Question

Kohler Corporation reports the following components of stockholders’ equity on December 31, 2016: Common stock—$15 par value, 100,000 shares authorized, 40,000 shares issued and outstanding $ 600,000 Paid-in capital in excess of par value, common stock 60,000 Retained earnings 400,000 Total stockholders' equity $ 1,060,000 In year 2017, 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 $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 $408,000 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

Date	General Journal	Debit	Credit
01-Jan	Treasury stock, Common (5500*20)	110,000
	Cash		110,000
05-Jan	Retained earnings (34500*4)	138,000
	Common dividend payable		138,000
28-Feb	Common dividend payable	138,000
	Cash		138,000
06-Jul	Cash (2063*24)	49,512
	Treasury stock, Common (2063*20)		41,260
	Paid-in capital, Treasury stock		8,252
22-Aug	Cash	58,429
	Paid-in capital, Treasury stock	8,252
	Retained earnings	2,059
	Treasury stock, Common		68,740
05-Sep	Retained earnings	160,000
	Common dividend payable		160,000
	(40000-5500+2063+3437)
28-Oct	Common dividend payable	160,000
	Cash		160,000
31-Dec	Income summary	408,000
	Retained earnings		408,000

KOHLER CORPORATION Statement of Retained Earnings For Year Ended December 31, 2017
Retained earnings, Dec. 31, 2016	400000
Add:Net Income	408,000
Less: Cash dividends declared	298,000
Less: Treasury stock reissuances	2,059
Retained earnings, Dec. 31, 2017	507,941
KOHLER CORPORATION Stockholders' Equity Section of the Balance Sheet December 31, 201
Common stock - $10 par value 400,000
Paid-in capital in excess of par value, common stock	60,000.00
Retained earnings	507,941
Explanation: Common stock ($10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding) = $400,000