(Learning Objective 2: Describe the effect of a stock issuance on paid-in capital)Saltwell Industries received $11,500,000 for the issuance of its stock on May 14. The par valueof the Saltwell stock was only $11,500. Was the excess amount of $11,488,500 a profit to Saltwell? If not, what was it?Suppose the par value of the Saltwell stock had been $2 per share, $4 per share, or $7 pershare. Would a change in the par value of the company’s stock affect Saltwell’s total paid-incapital? Give the reason for your answer.
(Learning Objective 2: Describe the effect of a stock issuance on paid-in capital)Saltwell Industries received $11,500,000 for the issuance of its stock on May 14. The par valueof the Saltwell stock was only $11,500. Was the excess amount of $11,488,500 a profit to Saltwell? If not, what was it?Suppose the par value of the Saltwell stock had been $2 per share, $4 per share, or $7 pershare. Would a change in the par value of the company’s stock affect Saltwell’s total paid-incapital? Give the reason for your answer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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(Learning Objective 2: Describe the effect of a stock issuance on paid-in capital)
Saltwell Industries received $11,500,000 for the issuance of its stock on May 14. The par value
of the Saltwell stock was only $11,500. Was the excess amount of $11,488,500 a profit to Saltwell? If not, what was it?
Suppose the par value of the Saltwell stock had been $2 per share, $4 per share, or $7 per
share. Would a change in the par value of the company’s stock affect Saltwell’s total paid-in
capital? Give the reason for your answer.
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