Question

Kohler Corporation reports the following components of stockholders’ equity on December 31, 2017.

Common stock—$15 par value, 100,000 shares authorized, 45,000 shares issued and outstanding	$	675,000
Paid-in capital in excess of par value, common stock		80,000
Retained earnings		430,000
Total stockholders' equity	$	1,185,000

In year 2018, the following transactions affected its stockholders’ equity accounts.

Jan.		1		Purchased 6,000 shares of its own stock at $20 cash per share.
Jan.		5		Directors declared a $2 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 $24 cash per share.
Aug.		22		Sold 3,750 of its treasury shares at $17 cash per share.
Sept.		5		Directors declared a $2 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 2018.
2. Prepare a statement of retained earnings for the year ended December 31, 2018.
3. Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2018.

Answer 1

Date	Account Title	Debit	Credit
Jan 1	Cash	$120,000		[6000 x $20]
	Treasury Stock		$120,000
	(To record purchase of treasury stock)
Jan 5	Retained Earnings	$78,000		[(45000-6000) x $2]
	Dividend Payable		$78,000	[4600 x $1]
	(To record declaration of dividend)
Feb 28	Cash	$78,000
	Dividend Payable		$78,000
	(To record payment of dividend)
July 6	Cash	$54,000		[2250 x $24]
	Paid In Capital - Treasury Stock		$9,000	[2250 x $4]
	Treasury Stock		$45,000	[2250 x $20]
	(To record issue of treasury stock)
Aug 22	Cash	$63,750		[3750 x $17]
	Paid In Capital - Treasury Stock	$9,000
	Retained Earnings	$2,250
	Treasury Stock		$75,000	[3750 x $20]
	(To record issue of treasury stock)
Sep 5	Retained Earnings	$90,000		[45000 x $2]
	Dividend Payable		$90,000
	(To record declaration of dividend)
Oct 28	Cash	$90,000
	Dividend Payable		$90,000
	(To record payment of dividend)
July 10	Cash	$90,000
	Dividend Payable		$90,000
	(To record payment of common stock dividend)
Dec 31	Income Summary	$388,000
	Retained Earniings		$388,000
	(To record transfer of net income to retained earnings)
Kohler Company
Statement of Retained Earnings
For the year ended Dec 31, 2018
Beginning Balance as on Jan 1, 2018		$430,000
Add: Net Income		$388,000
		$818,000
Less: Dividend		($168,000)
Less: Treasury Stock		($2,250)
Ending Balance as on Dec 31, 2019		$647,750
Kohler Company
Partial Balance Sheet
Dec 31, 2018
Particulars		Amount	Amount
Stockholders' Equity
Common Stock		$675,000
Paid in Capital in Excess of Par - Common Stock		$80,000
Total Paid in Capital			$755,000
Retained Earnings			$647,750
Total Stockholders' Equity			$1,402,750