Question

Problem 11-2A Cash dividends, treasury stock, and statement of retained earnings LO C3, P2, P3 [The following information applies to the questions displayed below.] Kohler Corporation reports the following components of stockholders' equity on December 31, 2015: Common stock-$10 par value, 100,000 shares authorized, 50,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings $ 500,000 80,000 430,000 Total stockholders' equity $1,010,000 In year 2016, 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 $4 per share cash dividend payable on Feb. 28 to the Feb. 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 $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.

Answer 1

1.

No	Date	General Journal	Debit	Credit
1	Jan 01	Treasury stock, common	120000
		Cash		120000
2	Jan 05	Retained earnings	176000
		Common dividend payable		176000
3	Feb 28	Common dividend payable	176000
		Cash		176000
4	Jul 06	Cash	54000
		Paid in capital , Treasury stock		9000
		Treasury stock, common		45000
5	Aug 22	Cash	63750
		Paid in capital , Treasury stock	9000
		Retained earnings	2250
		Treasury stock, common		75000
6	Sep 05	Retained earnings	200,000
		Common dividend payable		200,000
7	Oct 28	Common dividend payable	200,000
		Cash		200,000
8	Dec 31	Income summary	388,000
		Retained earnings		388,000

2.

Statement of Retained Earnings
Retained earnings, Dec 31 2015	430,000
Add: Net Income	388,000
	818,000
Less: Cash dividends declared	376,000
Less: Treasury stock reissuances	2250
Retained earnings, Dec 31 2016	439,750

3.

Stockholders equity section of the balance sheet
Common stock - $10 par value	500,000
Paid in capital in excess of par value, common stock	80,000
Total contributed capital	580,000
Retained earnings	439,750
Total stockholders equity	1,019,750