Question

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

Common stock—$10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding	$	400,000
Paid-in capital in excess of par value, common stock		60,000
Retained earnings		270,000
Total stockholders' equity	$	730,000

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

Jan.		1		Purchased 4,000 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 1,500 of its treasury shares at $24 cash per share.
Aug.		22		Sold 2,500 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 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
1-Jan	Treasury stock				80,000
	cash (4000*20)					80,000
5-Jan	Retained earnings				72000
	Dividends payable					72,000
	(40000-4000)*2
28-Feb	Dividends payable				72,000
	cash					72,000
6-Jul	Cash	(1,500*24)			36000
	Treasury stock		(1,500*20)			30000
	paid in capital in excess of Treasury stock					6000
22-Aug	Cash	(2500*17)			42500
	paid in capital in excess of par -TS				6,000
	Retained earnings				1,500
	Treasury stock		(2500*20)			50000
5-Sep	Retained earnings				80000
	Dividends payable (40000*2)					80,000
28-Oct	Dividends payable				80,000
	cash					80,000
31-Dec	Income summary				388,000
	Retained earnings					388,000
	Statement of retained earnings
	opening balance ,jan 1				270,000
	add :Net income				388,000
					658,000
	less:Cash Dividend				152000
	Treasury stock				1,500
	Closing balance,Dec 31				504,500
	Stockholders Equity section of the Balance Sheet
	common stock				400,000
	paid in capital in excess of par-CS				60,000
	total contributed capital				460,000
	Retained earnings				504,500
	total Stockholders Equity				964,500