Chapter 13, Problem E13.21E

To determine

Paid in Capital of Corporation:

The Corporation rely on the issue of stock as a major source of amount financed and the stock which can be issued cane of two types: Common Stock and preferred Stock (having some privileges over common stock).

Whether common or preferred stock issued, it may have a par value or no par value. In case of par value, the amount is fixed and is noted and approved with the State charter for each shares. The shares issued must be credited in the stock capital of the business with the amount of par value of shares issued. The amount excess recovered shall be credited in a separate account known as Additional paid in capital for each category of stock.

The Shares having no par value is done away the requirement of allocation of par value and excess amount among two accounts. The whole amount received is credited to Stock-No par account (for each category of stock).

Sometimes, the stock is issued as a consideration for any assets purchased. In such cases, the consideration must be determined on the basis of market value of assets or stock which is more clearly established for passing the entry in the books.

Requirement1:

The Journal entries for transactions relating issuance of stock capital.

To determine

Requirement2:

The amount of Stockholder’s equity after above transactions.