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Issuing Par Value Stock at Par Value

Brian Krogol
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Alright. So first let's talk about when the selling price is equal to the par value. Okay so when we sell the stock equal to the par value. Well in that case there's not gonna be any apec there's no additional paid in capital. Right? Because remember the par value goes to the common stock account and any extra money we bring in goes to additional paid in capital. Well if the selling Price is the par value then there's no additional right? We're only gonna have the par value. So let's look at this example the apartment depot issued 500,000 shares of 50 cent par value common stock for $250,000. Now this is a very common way that they're going to say this to you notice. They're gonna say 50 cent par value. Common stock so that just tells you that they're selling common stock has a 50 cent par value. Right so how many shares did they sell? 500,000 shares for $250,000. Notice in this case they told you the total selling price of All the shares, they can easily just tell you a per a per share amount instead of the total price. And you should be able to convert between the two by dividing by the number of shares sold. Okay so let's see how much each share was sold for by dividing our total selling price of 250,000 Divided by 500,000 shares. Soul equals 50 cent selling price per share. Right? They sold each share for 50 cents and that was because we took that total $250,000 divided by the 500,000 shares gives us a 50 cent per share selling price. Right? And notice our par value is 50 cents. Our per share selling price was 50 cents. So there was no additional paid in capital. Right? So let's go ahead and do our journal entry when there's no additional paid in capital. It's pretty easy. What what would be our debit? We sold it for $250,000. So we received cash of $250,000. So our debit is gonna be cash for 250,000. And what about our credit? Remember the par value of the stock is going to go to the common stock account and anything extra goes to additional paid in capital. So remember common stock is an equity account and equity accounts have credit balances, right? So we're gonna have common stock as our credit here and we're gonna put the par value into this account. So the way we would always do it regardless of whether they sell it at par value or at some amount more. We would take the number of shares sold 500,000 Times The par value of 50 cents. And it would give us 250,000. So that is the amount that needs to go to the common stock account? Obviously in this case they got sold at par value. So there's nothing extra. But we're always gonna want to do this this uh calculation right here to find what goes into the common stock account, right? And then the A pick, whatever's extra is gonna be the selling price. So the total total selling price - What went into common stock, right? Everything extra would be a pick, which in this case is zero, right? In this case it's zero because we we sold it at par value. So the credit here to common stock is the 250,000 received. Okay, now we're gonna see also an example with a pick down below, but let's go ahead and finish this one up. So what did we have? We had assets, we received cash of 250,000. So that increased our assets by 250,000 and that came from equity. Right? We we issued equity and that came in the common stock account That went up by 250,000. So our equation stays balanced here, assets, equal liabilities plus equity. Right, cool. All right. Now, let's see an example with additional paid in capital. A pick. Alright, let's do that in the next