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 (220,000 shares authorized; 6,000 shares issued), $125 par, $750,000; Paid-In Capital in excess of par— common stock, $150,000; and Retained earnings, $6,750,000. The board of directors declared a 1% stock dividend when the market price of the stock was $171 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

Journal entries

No	General Journal	Debit	Credit
a1	Stock dividend (6000*1%*171)	10260
	Common Stock dividend distributable		7500
	Paid in capital in excess of par value-Common Stock		2760
a2	Common Stock dividend distributable	7500
	Common Stock		7500

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 (750000+150000)	$900000
Total retained earnings	$6750000
Total stockholders' equity	$7650000

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 (900000+10260)	$910260
Total retained earnings (6750000-10260)	$6739740
Total stockholders' equity	$7650000