Question

Kohler Corporation reports the following components of stockholders' equity at December 31, 2018. 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 Total stockholders' equity $ 500,000 80,000 400,000 $ 980,000 During 2019, the following transactions affected its stockholders' equity accounts. Jan. 2 Purchased 5,000 shares of its own stock at $15 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 $19 cash per share. Aug. 22 Sold 3, 125 of its treasury shares at $12 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

Date	General journal	Debit	Credit
1-Jan	Treasury stock, common	75,000
	cash (5000*15)		75,000
5-Jan	Retained earnings	180000
	Common Dividends payable		180,000
	(50000-5000)*4
28-Feb	Common Dividends payable	180,000
	Cash		180,000
6-Jul	Cash(1875*19)	35625
	Treasury stock [1875*15]		28125
	paid in capital - TS		7500
22-Aug	Cash (3125*12)	37500
	paid in capital -TS	7500
	Retained earnings	1,875
	Treasury stock [3125*15]		46875
5-Sep	Retained earnings	200000
	Dividends payable (50000*4)		200,000
28-Oct	Dividends payable	200,000
			200,000
31-Dec	Income summary	388,000
	Retained earnings		388,000

Statement of retained earnings
	opening balance ,jan 1			400,000
	add :Net income			388,000
				788,000
	less:Cash Dividend			-380000
	Treasury stock			-1,875
	Closing balance,Dec 31			406,125
	Stockholders Equity section of the Balance Sheet
	common stock			500,000
	paid in capital in excess of par			80,000
	total contributed capital			580,000
	Retained earnings			406125
	total Stockholders Equity			986,125