Senior Life Co. is an HMO for businesses in the Portland area. The following acc
ID: 2516483 • Letter: S
Question
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 (340,000 shares authorized; 3,000 shares issued), $50 par, $150,000; Paid-In Capital in excess of par— common stock, $30,000; and Retained earnings, $1,200,000. The board of directors declared a 1% stock dividend when the market price of the stock was $63 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.
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.
Explanation / Answer
NO. OF SHARES ALREADY ISSUED 3000 STOCKDIVIDEND 1% SHARES TO BE ISSUED=3000*1% 30 MARKET VALUE 63 VALUE OF STOCK DIVIDEND=30*63 1890 a1 RETAINED EARNINGS A/C Dr 1890 To DIVIDEND PAYABLE A/C 1890 (BEING DIVIDEND DECLARED) a2 DIVIDEND PAYABLE A/C Dr 1890 To STOCK A/C 1890 (BEING STOCKS ISSUED FOR DIVIDEND) b. TOTAL PAID IN CAPITAL 3000*50 150000 RETAINED EARNINGS 1200000 TOTAL STOCK HOLDERS EQUITY 150000+1200000 1350000 c. TOTAL PAID IN CAPITAL 150000+1890 151890 RETAINED EARNINGS 1200000-1890 1198110 TOTAL STOCK HOLDERS EQUITY 151890+1198110 1350000
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