Kohler Corporation reports the following components of stockholders’ equity on D

Question

Kohler Corporation reports the following components of stockholders’ equity on December 31, 2015: Common stock—$20 par value, 100,000 shares authorized, 55,000 shares issued and outstanding $ 1,100,000 Paid-in capital in excess of par value, common stock 80,000 Retained earnings 430,000 Total stockholders’ equity $ 1,610,000 In year 2016, the following transactions affected its stockholders’ equity accounts. Jan. 1 Purchased 5,000 shares of its own stock at $20 cash per share. Jan. 5 Directors declared a $4 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record. Feb. 28 Paid the dividend declared on January 5. July 6 Sold 1,875 of its treasury shares at $24 cash per share. Aug. 22 Sold 3,125 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 $408,000 credit balance (from net income) in the Income Summary account to Retained Earnings. Prepare a statement of retained earnings for the year ended December 31, 2016. . Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2016.

Explanation / Answer

(1) Statement of Retained Earnings for the year ended December 31, 2016

     Opening Balance as on January 1, 2016                                                          $ 430,000

     Less : Dividend Paid on February 28, 2016 ($ 4 x 50,000)                                            200,000

     Less : Loss on Sale of Treasury Shares on August 22, 2016                                           1,875

     ((3,125 x ($20 - $17)) - (1,875 x ($24 -$20)))

     Less : Dividend Paid on October 28, 2016 ($ 4 x 50,000)                                             200,000

     Add : Net Incomes earned during the year                                                                  408,000

    Closing Balance as on December 31, 2016                                                       $       436,125

(2)                                                 Balance Sheet as of December 31, 2016

    Stockholders' Equity

    Paid-in Capital

       Common Stock, $ 20 par, 100,000 shares authorized

       55,000 shares issued, 55,000 shares outstanding                                              $       1,100,000

       (55,000 - 5,000 + 1,875 + 3,125)

       Paid-in Capital in excess of par value - common                                                             80,000

                   Total Paid-in Capital                                                                            $        1,180,000

       Retained Earnings                                                                                                       436,125

                   Total Stockholders' Equity                                                                   $        1,616,125

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