Kohler Corporation reports the following components of stockholders equity on December 31, 2013

Question

Kohler Corporation reports the following components of stockholders equity on December 31, 2013:


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 2014, 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 stockholder 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 S2 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 2014.
2. Prepare a statement of retained earnings for the year ended December 31, 2014
3. Prepare the stockholders' equity section of the company's balance sheet as of December 31, 2014.

[su_box title="♦ Relevant knowledge" box_color="#2d6ff7" radius="1"]Stockholders' equity is capital of the owner in the business. As with all investors they are also obliged to pay a return for their equity. This is known as dividends. Dividends are a distribution of income to shareholders from the accumulated earnings of the business. The majority of dividends are declared and distributed to the number of outstanding shareholders at the time of a record date. Because shares can be issued, reacquired, or reissued and the dividend paid to stock owners declared, and other times, the total number of shares outstanding keeps changing from time to time.

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kttutoria · Accepted Answer

tonytutoria · Answer

1
Date	General Journal	Debit	Credit
1-Jan	Treasury stock, Common	80,000		=4000*20
	Cash		80,000

5-Jan	Retained earnings	72,000		=(40000-4000)*2
	Common dividend payable		72,000

28-Feb	Common dividend payable	72,000
	Cash		72,000

6-Jul	Cash	36,000		=1500*24
	Treasury stock, Common		30,000	=1500*20
	Treasury stock, Paid-in capital		6,000

22-Aug	Cash	42,500		=2500*17
	Treasury stock, Paid-in capital	6,000
	Retained earnings	1,500
	Treasury stock, Common		50,000	=2500*20

5-Sep	Retained earnings	80,000		=40000*2
	Common dividend payable		80,000

28-Oct	Common dividend payable	80,000
	Cash		80,000

31-Dec	Summary of income	388,000
	Retained earnings		388,000

2
	KOHLER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31, 2014
	December 31, 2013, Retained earnings	270,000
	Add: Net income	388,000
		658,000
	Less: Cash dividends declared	(152,000)
	Treasury stock reissuances are less	(1,500)
	December 31, 2014, Retained earnings	504,500

3
	KOHLER CORPORATION
	Stockholders' Equity Section of the Balance Sheet
	December 31, 2014
	Common stock - $10 par value	400,000
	Common stock, paid-in capital exceeding par value	60,000
	Contributed capital	460,000
	Retained earnings	504,500
	Equity of total stockholders	964,500

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Kohler Corporation reports the following components of stockholders equity on December 31, 2013

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