Question

Kohler Corporation reports the following components of stockholders equity on December 31, 2013: 

Common Stock-$10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding.	$400,000
Paid-in capital in excess of par value, common stock	60,000
Retained Earnings	270,000
Total Stockholders' Equity	$730,000

 

In 2014, the following transactions affected its stockholders' equity accounts. 

Jan. 1: Purchased 4,000 shares of its own stock at $20 cash per share. 

Jan. 5: Directors declared a $2 per share cash dividend payable on Feb. 28 to the stockholder of record. 

Feb 28: Paid the dividend declared on January 5. 

July 6: Sold 1,500 of its treasury shares at $24 cash per share. 

Aug. 22: Sold 2,500 of its treasury shares at $17 cash per share. 

Sept. 5: Directors declared a S2 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 2014. 

2. Prepare a statement of retained earnings for the year ended December 31, 2014 

3. Prepare the stockholders' equity section of the company's balance sheet as of December 31, 2014.

Answer 1

1
Date	General Journal	Debit	Credit
1-Jan	Treasury stock, Common	80,000		=4000*20
	Cash		80,000
5-Jan	Retained earnings	72,000		=(40000-4000)*2
	Common dividend payable		72,000
28-Feb	Common dividend payable	72,000
	Cash		72,000
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	80,000		=40000*2
	Common dividend payable		80,000
28-Oct	Common dividend payable	80,000
	Cash		80,000
31-Dec	Income summary	388,000
	Retained earnings		388,000
2
	KOHLER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31, 2014
	Retained earnings, Dec. 31, 2013	270,000
	Add: Net income	388,000
		658,000
	Less: Cash dividends declared	(152,000)
	Less: Treasury stock reissuances	(1,500)
	Retained earnings, Dec. 31, 2014	504,500
3
	KOHLER CORPORATION
	Stockholders' Equity Section of the Balance Sheet
	December 31, 2014
	Common stock - $10 par value	400,000
	Paid-in capital in excess of par value, common stock	60,000
	Total contributed capital	460,000
	Retained earnings	504,500
	Total stockholders' equity	964,500

Answer 2

Date	General journal				Debit	Credit
1-Jan	Treasury stock				80,000
	cash (4000*20)					80,000
5-Jan	Retained earnings				72000
	Dividends payable					72,000
	(40000-4000)*2
28-Feb	Dividends payable				72,000
	cash					72,000
6-Jul	Cash	(1,500*24)			36000
	Treasury stock		(1,500*20)			30000
	paid in capital in excess of Treasury stock					6000
22-Aug	Cash	(2500*17)			42500
	paid in capital in excess of par -TS				6,000
	Retained earnings				1,500
	Treasury stock		(2500*20)			50000
5-Sep	Retained earnings				80000
	Dividends payable (40000*2)					80,000
28-Oct	Dividends payable				80,000
	cash					80,000
31-Dec	Income summary				388,000
	Retained earnings					388,000
	Statement of retained earnings
	opening balance ,jan 1				270,000
	add :Net income				388,000
					658,000
	less:Cash Dividend				152000
	Treasury stock				1,500
	Closing balance,Dec 31				504,500
	Stockholders Equity section of the Balance Sheet
	common stock				400,000
	paid in capital in excess of par-CS				60,000
	total contributed capital				460,000
	Retained earnings				504,500
	total Stockholders Equity				964,500