Question

Entries for Stock Dividends Senior ute Co. is an HMO for businesses in the Portland area. The following account balances appear on the balance sheet of Senior Co. Common stock (390,000 shares authorised; 3,000 shares issued) $50 par, $400,000; Pald-in Capital in excess of par- common stock, $80,000, and Retained earnings, $4,000,000. The board of directors declared a 2 stock dividend when the market price of the stock was $61 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 11. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value a2. Journalue the entry to record the issuance of the stock certificates b. Determine the following amounts before the stock dividend was declared (1) total pard in capital (2) Total paid in capital Total retained earnings Total stockholders' equity c. Determine the following amounts after the stock dividend was declared and closir 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

Requirement a:

Account title and explanation	Debit	Credit
Retained earnings	$9,760
Common stock dividend distributable		$8,000
Paid-In Capital in excess of par-common stock		$1,760
[To record declaration of stock dividend]

Calculations:

Stock dividend (in shares) = 8,000 shares x 2% = 160 shares

Retained earnings = 160 shares x $61 market rate = $9,760

Common stock dividend distributable = 160 shares x $50 par = $8,000

Paid-in capital in excess of par-common stock = 160 shares x ($61-$50) = $1,760

Requirement b:

Account title and explanation	Debit	Credit
Common stock dividend distributable	$8,000
Common stock		$8,000
[To record issuance of the stock dividend]

Requirement c:

Total paid-in capital	$480,000
Total retained earnings	$4,000,000
Total stockholders' equity	$4,480,000

Calculations:

Total paid-in capital = Common stock + Paid-in excess of par = $400,000+$80,000 = $480,000

Requirement d:

Total paid-in capital	$489,760
Total retained earnings	$3,990,240
Total stockholders' equity	$4,480,000

Calculations:

Total paid-in capital = Previous balance + Stock dividend = 480,000+9,760 = $489,760

Total retained earnings = Previous balance - Stock dividend = $4,000,000 - $9,760 = $3,990,240