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 (230,000 shares authorized ; 4,000 shares issued), $50 par, $200,000; Paid-In Capital in excess of par-common stock, $40,000; and Retained earnings, $1,600,000. The board of directors declared a 1% stock dividend when the market price of the stock was $64 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. 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

a1. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value.

	Stock Dividends (4000*1%*64)	2560
	Stock Dividends Distributable		2000
	Paid-In Capital in Excess of Par-Common Stock		560

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a1. Recall that a stock dividend affects only stockholders' equity.

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

	Stock Dividends Distributable	2000
	Common Stock		2000

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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.

Total paid-in capital	240000
Total retained earnings	1600000
Total stockholders' equity	1840000

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	240000+2560 = 242560
Total retained earnings	1600000-2560 = 1597440
Total stockholders' equity	1840000