Question

Towson Corp., was organized on January 2, 2018. During the first year of operation, Towson issued 50,000 shares of $6 par value common stock at a price of $40 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

50,000 shares of $6 par value were issued at a price of $40 per share.

Common stock will be credited by = Number of common share issued x Par value 1 share

= 50,000 x 6

= $300,000

Paid in capital in excess of par will be credited by = Number of common shares issued x (Issue price per share - Par value per share)

=50,000 x (40-6)

= 50,000 x 34

= $1,700,000

Thus, dollar amounts that Towson will report on its year end Balance Sheet for Paid in Capital Common Stock in Excess to par = $1,700,000

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