Question

Entries for Stock Dividends

Healthy Life Co. is an HMO for businesses in the Fresno area. The following account balances appear on Healthy Life’s balance sheet: Common stock (270,000 shares authorized ; 4,000 shares issued), $125 par, $500,000; Paid-In Capital in excess of par—common stock, $100,000; and Retained earnings, $5,000,000. The board of directors declared a 2% stock dividend when the market price of the stock was $169 a share. Healthy Life reported no income or loss for the current year.

If no entry is required, select "No entry required" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank.

a1. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value.

  

a2. Journalize the entry to record the issuance of the stock certificates.

  

b. Determine the following amounts before the stock dividend was declared: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders' equity.

Total paid-in capital$

Total retained earnings$

Total stockholders' equity$

c. Determine the following amounts after the stock dividend was declared and closing entries were recorded at the end of the year: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders' equity.

Total paid-in capital$

Total retained earnings$

Total stockholders' equity$

Answer 1

a1
Stock Dividends	13520		=4000*2%*169
Stock Dividends Distributable		10000	=4000*2%*125
Paid in Capital in excess of par-Common Stock		3520
a2
Stock Dividends Distributable	10000
Common Stock		10000
b
Total paid in Capital	600000		=500000+100000
Total Retained Earnings	5000000
Total Stockholders' Equity	5600000
c
Total paid in Capital	613520		=600000+13520
Total Retained Earnings	4986480		=5000000-13520
Total Stockholders' Equity	5600000