Question

Problem 13-2A Cash dividends, treasury stock, and statement of retained earnings LO C3, P2, P3 Kohler Corporation reports the following components of stockholders' equity at December 31, 2018. Common stock-$25 par value, 100,000 shares authorized, mon stock-$25 pued and outstanding common stock Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $1,375.000 70.000 370.000 $1,815,000 During 2019, the following transactions affected its stockholders' equity accounts. Jan. 2 Purchased 4,500 shares of its own stoct at $15 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. 2e 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, B12 of its treasury shares at $12 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 $420,000 credit balance (from net income) in the Income Summary account to Betained 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

1
Date	General Journal	Debit	Credit
2-Jan	Treasury stock, Common	67,500		=4500*15
	Cash		67,500
5-Jan	Retained earnings	303,000		=(55000-4500)*6
	Common dividend payable		303,000
28-Feb	Common dividend payable	303,000
	Cash		303,000
6-Jul	Cash	32,072		=1688*19
	Treasury stock, Common		25,320	=1688*15
	Paid-in capital, Treasury stock		6,752
22-Aug	Cash	33,744		=2812*12
	Paid-in capital, Treasury stock	6,752
	Retained earnings	1,684
	Treasury stock, Common		42,180	=2812*15
5-Sep	Retained earnings	330,000		=55000*6
	Common dividend payable		330,000
28-Oct	Common dividend payable	330,000
	Cash		330,000
31-Dec	Income summary	428,000
	Retained earnings		428,000
2
	KOHLER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31, 2019
	Retained earnings, Dec. 31, 2018	370,000
	Add: Net income	428,000
		798,000
	Less: Cash dividends declared	-633,000
	Less: Treasury stock reissuances	-1,684
	Retained earnings, Dec. 31, 2019	163,316
3
	KOHLER CORPORATION
	Stockholders' Equity Section of the Balance Sheet
	December 31, 2019
	Common stock - $25 par value	1,375,000
	Paid-in capital in excess of par value, common stock	70,000
	Total contributed capital	1,445,000
	Retained earnings	163,316
	Total stockholders' equity	1,608,316