Question

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

Common stock—$10 par value, 100,000 shares authorized, 60,000 shares issued and outstanding	$600,000
Paid-in capital in excess of par value, common stock	60,000
Retained earnings	400,000
Total stockholders' equity	$1,060,000

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

Jan.	1	Purchased 5,500 shares of its own stock 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.	28	Paid the dividend declared on January 5.
July	6	Sold 2,063 of its treasury shares at $19 cash per share.
Aug.	22	Sold 3,437 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 $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 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

	Date	General journal				Debit	Credit
	1-Jan	Treasury stock				82,500
		cash	(5500*15)				82,500
	5-Jan	Retained earnings				327000
		Dividends payable					327,000
		(60000-5500)*6
	28-Feb	Dividends payable				327,000
		cash					327,000
	6-Jul	Cash	(2063*19)			39197
		Treasury stock		(2063*15)			30945
		paid in capital in excess of Treasury stock					8252
	22-Aug	Cash	(3437*12)			41244
		paid in capital in excess of par -TS				8,252
		Retained earnings				2,059
		Treasury stock		(3437*15)			51555
	5-Sep	Retained earnings				360000
		Dividends payable		(60000*6)			360,000
	28-Oct	Dividends payable				360,000
		cash					360,000
	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				687000
		Treasury stock				2,059
		Closing balance,Dec 31				98,941
		Stockholders Equity section of the Balance Sheet
		common stock				600,000
		paid in capital in excess of par-CS				60,000
		total contributed capital				660,000
		Retained earnings				98,941
		total Stockholders Equity				758,941