Kohler Corporation reports the following components of
stockholders’ equity on December 31, 2016:
Common stock—$10 par value, 100,000 shares
authorized, 50,000 shares issued and outstanding |
$500,000 |
Paid-in capital in excess of par value, common stock | 80,000 |
Retained earnings | 400,000 |
Total stockholders' equity | $980,000 |
In year 2017, the following transactions affected its stockholders’
equity accounts.
Jan. | 1 | Purchased 4,000 shares of its own stock at $20 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 1,500 of its treasury shares at $24 cash per share. |
Aug. | 22 | Sold 2,500 of its treasury shares at $17 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 $368,000 credit balance (from net income) in the Income Summary account to Retained Earnings. |
Required:
1. Prepare journal entries to record each of these
transactions for 2017.
2. Prepare a statement of retained earnings for
the year ended December 31, 2017.
3. Prepare the stockholders' equity section of the
company’s balance sheet as of December 31, 2017.
Ans-1- Preparing journal entries to record each of these transactions for 2017:-
Date | Account Title and Explanation | Debit ($) | Credit ($) |
Jan.1 | Treasury Stock, Common | 80,000 | |
Cash | 80,000 | ||
(To record the purchase of treasury stock 4,000*$20) | |||
Jan.5 | Retained Earnings | 184,000 | |
Common dividends payable | 184,000 | ||
(To record the declaration of a cash dividend of $4 per share) | |||
Feb 28 | Common dividends payable | 184,000 | |
Cash | 184,000 | ||
(To record the payment of the cash dividend) | |||
July 6 | Cash (1,500*$24) | 36,000 | |
Treasury stock, common (1,500*$20) | 30,000 | ||
Paid-in capital , Treasury stock (1,500*$4) | 6,000 | ||
(To record the reissue of 1,500 shares of the treasury stock for $24 cash per share) | |||
Aug 22 | Cash (2,500*$17) | 42,500 | |
Paid-in capital, Treasury stock | 6,000 | ||
Retained Earnings | 1,500 | ||
Treasury stock, Common (2,500*$20) | 50,000 | ||
(To record the reissue of 2,500 shares of the treasury stock for $17 cash per share | |||
Sep. 5 | Retained earnings (50,000*$4) | 200,000 | |
Common dividends payable | 200,000 | ||
(To record the declaration of a cash dividend of $4 per share) | |||
Oct.28 | Common dividend payable | 200,000 | |
Cash | 200,000 | ||
(To record the payment of the cash dividend) | |||
Dec.31 | Income summary | 368,000 | |
Retained earnings | 368,000 | ||
(To record the entry to close the income summary account having a credit balance of $368,000) |
2- Preparing statement of retained earnings account:-
Kohler Corporation
Statement of retained earnings
For the year ended December 31,2017
Particulars | Amount ($) |
Retained earnings Dec.31,2016 | 400,000 |
Add: Net income | 368,000 |
768,000 | |
Less: Cash dividend declared | (384,000) |
Less:Treasury stock reissuances | (1,500) |
Retained earnings, Dec.31,2017 | $382,500 |
3- Preparing equity section of balance sheet:-
Kohler Corporation
Stockholder's equity section of balance sheet
For the year ended December 31, 2017
Particulars | Amount ($) |
Common Stock-$10 par value | 500,000 |
Paid-in capital in excess of par | 80,000 |
Total contributed capital | 580,000 |
Retained earnings | 382,500 |
Total stockholder's equity | 962,500 |
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