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 (220,000 shares authorized; 7,000 shares issued), $125 par, $875,000; Paid-In Capital in excess of par common stock, $91,000; and Retained earnings, $7,000,000. The board of directors declared a 2% stock dividend when the market price of the stock was $154 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. 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 a2. Journalize the entry to record the issuance of the stock certificates. Stock Dividends Distributable Common Stock 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 dedared 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.

Account title and Explanation	Debit	Credit
Stock dividends [7,000 x 2% x $154 market price]	$21,560
Stock dividends distributable [7,000 x 2% x $125 par]		$17,500
Paid-in Capital in Excess of Par-Common stock		$4,060
[To record declaration stock dividends]

a2.

Account title and Explanation	Debit	Credit
Stock dividends distributable	$17,500
Common stock		$17,500
[To record payment of stock dividends]

b. before stock dividends:

Total paid-in capital [875,000+91,000]	$966,000
Total retained earnings	$7,000,000
Total stockholders' equity	$7,966,000

c. after stock dividends:

Total paid-in capital [875,000+91,000 + (17,500+ 4,060)]	$987,560
Total retained earnings [7,000,000 - 21,560]	$6,978,440
Total stockholders' equity	$7,966,000