Question

Kohler Corporation reports the following components of stockholders’ equity on December 31, 2016: Common stock—$25 par value, 100,000 shares authorized,50,000 shares issued and outstanding$1,250,000Paid-in capital in excess of par value, common stock 60,000Retained earnings 430,000Total stockholders' equity$1,740,000

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

Answer 1

Date	General journal				Debit	Credit
1-Jan	Treasury stock				80,000
	cash (4000*20)					80,000
5-Jan	Retained earnings				184,000
	Dividends payable					184,000
	(50000-4000)*4
28-Feb	Dividends payable				184,000
	cash					184,000
6-Jul	Cash	(1,500*24)			36000
	Treasury stock		(1,500*20)			30000
	paid in capital in excess of Treasury stock					6000
22-Aug	Cash	(2500*17)			42500
	paid in capital in excess of par -TS				6,000
	Retained earnings				1,500
	Treasury stock		(2500*20)			50000
5-Sep	Retained earnings				200000
	Dividends payable (50000*4)					200,000
28-Oct	Dividends payable				200,000
	cash					200,000
31-Dec	Income summary				368,000
	Retained earnings					368,000
	Statement of retained earnings
	opening balance ,jan 1				430,000
	add :Net income				368,000
					798,000
	less:Cash Dividend				384,000
	Treasury stock				1,500
	Closing balance,Dec 31				412,500
	Stockholders Equity section of the Balance Sheet
	common stock				1,250,000
	paid in capital in excess of par-CS				60,000
	total contributed capital				1,310,000
	Retained earnings				412,500
	total Stockholders Equity				1,722,500