Question

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 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 (7000*2%*33)	4620
	Stock Dividends Distributable		3500
	Paid-In Capital in Excess of Par-Common Stock		1120

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

	Stock Dividends Distributable	3500
	Common Stock		3500

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 (175000+21000)	$196000
Total retained earnings	$1750000
Total stockholders' equity	$1946000

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 (196000+4620)	$200620
Total retained earnings	$1745380
Total stockholders' equity	1946000