Question
Kohler Corporation reports the following components of stockholders equity at December 31 of the prior year. Common stock$20 par value, 100,000 shares authorized, 55,000 shares
Kohler Corporation reports the following components of stockholders’ equity at December 31 of the prior year.
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 430,000
Total stockholders' equity $ 1,600,000
During the current year, the following transactions affected its stockholders’ equity accounts.
January 2 Purchased 5,000 shares of its own stock at $25 cash per share.
January 5 Directors declared a $4 per share cash dividend payable on February 28 to the February 5 stockholders of record.
February 28 Paid the dividend declared on January 5.
July 6 Sold 2,500 of its treasury shares at $29 cash per share.
August 22 Sold 2,500 of its treasury shares at $21 cash per share.
September 5 Directors declared a $4 per share cash dividend payable on October 28 to the September 25 stockholders of record.
October 28 Paid the dividend declared on September 5.
December 31 Closed the $428,000 credit balance (from net income) in the Income Summary account to Retained Earnings.
Required:
Prepare journal entries to record each of these transactions.
Prepare a statement of retained earnings for the current year ended December 31.
Prepare the stockholders’ equity section of the balance sheet as of December 31 of the current year.
No Date General Journal
1 January 02
Debit: Treasury stock, Common 125,000
Credit: Cash 125,000
2 January 05
Debit: Retained earnings 220,000
Credit: Common dividend payable 220,000
3 February 28
Debit: Common dividend payable 220,000
Credit: Cash 220,000
4 July 06
Debit: Cash 72,500
Credit: Treasury stock, Common ???
Credit: Paid-In capital, Treasury stock ???
5 August 22
Debit: Cash 52,500
Credit: Paid-In capital, Treasury stock ???
Credit: Retained earnings ???
Credit: Treasury stock, Common ???
6 September 05
Debit: Retained earnings 220,000
Credit: Common dividend payable 220,000
7 October 28
Debit: Common dividend payable 220,000
Credit: Cash 220,000
8 December 31
Debit: Retained earnings 428,000
Credit: Income summary 428,000
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Prepare a statement of retained earnings for the current year ended December 31.
Note: Amounts to be deducted should be indicated by a minus sign.
KOHLER CORPORATION
Statement of Retained Earnings
For Current Year Ended December 31
Retained earnings, December 31, prior year $430,000
Add: Net income 428,000
Less: Cash dividends declared (218,000) ???
Retained earnings, December 31, current year $640,000
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Prepare the stockholders’ equity section of the balance sheet as of December 31 of the current year.
KOHLER CORPORATION
Stockholders' Equity Section of the Balance Sheet
December 31
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 218,000
Total stockholders' equity $1,388,000
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