Question

Kohler Corporation reports the following components of stockholders’ equity on December 31, 2016:

Common stock—$20 par value, 100,000 shares authorized, 55,000 shares issued and outstanding	$	1,100,000
Paid-in capital in excess of par value, common stock		80,000
Retained earnings		370,000
Total stockholders' equity	$	1,550,000

In year 2017, the following transactions affected its stockholders’ equity accounts.

Jan.		1		Purchased 4,000 shares of its own stock at $15 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 1,500 of its treasury shares at $19 cash per share.
Aug.		22		Sold 2,500 of its treasury shares at $12 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.

Required:
1. Prepare journal entries to record each of these transactions for 2017.
2. Prepare a statement of retained earnings for the year ended December 31, 2017.
3. Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2017.

Answer 1

1
Date	General Journal	Debit	Credit
1-Jan	Treasury stock, Common	60,000		=4000*15
	Cash		60,000
5-Jan	Retained earnings	102,000		=(55000-4000)*2
	Common dividend payable		102,000
28-Feb	Common dividend payable	102,000
	Cash		102,000
6-Jul	Cash	28,500		=1500*19
	Treasury stock, Common		22,500	=1500*15
	Paid-in capital, Treasury stock		6,000
22-Aug	Cash	30,000		=2500*12
	Paid-in capital, Treasury stock	6,000
	Retained earnings	1,500
	Treasury stock, Common		37,500	=2500*15
5-Sep	Retained earnings	110,000		=55000*2
	Common dividend payable		110,000
28-Oct	Common dividend payable	110,000
	Cash		110,000
31-Dec	Income summary	408,000
	Retained earnings		408,000
2
	KOHLER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31, 2017
	Retained earnings, Dec. 31, 2016	370,000
	Add: Net income	408,000
		778,000
	Less: Cash dividends declared	(212,000)
	Less: Treasury stock reissuances	(1,500)
	Retained earnings, Dec. 31, 2017	564,500
3
	KOHLER CORPORATION
	Stockholders' Equity Section of the Balance Sheet
	December 31, 2017
	Common stock - $20 par value	1,100,000
	Paid-in capital in excess of par value, common stock	80,000
	Total contributed capital	1,180,000
	Retained earnings	564,500
	Total stockholders' equity	1,744,500