Question

Towson Corp., was organized on January 2, 2018. During the first year of operation, Towson issued 90,000 shares of $5 par value common stock at a price of $50 cash per share.  On December 31, 2018, Towson reported Net Income of $250,000 and paid $50,000 cash dividends. Use this information to determine the dollar amounts that Towson will report on its year end Balance Sheet for Paid in Capital Common Stock in Excess to par.

Answer 1

Solution:

Calculation of Paid in Capital Common Stock in Excess to par that will be reported in the balance sheet:

a)Cash received by Towson Corp. on issue of shares on January 2, 2018=90,000 shares x$50=$4,500,000

But, the shares issued at $50 has a par value of $5

b)Common stock -par -90,000 shares x$5 par=$450,000

Paid in Capital Common Stock in Excess to par (a-b)=$4,500,000-$450,000= $4,050,000

Hence, $4050000 to be reported as Paid in Capital Common Stock in Excess to par on year end balance sheet.