Kohler Corporation reports the following components of stockholders’ equity on D
ID: 2592795 • Letter: K
Question
Kohler Corporation reports the following components of stockholders’ equity on December 31, 2016: 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 70,000 Retained earnings 460,000 Total stockholders' equity $ 1,630,000 In year 2017, 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 $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 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 $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 $428,000 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.
Explanation / Answer
Solution: 1. Date General Journal Debit Credit Jan 01 Treasury stock, Common 100,000 Cash 100,000 Jan 05 Retained earnings 300,000 Common dividend payable 300,000 Feb 28 Common dividend payable 300,000 Cash 300,000 Jul 06 Cash 45,000 Treasury stock, Common 37,500 Paid-in capital, Treasury stock 7,500 Aug 22 Cash 53,125 Paid-in capital, Treasury stock 7,500 Retained earnings 1,875 Treasury stock, Common 62,500 Sep 05 Retained earnings 330,000 Common dividend payable 330,000 Oct 28 Common dividend payable 330,000 Cash 330,000 Dec 31 Income summary 428,000 Retained earnings 428,000 Working Notes: Date General Journal Debit Credit Jan 01 Treasury stock, Common 100,000 [ 5000 x $ 20 ] 100,000 Cash [ 5000 x $ 20 ] Jan 05 Retained earnings 300,000 [ (55,000 shares - 5,000 shares) x $ 6 ] Common dividend payable 300,000 [ (55,000 shares - 5,000 shares) x $ 6 ] Feb 28 Common dividend payable 300,000 Cash 300,000 Jul 06 Cash 45,000 [1,875 x $24 ] Treasury stock, Common 37,500 [1,875 x $20 ] Paid-in capital, Treasury stock 7,500 [1,875 x ($24 - $20) ] Aug 22 Cash 53,125 [3,125 x $ 17 ] Paid-in capital, Treasury stock 7,500 [balance from above entry] Retained earnings 1,875 [62,500-53,125 -7,500=1,875] Bal. fig. Treasury stock, Common 62,500 [3,125 x $20] Sep 05 Retained earnings 330,000 [50,000+3,125+1,875] x $6 Common dividend payable 330,000 [50,000+3,125+1,875] x $6 Oct 28 Common dividend payable 330,000 Cash 330,000 Dec 31 Income summary 428,000 Retained earnings 428,000 2 KOHLER CORPORATION Statement of Retained Earnings For Year Ended December 31, 2017 Retained earnings, Dec. 31, 2016 460,000 Add: Net income 428,000 888,000 Less: Cash dividends declared -630,000 Less: Treasury stock reissuance -1,875 [from Aug 22 entry] Retained earnings, Dec. 31, 2017 684,125 Working Notes: KOHLER CORPORATION Statement of Retained Earnings For Year Ended December 31, 2017 Retained earnings, Dec. 31, 2016 460,000 Add: Net income 428,000 Total 888,000 Less: Cash dividends declared -630,000 [300,000 + 330,000] Less: Treasury stock reissuance -1,875 Retained earnings, Dec. 31, 2017 256,125 3. KOHLER CORPORATION Stockholders' Equity Section of the Balance Sheet December 31, 2017 Common stock - $20 par value 1,100,000 Paid-in capital in excess of par value, common stock 70,000 Total contributed capital 1,170,000 Retained earnings 256,125 Total stockholders' equity 1,426,125 Please feel free to ask if anything about above solution in comment section of the question.
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