Question

Kohler Corporation reports the following components of stockholders' equity on December 31, 2016: Common stock-$15 par value, 100,000 shares authorized, 40,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $ 600.000 80,000 370,000 $1,050,000 In year 2017, the following transactions affected its stockholders' equity accounts. Jan. 1 Purchased 6,000 shares of its own stock at $15 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 2,250 of its treasury shares at $19 cash per share. Aug. 22 Sold 3,750 of its treasury shares at $12 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 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

Credit Remarks [6,000 shares x $15] $90,000 [(40,000 -6,000) shares x $4] $136,000 [Ref: Entry dated Jan. 5] $136,000 Date General Journal Debit Jan. 1 Treasury Stock $90,000 Cash (To record common stock repurchased (Treasury stock)) Jan. 5 Cash Dividends $136,000 Dividends Payable (To record cash dividends payable) Feb. 28 Dividends Payable $136,000 Cash |(To record cash dividends paid) Jul. 6 Cash $42,750 Treasury Stock Paid in Capital in excess of Par value - Treasury (To record sale of treasury stock) Aug. 22 Cash $45,000 Paid in Capital in excess of Par value - Treasury $9,000 Retained Earnings $2,250 Treasury Stock (To record sale of treasury stock) $33,750 $9,000 [2,250 shares x $19] [2,250 shares x $15] [Balancing figure] [3,750 shares x $12] [Available balance is utilized fully [Balancing figure] [3,750 shares x $15] $56,250

$160,000 [6,000 shares x $4] [As all treasury stocks were sold] $160,000 $160,000 [Ref: Entry dated Sep. 5] Sep. 5 Cash Dividends Dividends Payable |(To record cash dividends payable) Oct. 28 Dividends Payable Cash (To record cash dividends paid) Dec. 31 Income Summary Retained Earnings (To close net income for the year) $160,000 $388,000 $388,000 KOHLER CORPORATION Statement of Retained Earnings For the Year Ended December 31, 2017 Retained Earnings - Beginning Balance $370,000 Add: Net Income $388,000 [Ref: Entry dated Dec. 31] Less: Dividends $298,250 ($136000 + $2250 + $160000 --> Ref: Entries dated Jan. 5, Aug. 22 & Oct. 28] Net Increase in Retained Earnings $89,750 Retained Earnings - Ending Balance $459,750

3) KOHLER CORPORATION Stockholders' Equity Section of the Balance Sheet December 31, 2017 Common stock $600,000 [6,000 shares x $15 as all treasury stocks were sold] Paid-in-capital in excess of par value-Common $80,000 [No change] Retained Earnings $459,750 [As calculated in Part-2] Total Stockholders' Equity $1,139,750