Senior Life Co is an HMO for businesses in the Portland area

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 (230,000 shares authorized; 4,000 shares issued), $125 par, $500,000; Paid- In Capital in excess of par-common stock, $100,000; and Retained earnings, $5,500,000. The board of directors declared a 1% stock dividend when the market price of the stock was $173 a share. Senior Life Co. reported no income or loss for the current year. If an amount box does not require an entry, leave it blank. If no entry is required, select \"No entry required\" from the dropdowrn a1. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value. a2. Journalize the entry to record the issuance of the stock certificates b. Determine the following amounts before the stock dividend was declared: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders\' equity. Total paid-in capital Total retained earnings$ 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$

Solution

a1. Retained Earnings [(1% x 4000) x $173] 6920 Common Stock Dividend Distributable [(1% x 4000) x $125)] 5000 Paid-in capital in excess of par-common 1920 a2. Common Stock Dividend Distributable 5000 Common Stock 5000 b. Before stock dividend was declared: Total paid-in capital ($500000 + $100000) 600000 Total retained earnings 5500000 Total stockholders\' equity ($600000 + $5500000) 6100000 c. After stock dividend was declared: Total paid-in capital ($600000 + $5000 + $1920) 606920 Total retained earnings ($5500000 - $6920) 5493080 Total stockholders\' equity ($606920 + $5493080) 6100000