# Additional Paid in Capital and Common Stock Accounts

B

#### Brablo

Here is an example that I downloaded from the Net:

January 13
Cash (10,000 shares @ \$10) 100,000
Common Stock 10,000
Paid-in Capital in
Excess of Stated Value 90,000
Issue common stock at a premium

Q1: Does this \$100,000 raised as cash equate to: (IPO price of each
stock) X (no. of shares)?
Q2: What is the book value of the stock? Is it the IPO value or the
(share price)/(P/B ratio)?

Ad

P

#### Paul Thomas, CPA

Brablo said:
Here is an example that I downloaded from the Net:

January 13
Cash (10,000 shares @ \$10) 100,000
Common Stock 10,000
Paid-in Capital in
Excess of Stated Value 90,000
Issue common stock at a premium

Q1: Does this \$100,000 raised as cash equate to: (IPO price of each
stock) X (no. of shares)?

Probably not. It should be what the company received (after broker fees)
from the stock sale. I would mention that \$100,000 in stock sales isn't
handled through a Merrill Lynch type of firm, but generally to a close
friend.

Q2: What is the book value of the stock? Is it the IPO value or the
(share price)/(P/B ratio)?

Well, apparently the book value of each share would be the difference
between the \$100,000 received and the \$90,000 of "excess of stated value",
often called "additional paid in capital".

Ad

B

#### Beverly

Here is an example that I downloaded from the Net:

January 13
Cash (10,000 shares @ \$10) 100,000
Common Stock 10,000
Paid-in Capital in
Excess of Stated Value 90,000
Issue common stock at a premium

Q1: Does this \$100,000 raised as cash equate to: (IPO price of each
stock) X (no. of shares)?
Q2: What is the book value of the stock? Is it the IPO value or the
(share price)/(P/B ratio)?
In simplest terms, par value is \$1.00 per share, but it sold at \$10.00
per share. If the value of the stock goes up to \$12.00 per share, the
next sale of 10,000 shares would be booked as:

Cash 120,000
Common Stock 10,000
Additional PIC 110,000

Common stock is booked at par. The difference between par and the
selling price is additional PIC.
Beverly

## Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.