Question

Kohler Corporation reports the following components of stockholders’ equity at December 31, 2018.
 

Common stock—$10 par value, 100,000 shares authorized, 45,000 shares issued and outstanding	$	450,000
Paid-in capital in excess of par value, common stock		80,000
Retained earnings		430,000
Total stockholders' equity	$	960,000

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

Jan.		2		Purchased 5,000 shares of its own stock at $25 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 $29 cash per share.
Aug.		22		Sold 3,125 of its treasury shares at $22 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

1
Date	General Journal	Debit	Credit
1-Jan	Treasury stock, Common	80,000		=4000*20
	Cash		80,000
5-Jan	Retained earnings	82,000		=(45000-4000)*2
	Common dividend payable		82,000
28-Feb	Common dividend payable	82,000
	Cash		82,000
6-Jul	Cash	36,000		=1500*24
	Treasury stock, Common		30,000	=1500*20
	Paid-in capital, Treasury stock		6,000
22-Aug	Cash	42,500		=2500*17
	Paid-in capital, Treasury stock	6,000
	Retained earnings	1,500
	Treasury stock, Common		50,000	=2500*20
5-Sep	Retained earnings	90,000		=45000*2
	Common dividend payable		90,000
28-Oct	Common dividend payable	90,000
	Cash		90,000
31-Dec	Income summary	408,000
	Retained earnings		408,000
2
	KOHLER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31, 2019
	Retained earnings, Dec. 31, 2018	430,000
	Add: Net income	408,000
		838,000
	Less: Cash dividends declared	-172,000
	Less: Treasury stock reissuances	-1,500
	Retained earnings, Dec. 31, 2019	664,500
3
	KOHLER CORPORATION
	Stockholders' Equity Section of the Balance Sheet
	December 31, 2019
	Common stock - $10 par value	450,000
	Paid-in capital in excess of par value, common stock	80,000
	Total contributed capital	530,000
	Retained earnings	664,500
	Total stockholders' equity	1,194,500