Kohler Corporation reports the following components of stockholders’ equity at December 31, 2018. 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 During 2019, the following transactions affected its stockholders’ equity accounts. Jan. 2 Purchased 5,000 shares of its own stock at $25 cash per share. Jan. 5 Directors declared a $6 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 $29 cash per share. Aug. 22 Sold 3,125 of its treasury shares at $22 cash per share. Sept. 5 Directors declared a $6 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 $368,000 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.
Solution 1:
Kohler Corporation - Journal Entries | |||
Date | Particulars | Debit | Credit |
02-Jan | Treasury Stock A/c Dr | $1,25,000.00 | |
To Cash | $1,25,000.00 | ||
(Being 5000 shares of treasury stock purchased at $25 per share) | |||
05-Jan | Retained Earnings Dr | $2,40,000.00 | |
To Dividend payable [(45000 - 5000)*6] | $98,000.00 | ||
(Being dividend declared) | |||
28-Feb | Dividend Payable Dr | $2,40,000.00 | |
To Cash | $2,40,000.00 | ||
(Being dividend paid) | |||
06-Jul | Cash A/c Dr (1875*29) | $54,375.00 | |
To Treasury Stock (1875*25) | $46,875.00 | ||
To Additional Paid in Capital (1875*$4) | $7,500.00 | ||
(Being 1875 shares of treasury stock sold at $29 per share) | |||
22-Aug | Cash A/c Dr (3125*22) | $68,750.00 | |
Additional Paid in Capital A/c Dr | $7,500.00 | ||
Retained Earnings Dr (Balancing figure) | $1,875.00 | ||
To Treasury Stock (3125*$25) | $78,125.00 | ||
(Being 3125 shares of treasury stock sold at $22 per share) | |||
05-Sep | Retained Earnings Dr | $2,70,000.00 | |
To Dividend payable (45000*6) | $2,70,000.00 | ||
(Being dividend declared) | |||
28-Oct | Dividend Payable Dr | $2,70,000.00 | |
To Cash | $2,70,000.00 | ||
(Being dividend paid) | |||
31-Dec | Income summary Dr | $3,68,000.00 | |
To Retained Earnings | $3,68,000.00 | ||
(Being income transferred to retained earnings) |
Solution 2:
Kohler Corporation - Statement of Retained Earnings on 31.12.2019 | |
Particulars | Amount |
Opening balance | $4,30,000.00 |
Add: Income for 2017 | $3,68,000.00 |
Less: Dividend Paid (240000+270000) | -$5,10,000.00 |
Less: Loss on sale of treasury stock | -$1,875.00 |
Ending balance of Retained Earnings | $2,86,125.00 |
Solution 3:
Stockholder Equity Section of Balance sheet | |
Kohler Corporation at December 31, 2019 | |
Particulars | Amount |
Stockholders Equity: | |
Common
stock—$15 par value, 100,000 shares authorized, 45,000 shares issued and outstanding |
$6,75,000.00 |
Paid-in capital in excess of par value, common stock | $80,000.00 |
Retained Earnings | $2,86,125.00 |
Total Stockholder's Equity | $10,41,125.00 |
Kohler Corporation reports the following components of stockholders’ equity at December 31, 2018. Common stock—$15 par...
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