Exercise 11-10 (Algorithmic) Entries for Stock Dividends Organic Health Co. is a
ID: 2374202 • Letter: E
Question
Exercise 11-10 (Algorithmic)
Entries for Stock Dividends
Organic Health Co. is an HMO for businesses in the Chicago area. The following account balances appear on the balance sheet of Organic Health Co.: Common stock (250,000 shares authorized), $50 par, $150,000; Paid-In Capital in excess of par%u2014 common stock, $45,000; and Retained earnings, $1,650,000. The board of directors declared a 1% stock dividend when the market price of the stock was $69 a share. Organic Health Co. reported no income or loss for the current year.
For a compound transaction, if an amount box does not require an entry, leave it blank. If no entry is required, select "No entry required" from the dropdown.
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.
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.
Hide Hint(s)a1. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value.
Explanation / Answer
No of shares issued = Share cpaital/Par value = 150,000/50 = 3000 shares.
a1. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value.
Stock Div (3000*1%*$69) Dr 2070
Stock DIv DIstributable Cr 1500
(3000*1%*$50)
Paid in capital in excess of Par Cr 570
(Declared 1% (30 shares) Stock DIv on $50 par common stock with Mkt price of $69 per share)
a2. Journalize the entry to record the issuance of the stock certificates.
Stock DIv Disctributable Dr 1500
COmmon Stock Cr 1500
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:
Common stock $50 Par (250,000 shares auth, 3,000 shares issued) $150,000
Paid in capital in excess of Par-common stock $45,000
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Total Paid in capital $195,000
Total retained earnings $1650,000
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Total stockholders' equity $ 1845,000
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:
Common stock $50 Par (250,000 shares auth,3,000 shares issued) $150,000
Paid in capital in excess of Par-common stock $45,000
Common stock $50 par (3,000*1%*$50) $1500
Paid in capital in excess of Par
(3000*1%*$19) $570
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Total Paid in capital $197,070
Total retained earnings $1650,000
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Total stockholders' equity $1,847,070
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