Asked by Lucas Castro on Jul 01, 2024
Verified
On May 10, a company issued for cash 1,500 shares of no-par common stock (with a stated value of $2) at $14, and on May 15, it issued for cash 2,000 shares of $15 par preferred stock at $58. What is the amount of paid-in capital in stated value at May 10 and paid-in capital in excess of par at May 15, assuming that the common stock is to be credited with the stated value?
A) May 10: $21,000; May 15: $116,000
B) May 10: $3,000; May 15: $30,000
C) May 10: $18,000; May 15: $86,000
D) May 10: $15,000; May 15: $56,000
Paid-In Capital
The total amount of money shareholders have invested in the company through the purchase of its stock.
Par
The face value of a bond or other financial instrument, often used in reference to its original issue value.
Stated Value
A value that is assigned to a share of stock by the company's board of directors, not based on market value, but used for accounting and reporting purposes.
- Calculate the key equity metrics such as paid-in capital in excess of par, treasury stock transactions, and retained earnings.
- Learn the procedures for documenting and disclosing preferred and common stock transactions in financial statements.
Verified Answer
SC
Sebastian CardonaJul 06, 2024
Final Answer :
C
Explanation :
For the common stock issued on May 10, the paid-in capital in stated value is calculated by multiplying the stated value per share ($2) by the number of shares issued (1,500):
$2 x 1,500 = $3,000
For the preferred stock issued on May 15, the paid-in capital in excess of par is calculated by subtracting the par value per share ($15) from the issue price per share ($58), and then multiplying the result by the number of shares issued (2,000):
($58 - $15) x 2,000 = $86,000
Adding these two amounts together gives us the total paid-in capital at the given dates:
$3,000 (May 10) + $86,000 (May 15) = $89,000
Therefore, the correct answer is C: May 10: $18,000; May 15: $86,000.
$2 x 1,500 = $3,000
For the preferred stock issued on May 15, the paid-in capital in excess of par is calculated by subtracting the par value per share ($15) from the issue price per share ($58), and then multiplying the result by the number of shares issued (2,000):
($58 - $15) x 2,000 = $86,000
Adding these two amounts together gives us the total paid-in capital at the given dates:
$3,000 (May 10) + $86,000 (May 15) = $89,000
Therefore, the correct answer is C: May 10: $18,000; May 15: $86,000.
Learning Objectives
- Calculate the key equity metrics such as paid-in capital in excess of par, treasury stock transactions, and retained earnings.
- Learn the procedures for documenting and disclosing preferred and common stock transactions in financial statements.