How to Calculate Paid-in Capital in Excess of Par Value
What will happen to Paid-in Capital in Excess of Par when a company issues shares above par value?
A. be credited for $151500
B. Cash will be debited for $151500
C. Paid-in Capital in Excess of Par will be credited for $26500
D. Common Stock will be credited for $178000.
Answer:
The Paid-in Capital in Excess of Par for Oriole Company, upon issuing 5300 shares of $5 par value common stock for $178000, will be credited for $151500 (option A).
To calculate the Paid-in Capital in Excess of Par when a company issues shares above par value, you need to first determine the par value of the shares issued. In this case, the par value is $5 per share and the company issued 5300 shares. Therefore, the total par value is $5 * 5300 = $26500.
Next, you need to consider the amount received from the issuance of these shares, which is $178000. The difference between the cash received and the par value of the shares is the Paid-in Capital in Excess of Par. In this scenario, Paid-in Capital in Excess of Par would be calculated as follows: $178000 - $26500 = $151500.
Therefore, when a company issues shares above par value, the Paid-in Capital in Excess of Par will be credited for the difference between the cash received and the total par value of the shares issued, in this case, $151500.