Question

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.

Answer 1

Date	General Journal	Debit	Credit
2-Jan	Treasury stock, common (5500X20)	$110,000.00
	Cash		$110,000.00
	Record Purchase of Treasury Share
5-Jan	Retained earnings (55000-5500)*4	$198,000.00
	Common dividend payable		$198,000.00
	Record decleration of Dividend
28-Feb	Common dividend payable	$198,000.00
	Cash		$198,000.00
	Record payment of Dividend
6-Jul	Cash (2063X24)	$49,512.00
	Treasury stock, common (2063*20)		$41,260.00
	Paid-in capital, treasury stock (BF)		$8,252.00
	Record Sale of Treasury stock
22-Aug	Cash (3437X 17)	$58,429.00
	Paid-in capital, treasury stock	$8,252.00
	Retained earnings (BF)	$2,059.00
	Treasury stock, common (3437*20)		$68,740.00
	Record Sale of Treasury stock
5-Sep	Retained earnings (55000-5500+2063+3437)X4	$220,000.00
	Common dividend payable		$220,000.00
	Record decleration of Dividend
22-Oct	Common dividend payable	$220,000.00
	Cash		$220,000.00
	Record payment of Dividend
31-Dec	Income summary	$388,000.00
	Retained earnings		$388,000.00

Kohler CORPORATION
Statement of Retained Earnings
For Year Ended December 31, 2019
Retained earnings, December 31, 2018	$400,000.00
Add: Net income	$388,000.00
	$788,000.00
Less: Cash dividends declared (198000+220000)	-$418,000.00
Less: Treasury stock reissuances	-$2,059.00
Retained earnings, December 31, 2019	$367,941.00
Kohler CORPORATION
stockholders’ Equity Section of the Balance Sheet
31-Dec-17
Common stock - $15 par value	$825,000.00
Paid-in capital in excess of par value, common stock	$60,000.00
Retained earnings	$367,941.00
Less cost of treasury stock (110000-41260-68740)	$0.00
tal stockholders’ equity	$367,941.00