Question

Senior Life Co. is an HMO for businesses in the Portland area. The following account balances appear on the balance sheet of Senior Life Co.: Common stock (900,000 shares authorized; 460,000 shares issued), $5 par, $2,300,000; Paid-in capital in excess of par—common stock, $900,000; and Retained earnings, $33,595,000. The board of directors declared a 1% stock dividend when the market price of the stock was $13 a share. Life Co. reported no income or loss for the current year.

Required:

A.	Journalize the entries to record (1) the declaration of the dividend on December 1, capitalizing an amount equal to market value, and (2) the issuance of the stock certificates on December 31. Refer to the Chart of Accounts for exact wording of account titles.
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.
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.

Answer 1

A.

Date	General Journal	Debit	Credit
Dec. 1	Stock Dividends (4600 x $13)	59800
	Stock Dividends Distributable (4600 x $5)		23000
	Paid-in capital in excess of par-common stock		36800
	(To record declaration of stock dividend)
Dec. 31	Stock Dividends Distributable	23000
	Common Stock		23000
	(To record distribution of stock dividend)

Kindly confirm exact wording of account titles from the Chart of Accounts since the same has not been provided with the question.

B.

1	Total paid-in capital ($2300000 + $900000)	3200000
2	Total retained earnings	33595000
3	Total stockholders' equity	36795000

C.

1	Total paid-in capital ($2300000 + $900000 + $23000 + $36800)	3259800
2	Total retained earnings ($33595000 - $59800)	33535200
3	Total stockholders' equity	36795000