Question

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 (400,000 shares authorized ; 7,000 shares issued), $50 par, $350,000; Paid-In Capital in excess of par—common stock, $70,000; and Retained earnings, $4,200,000. The board of directors declared a 1% stock dividend when the market price of the stock was $65 a share. Healthy Life reported no income or loss for the current year.

If no entry is required, select "No entry required" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank.

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

a) Journal entry

date	account and explanation	Debit	Credit
	Retained earnings (7000*1%*65)	4550
	Common Stock dividend distributable		3500
	Paid in capital in excess of par value-Common Stock		1050
	Common Stock dividend 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	$420000
Total retained earnings	$4200000
Total stockholders' equity	$4620000

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 (420000+4550)	$424550
Total retained earnings (4200000-4550)	$4195450
Total stockholders' equity	$4620000