Kohler Corporation reports the following components of stockholders\' equity on

Question

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 400,000 60,000 270,000 730,000 issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity 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 January5 Jul. 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 Sep. 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 3 9

Explanation / Answer

Impact on Equity Impact on Equity $ Total Stakeholder's Equity - December 31, 2015 $730,000 Jan 1.)Purchased 4000 shares of its own stock at $20 cash per share Treasury stock will reduce the stakeholers' Equity ($80,000) Jan 5.) Directors declared a $2 per share cash dividend payable on Feb. 28 to the Feb. 5 stakeholders of record Dividend distribution will reduce the retained earnings ($72,000) Feb 28.) Paid the dividend declared on January 5. No impact Jul 6.)Sold 1500 of its treasury shares at $24 cash per share Increase the stakeholders' Equity $36,000 Aug 22.)Sold 2500 of its treasury shares at $17 cash per share Increase the stakeholders' Equity $42,500 Sep 5.) Directors declared a $2 per share cash dividend payable on Oct. 28 to the Sep. 25 stakeholders of record Dividend distribution will reduce the retained earnings ($80,000) Oct 28.) Paid the dividend declared on Sep 5. No impact Dec 31.) Closed the $388,000 credit balance from net income in the income summary account to Retained Earnings Increase the stakeholders' Equity $388,000 $964,500 Working Note: Treasury stock @ $20 per share $80,000 Sold treasury stock @ $24 per share ($36,000) Sold treasury stock @ $17 per share ($42,500) Adjustment to Retained Earnings $1,500 Statement of Retained Earnings Opening Balance $270,000 Add: Net Income $388,000 $658,000 Less: Cash dividend paid ($152,000) Less: Treasury stock reissuance ($1,500) Ending Balance $504,500 Statement of Stockholders' Equity Common stock at $10 par value $400,000 Paid in capital in excess of par value, common stock $60,000 Retained Earnings, Dec 31 $504,500 Total stockholders Equity $964,500

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