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 (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 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.

	Stock Dividends
	Stock Dividends Distributable
	Paid-In Capital in Excess of Par-Common Stock

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

	Stock Dividends Distributable
	Common Stock

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.

	Stock Dividends (5000*2%*31)	3100
	Stock Dividends Distributable		2500
	Paid-In Capital in Excess of Par-Common Stock		600

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

	Stock Dividends Distributable	2500
	Common Stock		2500

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	$140000
Total retained earnings	$1375000
Total stockholders' equity	$1515000

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 (140000+3100)	$143100
Total retained earnings	$1371900
Total stockholders' equity	$1515000