Question

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

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		80,000
Retained earnings		400,000
Total stockholders' equity	$	1,230,000

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

Jan.		1		Purchased 6,000 shares of its own stock at $25 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 $29 cash per share.
Aug.		22		Sold 3,750 of its treasury shares at $22 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 $408,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2018.

	KOHLER CORPORATION Stockholders' Equity Section of the Balance Sheet December 31, 2018 Total contributed capital Total stockholders' equity

Answer 1

Solution: KOHLER CORPORATION Stockholders' Equity Section of the Balance Sheet December 31, 2018. Paid-In Capital Common stock-$15 par value, 100,000 shares authorized, 50,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Total Contributed Capital Retained earnings Total stockholders' equity $750,000 $80,000 $830,000 $ 617,750 $1,447,750 Explanation: Calculation of Retained earnings Retained earnings at December 31, 2017 Net income (given) Less: Dividends* Less: Treasury stock adjustment** Retained earnings at December 31, 2018 $ $ $ $ $ 400,000 408,000 (188,000) (2,250) 617,750 $ 88,000 Calculation of Dividend* Dividend payable on january 5 [(50,000 - 6,000) x 2] Dividend payable on september 5 [(50,000 -6,000 +2,250 +3,750) x 2] Dividend paid $ 100,000 $ 188,000 Treasury stock adjustment** Additional paid in capital on sale of 2,250 share (2,250 x [29 - 25]) $ Additional paid in capital on sale of 3,750 share (3,750 x [25-22]) | $ Loss on treasury stock after adjustment $ 9,000 11,250 (2,250)

Answer 2

Date	Accounts title and explanation	Debit $	Credit $
1-Jan	Treasury Stock Dr.	150000
	Cash account (6000*25)		150000
5-Jan	Dividend Dr.	88000
	Dividend payable (44000*$2)		88000
28-Feb	Dividend payable Dr.	88000
	Cash account		88000
6-Jul	Cash account Dr. (2250*$29)	65250
	Treasury Stock (2250*25)		56250
	Additional paid in capital -Treasury		9000
22-Aug	cash account Dr. (3750*$22)	82500
	Additional paid in capital-Treasury Dr.	9000
	Retained earnings Dr.	2250
	Treasury Stock (3750 * $25)		93750
5-Sep	Dividend Dr.	100000
	Dividend payable (50000*$2)		100000
28-Oct	Dividend payable Dr.	100000
	Cash account		100000
31-Dec	Income Summary Dr.	$408000
	Retained earnings		$408000

2)

Statement of Retained earnings
Beginning balance of Ret. Earnings	$400000
Add: Net income	$408000
Less: Dividend paid (88000+100000)	-188000
Less: Loss on Treasury	-2250
Ending balance of Retained earnings	$617750