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 (300,000 shares authorized), $100 par, $10,000,000; Paid-in capital in excess of par–common stock, $2,000,000; and Retained earnings, $45,000,000. The board of directors declared a 2% stock dividend when the market price of the stock was $125 a share.
Organic Health Co. reported no income or loss for the current year.
(a) Journalize the entries to record
(1) The declaration of the dividend, capitalizing an amount equal to market value, and
(2) 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.