Entries for Stock Dividends

Healthy Life Co. is an HMO for businesses in the Fresno area. The following account balances appear on Healthy Life’s balance sheet: Common stock (3,000,000 shares authorized; 2,200,000 shares issued), $15 par, $33,000,000; Paid-in capital in excess of par—common stock, $9,000,000; and Retained earnings, $89,550,000. The board of directors declared a 5% stock dividend when the market price of the stock was $18 a share. Healthy Life reported no income or loss for the current year.

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a1. 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

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Recall that a stock dividend affects only stockholders' equity.

Learning Objective 3.

a2. Journalize the entry to record the issuance of the stock certificates.

Stock Dividends Distributable

Common Stock

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What is the company giving to the stockholders?

Learning Objective 3.

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 $