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 70,000 Retained earnings 400,000 Total stockholders' equity $ 1,295,000 During 2019, the following transactions affected its stockholders’ equity accounts. Jan. 2 Purchased 5,000 shares of its own stock at $20 cash per share. Jan. 5 Directors declared a $6 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 1,875 of its treasury shares at $24 cash per share. Aug. 22 Sold 3,125 of its treasury shares at $17 cash per share. Sept. 5 Directors declared a $6 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.

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		70,000
Retained earnings		400,000
Total stockholders' equity	$	1,295,000

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

Jan.		2		Purchased 5,000 shares of its own stock at $20 cash per share.
Jan.		5		Directors declared a $6 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 1,875 of its treasury shares at $24 cash per share.
Aug.		22		Sold 3,125 of its treasury shares at $17 cash per share.
Sept.		5		Directors declared a $6 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

1.

Date	Account Titles	Debit	Credit
Jan-02	Treasury Stock	$         100,000
	Cash		$       100,000
Jan-05	Dividend / Retained Earnings	$         300,000
	Dividend Payable		$       300,000
Feb-28	Dividend Payable	$         300,000
	Cash		$       300,000
Jul-06	Cash	$           45,000
	Treasury Stock		$          37,500
	Paid in Capital from Treasury Stock		$            7,500
Aug-22	Cash	$           53,125
	Paid in Capital from Treasury Stock	$             7,500
	Retained Earnings	$             1,875
	Treasury Stock		$          62,500
Sep-05	Dividend / Retained Earnings	$         330,000
	Dividend Payable		$       330,000
Oct-28	Dividend Payable	$         330,000
	Cash		$       330,000
Dec-31	Income Summary	$         388,000
	Retained Earnings		$       388,000

2.

Statement of Retained Earnings
Beginning Balance		$       400,000
Add Net Income		$       388,000
		$       788,000
Less
Dividend	$         630,000
Treasury Stock	$             1,875	$       631,875
Ending Balance		$       156,125

3.

Stockholders Equity
Common Stock	$         825,000
Paid in capital in excess of par-common	$           70,000
Total Paid in Capital	$         895,000
Retained Earnings	$         156,125
Total Stockholders Equity	$     1,051,125