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14 June, 04:36

Spridget Company has 1 million shares of common stock authorized with a par value of $3 per share, of which 600,000 shares are outstanding. The company received $7 per share when it issued shares to the public.

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What is the book value of the Common stock par account and the Additional paid-in capital account?

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  1. 14 June, 05:04
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    Book value of Common stock par account is $1,800,000

    and the Additional paid-in capital account $2400,000.

    Explanation:

    Authorized Common stock is the maximum numbers of share a company is permitted to issue.

    Outstanding shares are those share which are issued and held by the stockholders.

    Number shares outstanding = 600,000

    Par value = $3

    Issue price = $7

    The amount received above the par value of the share is the add in capital of common share or share premium.

    Book value of

    Common stock at par = Number of outstanding share x par value = 600,000 x $3 = $1,800,000

    Additional paid-in capital account = ($7 - $3) x 600000 = $4 x 600,000 = $2,400,000
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