Question

Entries for Stock Dividends 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 (420,000 shares authorized ; 4,000 shares issued), $125 par, $500,000; Paid-In Capital in excess of par-common stock, $100,000; and Retained earnings, $5,500,000. The board of directors declared a 1% stock dividend when the market price of the stock was $158 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. al. 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 Feedback a2. Journalize the entry to record the issuance of the stock certificates. Stock Dividends Distributable Common Stock Feedback Check My Work 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.

Answer -

Particulars	Debit ($)	Credit ($)
Stock Dividends [(4000 shares*1%)*$158] Stock Dividends Distributable [(4000 shares*1%)*125] Paid-In Capital in Excess of Par-Common Stock [Balancing figure]	6320 - -	- 5000 1320

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( a2 ) -- Journalize the entry to record the issuance of the stock certificates.

Answer -

Particulars	Debit ($)	Credit ($)
Stock Dividends Distributable Common Stock	5000 -	- 5000

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( 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.

Answer -

	Calculations ($)	Amount ($)
Total paid-in capital	= Common stock at par + Paid-in capital in excess of par---common stock = 500000 + 100000 = 600000	600000
Total retained earnings	Given in question	5500000
Total stockholders' equity	[600000 + 5500000]	6100000

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( 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.

Answer -

	Calculations ($)	Amount ($)
Total paid-in capital	= Common stock at par + Paid-in capital in excess of par---Common stock + Stock Dividends Distributable + Paid-in capital in excess of par---Common stock = 500000 + 100000 + 5000 + 1320 = 606320	606320
Total retained earnings	= Retained earnings before stock Dividends - Stock Dividends = 5500000 - 6320 = 5493680	5493680
Total stockholders' equity	[606320 + 5493680]	6100000