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 (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 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

• All working forms part of the answer
• Working for amounts:

Issued Common Stock shares	8000
Stock dividend rate	1%
No. of shares distributable as dividend	80
Market price per share	$                              61.00
Total Stock Dividend	$                        4,880.00
Common Stock value affected by [80 shares x $50 par]	$                        4,000.00
Paid in Capital in excess of Par - Common Stock value affected by [ 80 shares x $11]	$                           880.00

• Journal Entries

Accounts title	Debit	Credit
Dividend	$                        4,880.00
Dividend Distributable		$                               4,880.00
(Stock dividend declared)

Accounts title	Debit	Credit
Dividend Distributable	$                        4,880.00
Common Stock		$                               4,000.00
Paid In Capital in excess of Par - Common Stock		$                                   880.00
(dividend distributed)

• Requirement 2

	Before Stock Dividend	Effect of Stock Dividend – WORKING COLUMN	After Stock Dividend
Common Stock	$                   400,000.00	$                               4,000.00	$             404,000.00
Paid In Capital in excess of Par - Common Stock	$                     80,000.00	$                                   880.00	$               80,880.00
Total Paid in Capital	$                   480,000.00	$                               4,880.00	$             484,880.00
Retained Earnings	$               4,000,000.00	$                             (4,880.00)	$         3,995,120.00
Total Stockholder's Equity	$               4,480,000.00	$                                            -	$         4,480,000.00