Question

When a firm issues 50,000 shares with a par value of $5 for $22 per share, additional paid-in capital will:

Answer 1

The additional paid-in capital will increase by $850,000

Step-by-step explanation:

Additional paid up capital: It is that paid up capital which is excess of par value. It is mentioned in the balance sheet when new shares is issued.

The computation of additional paid up capital are shown below:

= Difference of per share price × Number of shares

where,

difference = $22 - $5 = $17

So, the value equals to

= $17 × 50,000

= $850,000

So, the additional paid-in capital will increase by $850,000