Question

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.
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.

Stock Dividends_________
Stock Dividends Distributable__________
Paid-In Capital in Excess of Par-Common Stock___________
a2. Journalize the entry to record the issuance of the stock certificates.

Stock Dividends Distributable____________
Common Stock________

Answer 1

Answer:

Explanation:

The journal entries are shown below:

a. Stock Dividends A/c Dr $1,980,000  (2,200,000 shares × 5% × $18)

            To Stock Dividends Distributable A/c $1,650,000 (2,200,000 shares × 5% × $15)

            To Paid-In Capital in Excess of Par-Common Stock A/c $330,000

(2,200,000 shares × 5% × $3)

(Being the stock dividend is declared)

b. Stock Dividends Distributable A/c Dr $1,650,000

           To Common Stock A/c $1,650,000

(Being issuance of the stock certificate is recorded)