Problem 11-2A Cash dividends, treasury stock, and statement of retained earnings
ID: 2565456 • Letter: P
Question
Problem 11-2A Cash dividends, treasury stock, and statement of retained earnings 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 60,000 270.000 $730,000 Paid-in capital in excess of par value, common stock . . Total stockholders' equity . In year 2016, the following transactions affected its stockholders' equity accounts. Jan. 2 Issued 10,000 shares of Common Stock for $20 per share. Jan. 2 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 Feb. Feb. July Aug. Sept. 1. 28 6 2 5 stockholders of record. Date of record of Jan 5 Cash dividend declaration. Paid the dividend declared on January 5. Sold 1,500 of its treasury shares at $24 cash per share. Sold 2,500 of its treasury shares at $17 cash per share. 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 Nov. Issued a 10 percent stock dividend to stockholders of record of November 10 to be distributed on November 30. The stock was selling for $25 per share at the time of the declaration. 2 Nov. 30 Distributed the stock dividend declared on November 2 Dec. 3 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 2016.Explanation / Answer
Jan 2, 2016
Cash A/c Dr. $ 200000
Common Stock a/c Cr. $ 100000
Paid in capital in excess of par value, common stock Cr. $ 100000
(10,000 Common stock issued at $20 per share)
Treasury stock a/c Dr. $ 80000
Cash A/c Cr. $80000
(4000 own stocks repurchased at $20 per stock)
Feb 1, 2016
Dividends A/c Dr. $ 92000
Dividends payable A/c Cr. $ 92000
(@$2 dividends declared on per stock)
Feb 28, 2016
Dividends payable A/c Dr. $ 92000
Cash A/c Cr. $92000
(Dividends declared on stocks are paid out)
July 6, 2016
Cash A/c (1500*24) Dr. $36000
Treasury stock (1500*20) Cr. $30000
Paid in capital, Treasury stock (1500*4) Cr. $ 6000
(1500 treasury stock sold @$24 per stock)
Aug 2, 2016
Cash A/c (2500*17) Dr. $42500
Paid in capital, Treasury stock (2500*3) Dr. $ 7500
Treasury Stock A/c (2500*20) Cr. $50000
(2500 treasury stocks sold @$17 per stock)
Sept 05, 2016
Dividends A/c (50000*2) Dr. $100000
Dividends payable Cr. $100000
(Dividends declared on 50000 shares @$2 per share)
Oct 28, 2016
Dividends payable A/c Dr. $ 100000
Cash A/c Cr. $100000
(Dividends declared are paid out)
Nov 02, 2016
Dividends A/c (5000*25) Dr. $ 125000
Dividends payable a/c Cr. $125000
(10% stock dividend is to be given at market price of $25 per share)
Nov 30, 2016
Dividends payable a/c Dr. $ 125000
Common stock a/c (5000*10) Cr. $ 50000
Paid in capital in excess of par value, Common stock Cr. $ 75000
(Stock dividend paid out)
Dec 03, 2016
Net Income a/c Dr. $317000
Dividends a/c (92000+1000+125000) Cr. $ 317000
(Dividends paid throughout the year are written off on retained earnings)
Net Income A/c Dr. $71000
Reatined earnings a/c Cr. $71000
(Net income transferred to retainde earnings)