Kohler Corporation reports the following components of stockholders’ equity on January 1. 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 During the year, the following transactions affected its stockholders’ equity accounts. January 2 Purchased 4,000 shares of its own stock at $20 cash per share. January 5 Directors declared a $2 per share cash dividend payable on February 28 to the February 5 stockholders of record. February 28 Paid the dividend declared on January 5. July 6 Sold 2,000 of its treasury shares at $24 cash per share. August 22 Sold 2,000 of its treasury shares at $16 cash per share. September 5 Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record. October 28 Paid the dividend declared on September 5. December 31 Closed the $388,000 credit balance (from net income) in the Income Summary account to Retained Earnings. General Journal tab - Journalize the transactions related to the notes and accounts payable of Kohler Corporation. The General Ledger, Trial Balance and Schedule of Payables will be updated based on your entries. General Ledger tab - One of the advantages of general ledger software is that posting is done automatically. To see the detail of all transactions that affect a specific account, or the balance in an account at a specific point in time, click on the General Ledger tab. Trial Balance tab - General ledger software also automates the preparation of trial balances. A trial balance lists each account from the General Ledger, along with its balance, either a debit or a credit. Total debits should always equal total credits. Statement of Retained Earnings tab - Prepare the Statement of Retained Earnings for the Kohler Corporation for the year ended December 31. Stockholders' Equity tab - Prepare the Stockholders' equity section of Kohler Corporation's December 31 balance sheet. Impact on Equity tab - For each transaction, indicate the total change in Stockholders' Equity, if any. Verify that total equity, as calculated, agrees with the amount reported on the Stockholders' Equity tab.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Kohler Corporation reports the following components of
| 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 |
During the year, the following transactions affected its stockholders’ equity accounts.
| January 2 | Purchased 4,000 shares of its own stock at $20 cash per share. |
|---|---|
| January 5 | Directors declared a $2 per share cash dividend payable on February 28 to the February 5 stockholders of record. |
| February 28 | Paid the dividend declared on January 5. |
| July 6 | Sold 2,000 of its treasury shares at $24 cash per share. |
| August 22 | Sold 2,000 of its treasury shares at $16 cash per share. |
| September 5 | Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record. |
| October 28 | Paid the dividend declared on September 5. |
| December 31 | Closed the $388,000 credit balance (from net income) in the Income Summary account to Retained Earnings. |
General Journal tab - Journalize the transactions related to the notes and accounts payable of Kohler Corporation. The General Ledger,
General Ledger tab - One of the advantages of general ledger software is that posting is done automatically. To see the detail of all transactions that affect a specific account, or the balance in an account at a specific point in time, click on the General Ledger tab.
Trial Balance tab - General ledger software also automates the preparation of trial balances. A trial balance lists each account from the General Ledger, along with its balance, either a debit or a credit. Total debits should always equal total credits.
Statement of Retained Earnings tab - Prepare the Statement of Retained Earnings for the Kohler Corporation for the year ended December 31.
Stockholders' Equity tab - Prepare the Stockholders' equity section of Kohler Corporation's December 31 balance sheet.
Impact on Equity tab - For each transaction, indicate the total change in Stockholders' Equity, if any. Verify that total equity, as calculated, agrees with the amount reported on the Stockholders' Equity tab.
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