Question

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Problem 13-2A Cash dividends, treasury stock, and statement of retained earnings LO C3, P2, P3 Kohler Corporation reports the following components of stockholders' equity at December 31, 2018. Common stock-$15 par value, 100,000 shares authorized, 60,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $ 900,000 60,000 370,000 $1,330,000 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 $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 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 $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. 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 credit Debit $100,00 Jany Treasury stock, Common Cash (To record purchased treasury stock) $ 100,000 Jan 5 $ 220,000 Retained earnings Common dividend payable (To neurd common dividend payable) $ 220,000 feb. 28 $ 220,000 Common dividend payable Cash (To record paid dividend declared) $ 220,000 July 6 * 45,000 cash Paid - in capital, Treasury stock treasury stock, common (то несоо доld trеална хһанел) $ 7,500 $37,500 Aug. 22 Cash $ 53,125 & 7,500 $ 1,875 Paid - in capital, treasury stock Retained earnings Treasury stock, Common (to retord sold treasury stock) $62,500 $ 240,000 Sep.5 Retouned earnings $ 240,000 Common dividend payable "To record declared dividend)

Oct 28 40 4 240,000 Common dividend payable C Cash (to record dividend declared) $ 240,000 Dec 31 $ 400,000 Income summary Retained earnings (to record Closed Credit balance) $408,000 Calculation : Jan. 1 Purchased treasury stock = 5,000 shares x $20 $ 100,000 wants Common dividend payable = 60,000 shares - 5,000 shares = 55,000 outstanding Shares Declared $4 dividend on 55,000 outstanding shares * 4 X 55,000 $ 220,000 July 6 Cash = 1875 × $24. = $ 45,000 Treasury stock, common = 1,875 × $20 = $7,500 Aug. 22 Paid - in capital, Treasury stock = 1,875 X $4 = $ 7,500 Cash = 3,125 * $ 17 = $ 53,125 Treasury stock, common = 3,125 × $20 = $ 62,500

Sept. 5 Declared $4 dividend on 60,000 shares $ 4x 60,000 = $ 240,000 KOHLER CORPORATION Statement of Retained Earrings Fon Year Ended Dec 31, 2018 Retained earnings , Dec 31, 2018 & 370,000 Add: Net income $ 408,000 $ 778,000 Less: Cash dividends declared .. $ (460,000 Less Treasury stock reissuances $ (1,875) Retained earnings , Dec 31, 2018 $ 316,125 Calculation Ceash dividends declared = $220,000+ $240,000 = $ 460,000 KOHLER CORPORATION Stockholders' Equity Section of the Balance sheet December 31, 2018 - Common stock $ 900,000 $ 15 par value Adol: Paid - in capital in excess of parvalue, common $ 60,000 Total & contributed capital $ 960,000 Add: Retained earnings, $316, 125 Total shareholders' equity $1,276,125