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In: Accounting

Kohler Corporation reports the following components of stockholders’ equity at December 31, 2018. Common stock—$15 par...

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

Common stock—$15 par value, 100,000 shares authorized,
55,000 shares issued and outstanding
$ 825,000
Paid-in capital in excess of par value, common stock 60,000
Retained earnings 400,000
Total stockholders' equity $ 1,285,000


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

Jan. 2 Purchased 5,500 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 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 $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.
2. Prepare a statement of retained earnings for the year ended December 31, 2019.
3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2019.

Solutions

Expert Solution

1
Date General Journal Debit Credit
2-Jan Treasury stock, Common 110,000 =5500*20
Cash 110,000
5-Jan Retained earnings 198,000 =(55000-5500)*4
Common dividend payable 198,000
28-Feb Common dividend payable 198,000
Cash 198,000
6-Jul Cash 49,512 =2063*24
Treasury stock, Common 41,260 =2063*20
Paid-in capital, Treasury stock 8,252
22-Aug Cash 58,429 =3437*17
Paid-in capital, Treasury stock 8,252
Retained earnings 2,059
Treasury stock, Common 68,740 =3437*20
5-Sep Retained earnings 220,000 =55000*4
Common dividend payable 220,000
28-Oct Common dividend payable 220,000
Cash 220,000
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 400,000
Add: Net income 388,000
788,000
Less: Cash dividends declared -418,000
Less: Treasury stock reissuances -2,059
Retained earnings, Dec. 31, 2019 367,941
3
KOHLER CORPORATION
Stockholders' Equity Section of the Balance Sheet
December 31, 2019
Common stock - $15 par value 825,000
Paid-in capital in excess of par value, common stock 60,000
Total contributed capital 885,000
Retained earnings 367,941
Total stockholders' equity 1,252,941

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