Question

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 (400,000 shares authorized ; 8,000 shares issued), $25 par, $200,000; Paid-In Capital in excess of par— common stock, $24,000; and Retained earnings, $2,400,000. The board of directors declared a 2% stock dividend when the market price of the stock was $32 a share. Healthy Life reported no income or loss for the current year.

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

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

	stock dividend = 8000 shares *2%=				160	shares
a1)	Accounting titles & Explanation					Debit	Credit
	Stock dividend		(160*32)			5120
	Stock dividend distributable			(160*25)			4000
	paid in capital in excess of par (160*7)						1120
A2)	Stock dividend distributable					4,000
	common Stock						4,000
b)	total paid in capital					224,000
	total retained earnings					2,400,000
	total stockholders Equity					2,624,000
c)
	total paid in capital					229,120
	total retained earnings					2,394,880
	total stockholders Equity					2,624,000