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)?
 
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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".
 
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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
 

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