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 ; 7,000 shares issued), $125 par, $875,000; Paid-In Capital in excess of par—common stock, $175,000; and Retained earnings, $7,000,000. The board of directors declared a 1% stock dividend when the market price of the stock was $159 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. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value.

a	Stock dividend (7000*1%*159)	11130
	Common Stock dividend distributable		8750
	Paid in Capital in excess of par value-Common Stock		2380

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

b)	Common Stock dividend distributable	8750
	Common Stock		8750

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	$1050000
Total retained earnings	$7000000
Total stockholders' equity	$8050000

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	$1061130
Total retained earnings	$6988870
Total stockholders' equity	$8050000