Question

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

Common stock—$15 par value, 100,000 shares authorized, 50,000 shares issued and outstanding	$	750,000
Paid-in capital in excess of par value, common stock		60,000
Retained earnings		430,000
Total stockholders' equity	$	1,240,000

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

Jan.		1		Purchased 5,500 shares of its own stock at $15 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 2,063 of its treasury shares at $19 cash per share.
Aug.		22		Sold 3,437 of its treasury shares at $12 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 $368,000 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

1)

Date	General Journal	Debit	Credit
Jan-01	Treasury stock,common	82,500.00
	Cash		82,500.00
Jan-05	Retained Earnings	267,000.00
	Cash		267,000.00
Feb-28	Common Dividend Payable	267,000.00
	Cash		267,000.00
Jul-06	Cash	39,197.00
	Paid in Capital, Treasury Stock		8,252.00
	Treasury stock,common		30,945.00
Aug-22	Cash	41,244.00
	Paid in Capital, Treasury Stock	8,252.00
	Retained Earnings	2,059.00
	Treasury Stock, Common		51,555.00
Sep-05	Retained Earnings	300,000.00
	Common Dividend Payable		300,000.00
Oct-28	Common Dividend Payable	300,000.00
	Cash		300,000.00
Dec-31	Income Summary	368,000.00
	Retained Earnings		368,000.00

2)

KOHLER CORPORATION
Statement of Retained Earnings
For Year Ended December 31,2017
Retained Earnings Dec,31,2016	430,000.00
Add: Net Income	368,000.00
	798,000.00
Less: Cash Dividends Declared	567,000.00
Less: Treasury Stock Reissuances	2,059.00
Retained Earnings Dec,31,2017	228,941.00

3)

KOHLER CORPORATION
Stockholders Equity Section of the Balance Sheet
December 31,2017
Common Stock -15 Par Value	750,000.00
Paid in Capital in Excess of Par Value, Common Stock	60,000.00
Total Contributed Capital	810,000.00
Retained Earnings	228,941.00
Total Stockholders Equity	1,038,941.00