Question

Kohler Corporation reports the following components of stockholders’ equity at December 31, 2018.

Common stock—$15 par value, 100,000 shares authorized, 55,000 shares issued and outstanding	$	825,000
Paid-in capital in excess of par value, common stock		70,000
Retained earnings		400,000
Total stockholders' equity	$	1,295,000

During 2019, the following transactions affected its stockholders’ equity accounts.

Jan.		2		Purchased 4,500 shares of its own stock at $25 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 $29 cash per share.
Aug.		22		Sold 2,812 of its treasury shares at $22 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 $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.
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.

• Record the purchase of 4,500 shares of its own common stock for $25 cash per share.

Note: Enter debits before credits.

	Date General Journal Debit Credit Jan 02

• Record the declaration of a cash dividend of $4 per share.

Note: Enter debits before credits.

	Date General Journal Debit Credit Jan 05

• Record the payment of the cash dividend.

Note: Enter debits before credits.

	Date General Journal Debit Credit Feb 28

• Record the reissue of 1,688 shares of the treasury stock for $29 cash per share.

Note: Enter debits before credits.

	Date General Journal Debit Credit Jul 06

• Record the reissue of 2,812 shares of the treasury stock for $22 cash per share.

Note: Enter debits before credits.

	Date General Journal Debit Credit Aug 22

• Record the declaration of a cash dividend of $4 per share.

Note: Enter debits before credits.

	Date General Journal Debit Credit Sep 05

• Record the payment of the cash dividend.

Note: Enter debits before credits.

	Date General Journal Debit Credit Oct 28

• Record the entry to close the $388,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Note: Enter debits before credits.

	Date General Journal Debit Credit Dec 31

Answer 1

1
Date	General Journal	Debit	Credit
2-Jan	Treasury stock, Common	112,500		=4500*25
	Cash		112,500
5-Jan	Retained earnings	202,000		=(55000-4500)*4
	Common dividend payable		202,000
28-Feb	Common dividend payable	202,000
	Cash		202,000
6-Jul	Cash	48,952		=1688*29
	Treasury stock, Common		42,200	=1688*25
	Paid-in capital, Treasury stock		6,752
22-Aug	Cash	61,864		=2812*22
	Paid-in capital, Treasury stock	6,752
	Retained earnings	1,684
	Treasury stock, Common		70,300	=2812*25
5-Sep	Retained earnings	220,000		=55000*4
	Common dividend payable		220,000
28-Oct	Common dividend payable	220,000
	Cash		220,000
31-Dec	Income summary	388,000
	Retained earnings		388,000
2
	KOHLER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31, 2019
	Retained earnings, Dec. 31, 2018	400,000
	Add: Net income	388,000
		788,000
	Less: Cash dividends declared	-422,000
	Less: Treasury stock reissuances	-1,684
	Retained earnings, Dec. 31, 2019	364,316
3
	KOHLER CORPORATION
	Stockholders' Equity Section of the Balance Sheet
	December 31, 2019
	Common stock - $15 par value	825,000
	Paid-in capital in excess of par value, common stock	70,000
	Total contributed capital	895,000
	Retained earnings	364,316
	Total stockholders' equity	1,259,316