Spridget Company has 1 million shares of common stock authorized with a par value of $3 per share, of which 600,000 shares are outstanding. The company received $7 per share when it issued shares to the public.

Required:

What is the book value of the Common stock par account and the Additional paid-in capital account?

Question

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10 December, 08:05

Spridget Company has 1 million shares of common stock authorized with a par value of $3 per share, of which 600,000 shares are outstanding. The company received $7 per share when it issued shares to the public.

Required:

What is the book value of the Common stock par account and the Additional paid-in capital account?

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Answers (1)

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Eric Weiss · Answer 1

Book value of Common stock par account is $1,800,000

and the Additional paid-in capital account $2400,000.

Explanation:

Authorized Common stock is the maximum numbers of share a company is permitted to issue.

Outstanding shares are those share which are issued and held by the stockholders.

Number shares outstanding = 600,000

Par value = $3

Issue price = $7

The amount received above the par value of the share is the add in capital of common share or share premium.

Book value of

Common stock at par = Number of outstanding share x par value = 600,000 x $3 = $1,800,000

Additional paid-in capital account = ($7 - $3) x 600000 = $4 x 600,000 = $2,400,000