Question

General Ledger assignment 11-1 is adapted from Problem 11-2A, including beginning equity balances. Prepare journal entries related to treasury stock, cash dividends, and net income. Then, prepare the statement of retained earnings and the stockholders’ equity section of the balance sheet.

Short answer

Retained earnings balance as on 31 December 2017 is $504,500

The total stockholders’ equity balance as on 31 December 2017 is $964,500

Step-by-step solution

Definition of Treasury Stock

Treasury stock can be described as the stock that the issuing company repurchases from the stockholders, and this buyback of shares reduce the number of stocks in the open market.

Journal entries

Date	Particulars	Debit ($)	Credit ($)
Jan 1	Treasury Stocks, Common $\left(4000\times \$20\right)$	80,000
	Cash		80,000
	(To Stocks repurchased)
Jan 5	Retained Earnings role="math" localid="1663063730167" $\left(36,000\times \$2\right)$	72,000
	Common dividends payable		72,000
	(To dividend due)
Feb 28	Common dividend Payable	72,000
	Cash		72,000
	(To Cash dividend paid)
Jul 6	Cash $\left(1500\times \$24\right)$	36,000
	Treasury stock, Common $\left(1500\times \$20\right)$		30,000
	Paid In capital, treasury stock		6,000
	(To treasury stock sold)
Aug 22	Cash $\left(2500\times \$17\right)$	42,500
	Paid In Capital	6,000
	Retained Earnings	1,500
	Treasury Stock, Com $\left(2500\times \$20\right)$		50,000
	(To treasury stock sold)
Sept 5	Retained Earnings $\left(40,000\times \$2\right)$	80,000
	Common dividend Payable		80,000
	(To dividend due)
Oct 28	Common dividend Payable	80,000
	Cash		80,000
	(To dividend paid)
Dec 31	Income Summary	388,000
	Retained Earnings		388,000
	(To net Income recorded)

Preparation of statement of retained earnings

KOHLER Corporation
Statement of retained Earnings
For the year ended December 31, 2017
	Amount ($)
Retained Earnings Dec 31 2016	270,000
Add: Net Income	388,000
	758,000
Less: Cash dividends$(\$72,000+\$80,000)$	(152,000)
Less: Treasury stock reissuance	(1,500)
Retained Earnings, dec 31, 2017	504,500

Preparation of stockholders’ equity section

KOHLER Corporation
Stockholders’ equity section
For the year ended December 31, 2017
	Amount ($)
Common stock- $10 par value	400,000
Paid in capital in excess of par value, common stock	60,000
Total contributed capital	460,000
Retained Earnings	504,500
Total stockholder’ equity	964,500