Page 499 - Accounting Principles (A Business Perspective)

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Common Stock (+SE) 200,000
To record issuance of 10,000 shares for cash.
Since the company may issue shares at different times and at differing amounts, its credits to the capital stock

account are not uniform amounts per share. This contrasts with issuing par value shares or shares with a stated
value.
To continue our example, the paid-in capital section of the company's balance sheet would be as follows:
Paid-in capital:
Common stock—without par or stated value; 10,000
shares authorized, issued and outstanding $ 220,000
Total paid-in capital $ 220,000
The actual capital contributed by stockholders is USD 220,000. In some states, the entire amount received for

shares without par or stated value is the amount of legal capital. The legal capital in this example would then be
equal to USD 220,000.
Capital stock issued for property or services

When issuing capital stock for property or services, companies must determine the dollar amount of the
exchange. Accountants generally record the transaction at the fair value of (1) the property or services received or
(2) the stock issued, whichever is more clearly evident.
To illustrate, assume that the owners of a tract of land deeded it to a corporation in exchange for 1,000 shares of
USD 12 par value common stock. The firm can only estimate the fair market value of the land. At the time of the
exchange, the stock has an established total market value of USD 14,000. The required entry is:
Land (+A) 14,000
Common Stock (+SE) 12,000
Paid-In Capital in Excess of Par Value— 2,000
Common (+SE)
To record the receipt of land for capital stock.
As another example, assume a firm issues 100 shares of common stock with a par value of USD 40 per share in
exchange for legal services received in organizing as a corporation. No shares have been traded recently, so there is
no established market value. The attorney previously agreed to a price of USD 5,000 for these legal services but
decided to accept stock in lieu of cash. In this example, the correct entry is:

Organization Costs (+A) 5,000
Common Stock (+SE) 4,000
Paid-In Capital in Excess of Par Value—Common 1,000
(+SE)
To record the receipt of legal services for capital
stock.
The company should value the services at the price previously agreed on since that value is more clearly evident

than the market value of the shares. It should debit an intangible asset account because these services benefit the
corporation throughout its entire life. The company credits the amount by which the value of the services received
exceeds the par value of the shares issued to a Paid-In Capital in Excess of Par Value—Common account.
Balance sheet presentation of paid-in capital in excess of par (or stated) value—
Common or preferred

Accountants credit amounts received in excess of the par or stated value of shares to a Paid-In Capital in Excess
of Par (or Stated) Value—Common (or Preferred) account. They carry the amounts received in excess of par or
stated value in separate accounts for each class of stock issued. Using the following assumed data, the stockholders'

Accounting Principles: A Business Perspective 500 A Global Text