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Kohler Corporation reports the following components of stockholders’ equity on December 31, 2017. Common stock—$10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding $ 400,000 Paid-in capital in excess of par value, common stock 60,000 Retained earnings 270,000 Total stockholders' equity $ 730,000 In year 2018, 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 $2 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 $2 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 $388,000 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 2018. 2. Prepare a statement of retained earnings for the year ended December 31, 2018. 3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2018

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fichoh

Answer:

Explanation:

1.) Kindly check attached picture

2.) Statement of retained earning

Statement of Retained Earnings

For Year Ended December 31, 2018

Retained earnings, Dec. 31, 2017, 270,000

Add: Net income 388,000

Less: Cash dividends declared (152,000)

Less: Treasury stock reissuance (1,500)

Retained earnings, Dec. 31, 2018, 504,500

C.) Stockholders' Equity Section of the Balance Sheet

December 31, 2018

Common stock - $10 par value 400,000

Paid-in capital in excess of par value, common stock 60,000

Retained earnings 504,500

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1. The journal entries to record Kohler Corporation's stock transactions for the year, 2017, are as follows:

Jan. 1 Debit Treasury Stock $40,000

Debit  Additional Paid-in Capital $40,000

Credit Cash $80,000

  • To record the purchase of 4,000 shares of treasury stock at $20 per share.

Jan. 5 Debit Dividend $72,000

Credit Dividend Payable $72,000

  • To record the declaration of dividend on 36,000 shares at $2 per share

Feb. 28 Debit Dividends Payable $72,000

Credit Cash $72,000

  • To record the payment of the dividend.

July 6 Debit Cash $36,000

Credit Treasury Stock $15,000

Credit Additional Paid-in Capital $21,000

  • To record the resale of 1,500 treasury shares at $24.

Aug. 22 Debit Cash $42,500

Credit Treasury Stock $25,000

Credit Additional Paid-in Capital $17,500

  • To record the resale of 2,500 treasury shares at $17.

Sept. 5 Debit Dividend $80,000

Credit Dividends Payable $80,000

  • To record the declaration of dividend on 40,000 shares at $2 per share.

Oct. 28 Debit Dividends Payable $80,000

Credit  Cash $80,000

  • To record the payment of the dividend.

Dec. 31 Debit Income Summary $388,000

Credit Retained Earnings $388,000

  • To close the net income to Retained Earnings.

2. Statement of Retained Earnings for the year ended December 31, 2018:

Retained Earnings b/forward        $270,000

Net income                                       388,000

Dividends Paid (72,000 + 80,000) -152,000

Retained Earnings balance         $506,000

3. The Stockholders' Equity Section of Kohler Corporation's Balance Sheet as of December 31, 2018, is as follows:

100,000 authorized shares at $10 par value

Issued and outstanding:

40,000 shares at $10       $400,000

Additional Paid-in Capital  58,500

Retained Earnings            506,000

Total equity =                 $964,500

Data Analysis:

Authorized Common Stock, 100,000 shares at $10 par value

Issued and outstanding:

40,000 shares at $10  $400,000

Additional Paid-in Capital $60,000

Retained Earnings 270,000

Total equity = $730,000

Jan. 1 Treasury Stock $40,000 Additional Paid-in Capital $40,000 Cash $80,000 4,000 shares at $20

Jan. 5 Dividend $72,000 Dividend Payable $72,000 (36,000 shares at $2 per share

Feb. 28 Dividends Payable $72,000 Cash $72,000

July 6 Cash $36,000 Treasury Stock $15,000 Additional Paid-in Capital $21,000  1,500 treasury shares at $24

Aug. 22 Cash $42,500 Treasury Stock $25,000 Additional Paid-in Capital $17,500 2,500 treasury shares at $17

Sept. 5 Dividend $80,000 Dividends Payable $80,000  (40,000 x $2 per share)

Oct. 28 Dividends Payable $80,000 Cash $80,000

Dec. 31 Income Summary $388,000 Retained Earnings $388,000

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