Question

In: Accounting

Senior Life Co. is an HMO for businesses in the Portland area. The following account balances...

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 (800,000 shares authorized; 500,000 shares issued), $4 par, $2,000,000; Paid-in capital in excess of par—common stock, $1,000,000; and Retained earnings, $33,500,000. The board of directors declared a 2% stock dividend when the market price of the stock was $13 a share. Senior 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.
CHART OF ACCOUNTS
Senior Life Co.
General Ledger
ASSETS
110 Cash
120 Accounts Receivable
131 Notes Receivable
132 Interest Receivable
141 Merchandise Inventory
145 Office Supplies
151 Prepaid Insurance
181 Land
193 Equipment
194 Accumulated Depreciation-Equipment
LIABILITIES
210 Accounts Payable
221 Notes Payable
226 Interest Payable
231 Cash Dividends Payable
241 Salaries Payable
261 Mortgage Note Payable
EQUITY
311 Common Stock
312 Paid-In Capital in Excess of Par-Common Stock
315 Treasury Stock
321 Preferred Stock
322 Paid-In Capital in Excess of Par-Preferred Stock
331 Paid-In Capital from Sale of Treasury Stock
340 Retained Earnings
350 Stock Dividends Distributable
351 Cash Dividends
352 Stock Dividends
390 Income Summary

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.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY

1

2

3

4

5

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
REVENUE
410 Sales
610 Interest Revenue
EXPENSES
510 Cost of Merchandise Sold
515 Credit Card Expense
520 Salaries Expense
531 Advertising Expense
532 Delivery Expense
533 Selling Expenses
534 Rent Expense
535 Insurance Expense
536 Office Supplies Expense
537 Organizational Expenses
562 Depreciation Expense-Equipment
590 Miscellaneous Expense
710 Interest Expense

Solutions

Expert Solution

Solution A:

Journal Entries
DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY
1-Dec Stock dividends Dr (500000*2%*$13) $130,000.00 -$130,000.00
        To Stock dividend distributable (500000*2%*$4) $40,000.00 $40,000.00
        To Paid-In Capital in Excess of Par-Common Stock (500000*2%*$9) $90,000.00 $90,000.00
(To record stock dividend declared)
31-Dec Stock dividend Distributable Dr $40,000.00 -$40,000.00
        To Common Stock $40,000.00 $40,000.00
(To record issue of stock certificates)

Solution B:

Computation - Before stock dividend declared
Particulars Amount
Total paid in capital ($2,000,000 + $1,000,000) $3,000,000.00
Total retained earnings $33,500,000.00
Total stockholder's equity $36,500,000.00

Solution C:

Computation - After stock dividend declared
Particulars Amount
Total paid in capital ($2,040,000 + $1,090,000) $3,130,000.00
Total retained earnings $33,370,000.00
Total stockholder's equity $36,500,000.00

Related Solutions

Senior Life Co. is an HMO for businesses in the Portland area. The following account balances...
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 (220,000 shares authorized; 7,000 shares issued), $75 par, $525,000; Paid-In Capital in excess of par— common stock, $105,000; and Retained earnings, $4,200,000. The board of directors declared a 2% stock dividend when the market price of the stock was $100 a share. Senior Life Co. reported no income or loss for the current...
Senior Life Co. is an HMO for businesses in the Portland area. The following account balances...
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 (430,000 shares authorized; 8,000 shares issued), $50 par, $400,000; Paid-In Capital in excess of par— common stock, $80,000; and Retained earnings, $4,000,000. The board of directors declared a 1% stock dividend when the market price of the stock was $61 a share. Senior Life Co. reported no income or loss for the current...
Senior Life Co. is an HMO for businesses in the Portland area. The following account balances...
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 (210,000 shares authorized; 5,000 shares issued), $125 par, $625,000; Paid-In Capital in excess of par— common stock, $65,000; and Retained earnings, $5,625,000. The board of directors declared a 2% stock dividend when the market price of the stock was $161 a share. Senior Life Co. reported no income or loss for the current...
1)Senior Life Co. is an HMO for businesses in the Portland area. The following account balances...
1)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 (310,000 shares authorized; 3,000 shares issued), $50 par, $150,000; Paid-In Capital in excess of par— common stock, $15,000; and Retained earnings, $1,350,000. The board of directors declared a 2% stock dividend when the market price of the stock was $68 a share. Senior Life Co. reported no income or loss for the current...
Entries for Stock Dividends Senior Life Co. is an HMO for businesses in the Portland area....
Entries for Stock Dividends 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 (320,000 shares authorized; 3,000 shares issued), $50 par, $150,000; Paid-In Capital in excess of par— common stock, $30,000; and Retained earnings, $1,500,000. The board of directors declared a 2% stock dividend when the market price of the stock was $69 a share. Senior Life Co. reported no income or...
Entries for Stock Dividends Senior Life Co. is an HMO for businesses in the Portland area....
Entries for Stock Dividends 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 (360,000 shares authorized; 7,000 shares issued), $25 par, $175,000; Paid-In Capital in excess of par— common stock, $21,000; and Retained earnings, $1,750,000. The board of directors declared a 2% stock dividend when the market price of the stock was $33 a share. Senior Life Co. reported no income or...
Healthy Life Co. is an HMO for businesses in the Fresno area. The following account balances...
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...
Entries for stock dividendsOBJ. 4Senior Life Co. is an HMO for businesses in the Portland area.
EX 13-10Entries for stock dividendsOBJ. 4Senior 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 (800,000 shares authorized; 500,000 shares issued), $4 par, $2,000,000; Paid-in capital in excess of par—common stock, $1,000,000; and Retained earnings, $33,500,000. The board of directors declared a 2% stock dividend when the market price of the stock was $13 a share. Senior Life Co. reported no income or...
Entries for Stock Dividends Advanced Life Co. is an HMO for businesses in the Albuquerque area....
Entries for Stock Dividends Advanced Life Co. is an HMO for businesses in the Albuquerque area. The following account balances appear on the balance sheet of Advanced Life Co.: Common stock (600,000 shares authorized; 400,000 shares issued), $8 par, $3,200,000; Paid-in capital in excess of par—common stock, $800,000; and Retained earnings, $25,600,000. The board of directors declared a 2% stock dividend when the market price of the stock was $19 a share. Advanced Life Co. reported no income or loss...
Entries for Stock Dividends Healthy Life Co. is an HMO for businesses in the Fresno area....
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 (420,000 shares authorized ; 5,000 shares issued), $25 par, $125,000; Paid-In Capital in excess of par— common stock, $15,000; and Retained earnings, $1,375,000. The board of directors declared a 2% stock dividend when the market price of the stock was $31 a share. Healthy Life reported no income or loss for the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT