Kohler Corporation reports the following components of
stockholders’ equity on December 31, 2017.
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 | 460,000 | |
Total stockholders' equity | $ | 1,640,000 |
In year 2018, the following transactions affected its stockholders’
equity accounts.
Jan. | 1 | Purchased 4,500 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 1,688 of its treasury shares at $19 cash per share. | ||
Aug. | 22 | Sold 2,812 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 $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 2018.
2. Prepare a statement of retained earnings for
the year ended December 31, 2018.
3. Prepare the stockholders' equity section of the
company’s balance sheet as of December 31, 2018.
Note: Enter debits before credits.
|
Solution 1:
Kohler Corporation - Journal Entries | |||
Date | Particulars | Debit | Credit |
1-Jan | Treasury Stock A/c Dr | $67,500.00 | |
To Cash | $67,500.00 | ||
(Being 4500 shares of treasury stock purchased at $15 per share) | |||
5-Jan | Retained Earnings Dr | $202,000.00 | |
To Dividend payable [(55000 - 4500)*4] | $202,000.00 | ||
(Being dividend declared) | |||
28-Feb | Dividend Payable Dr | $202,000.00 | |
To Cash | $202,000.00 | ||
(Being dividend paid) | |||
6-Jul | Cash A/c Dr (1688*19) | $32,072.00 | |
To Treasury Stock (1688*15) | $25,320.00 | ||
To Additional Paid in Capital (1688*$4) | $6,752.00 | ||
(Being 1688 shares of treasury stock sold at $29 per share) | |||
22-Aug | Cash A/c Dr (2812*12) | $33,744.00 | |
Additional Paid in Capital A/c Dr | $6,752.00 | ||
Retained Earnings Dr (Balancing figure) | $1,684.00 | ||
To Treasury Stock (2812*$15) | $42,180.00 | ||
(Being 2812 shares of treasury stock sold at $22 per share) | |||
5-Sep | Retained Earnings Dr | $220,000.00 | |
To Dividend payable (55000*4) | $220,000.00 | ||
(Being dividend declared) | |||
28-Oct | Dividend Payable Dr | $220,000.00 | |
To Cash | $220,000.00 | ||
(Being dividend paid) | |||
31-Dec | Income summary Dr | $408,000.00 | |
To Retained Earnings | $408,000.00 | ||
(Being income transferred to retained earnings) |
Solution 2:
Kohler Corporation - Statement of Retained Earnings on 31.12.2018 | |
Particulars | Amount |
Opening balance | $460,000.00 |
Add: Income for 2018 | $408,000.00 |
$868,000.00 | |
Less: Dividend Paid (50500*$4 + 55000*$4) | $422,000.00 |
Less: Loss on sale of treasury stock | $1,684.00 |
Ending balance of Retained Earnings | $444,316.00 |
Solution 3:
Stockholder Equity Section of Balance sheet | |
Kohler Corporation at December 31, 2016 | |
Particulars | Amount |
Stockholders Equity: | |
Common
stock—$20 par value, 100,000 shares authorized, 55,000 shares issued and outstanding |
$1,100,000.00 |
Paid-in capital in excess of par value, common stock | $80,000.00 |
Total contributed Capital | $1,180,000.00 |
Retained Earnings | $444,316.00 |
Total Stockholder's Equity | $1,624,316.00 |
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