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 (250,000 shares authorized; 6,000 shares issued), $75 par, $450,000; Paid-In Capital in excess of par— common stock, $48,000; and Retained earnings, $4,500,000. The board of directors declared a 2% stock dividend when the market price of the stock was $95 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_______.A1. Journalize the entry to record the dedaration of the dividend, capitalizing an amount equal to market value. Stock Dividends 10,440 Stock Dividends Distributable 7,500 Paid In Capital in Excess of Par Common Stock 3,120 A2. Journalize the entry to record the issuance of the stock certificates. ) Stock Dividends 7,500 Common Stock 7,500.B. Determine the following amounts before the stock dividend was dedared: (1) total paid-in capital, (2) total and retained earning (3) total stockholders' equity. Total paid-in capital 828,000Total retained earnings 6,000,000 Total stockholders' equity 6,828,000C. Determine the following amounts after the stock dividend was dedlared and closing entries were recorded at the end of the year:Total paid-in capitalTotal retained earningsTotal stockholders' equity

Answer 1

common stock = 6,000 at $75 par = $450,000

additional paid in capital = $48,000

retained earnings = $4,500,000

market price per stock $95

since the stock dividend is 2% (= 6,000 x 2% = , then we must use the market price to calculate it:

A1. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value.

Dr Retained earnings 11,400

Cr Common stock dividend distributable 9,000

Cr Additional paid in capital 2,400

A2. Journalize the entry to record the issuance of the stock certificates.

Dr Common stock dividend distributable 9,000

Cr Common stock 9,000

B. Determine the following amounts before the stock dividend was declared:

(1) total paid-in capital = $48,000

(2) total retained earning = $4,500,000

(3) total stockholders' equity = $4,998,000

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 = $50,400

(2) total retained earning = $4,488,600

(3) total stockholders' equity = $4,998,000