Question

from book corporate Finance (3Rd edition) chapter 2-Problem 11P I have questions: How can you explain the paid -n -capital in excess of par formula?

Answer 1

The paid in capital in excess of par, is the excess that the stock holders pay over the par value of the stock,

For example, if 1,000 shares of $20 par value common stock are issued at a price of $22 per share, the additional paid-in capital is $2,000 (1,000 shares x $2). Additional paid-in capital is shown in the Shareholders' Equity section of the balance sheet.

The par value of share is the price that has to be paid by the investor legitimately and is printed on the share certificate.