5	Retained earnings (45,000*$2)	$         90,000.00
	Common dividends payable		$        90,000.00
	(To record the declaration of a cash dividend of $2 per share)
Oct.28	Common dividend payable	$         90,000.00
	Cash		$        90,000.00
	(To record the payment of the cash dividend)
Dec.31	Income summary	$       388,000.00
	Retained earnings		$      388,000.00
	(To record the entry to close the income summary account having a credit balance of $388,000)

2- Preparing statement of retained earnings account:-

Kohler Corporation

Statement of retained earnings

For the year ended December 31,2018

Particulars	Amount ($)
Retained earnings Dec.31,2017	$       460,000.00
Add: Net income	$       388,000.00
	$       848,000.00
Less: Cash dividend declared	$      (169,000.00)
Less:Treasury stock reissuances	$         (2,059.00)
Retained earnings, Dec.31,2018	$       676,941.00

3- Preparing equity section of balance sheet:-

Kohler Corporation

Stockholder's equity section of balance sheet

For the year ended December 31, 2018

Particulars	Amount ($)
Common Stock-$20 par value	$       900,000.00
Paid-in capital in excess of par	$         70,000.00
Total contributed capital	$       970,000.00
Retained earnings	$       676,941.00
Total stockholder's equity	$    1,646,941.00