Kohler Corporation reports the following components of stockholders’ equity on December 31, 2015:
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 2016, 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 Feb. 28 to the Feb. 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.
| Kohler Corporation | |
| Statement of Retained Earning | |
| For Year Ended December 31, 2016 | |
| Retained earnings, Dec. 31, 2015 270,000 | 270,000 |
| Add: Net income | 388000 |
| Less: Cash dividends declared | -152000 |
| Less: Treasury stock reissuances | -1500 |
| Retained earnings, Dec. 31, 2016 | 504,500 |
| Kohler Corporation | |
| Stockholders’ Equity Section of the Balance Sheet | |
| December 31, 2016 | |
| Common stock – $10 par value | 400,000 |
| Paid-in capital in excess of par value, common stock |
60,000 |
| Retained earnings | 504500 |
Working notes for the above answer is as under
Jan 01
DR Treasury stock, Common 80,000
CR Cash 80,000
Jan 05
DR Retained earnings 72,000
CR Common dividend payable 72,000
Feb 28
DR Common dividend payable 72,000
CR Cash 72,000
Jul 06
DR Cash 36,000
CR Treasury stock, Common 30,000
CR Paid-in capital, Treasury stock 6,000
Aug 22
DR Cash 42,500
DR Paid-in capital, Treasury stock 6,000
DR Retained earnings 1,500
CR Treasury stock, Common 50,000
Sep 05
DR Retained earnings 80,000
CR Common dividend payable 80,000
Oct 28
DR Common dividend payable 80,000
CR Cash 80,000
Dec 31
DR Income summary 388,000
CR Retained earnings 388,000
Explanation:
Jan. 1 Purchased treasury stock (4,000 × $20) = $80,000.
Jan. 5 Declared $2 dividend on 36,000 outstanding shares = $72,000
July 6 Cash = (1500 × $24) = $36,000.
Treasury Stock, Common = (1500 × $20) = $30,000.
Paid-In Capital, Treasury Stock = (1500 × $4) = $6,000.
Aug. 22 Cash = (2,500 × $17) = $42,500.
Treasury Stock, Common = (2,500 × $20) = $50,000.
Sept. 5 Declared $2 dividend on 40,000 outstanding shares = $80,000
Common stock ($10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding) = $400,000
