In this lesson, Nick Palazzolo, CPA, breaks down the fundamentals of common stock, focusing on the nuances of par value and its historical significance. He unpacks the concept of par value per share, explaining how it's assigned by a company and its often nominal amount, contrasting it with no par stock, which is issued without a designated minimum value. Emphasizing that while par value holds little economic significance for investors, it's crucial for a company's internal equity tracking and treasury stock. To bring the concept to life, Nick runs through the journal entry process when issuing par value stock for cash, clarifying the recording of common stock at par and the treatment of additional paid-in capital. He also addresses the treatment of stock issued in lump sum sales, whether for services, property, or other non-cash considerations, underscoring that fair market value is the standard measure throughout the exam unless otherwise specified.
Lesson: Basics of Common Stock
In this lesson, Nick Palazzolo, CPA, breaks down the fundamentals of common stock, focusing on the nuances of par value and its historical significance. He unpacks the concept of par value per share, explaining how it's assigned by a company and its often nominal amount, contrasting it with no par stock, which is issued without a designated minimum value. Emphasizing that while par value holds little economic significance for investors, it's crucial for a company's internal equity tracking and treasury stock. To bring the concept to life, Nick runs through the journal entry process when issuing par value stock for cash, clarifying the recording of common stock at par and the treatment of additional paid-in capital. He also addresses the treatment of stock issued in lump sum sales, whether for services, property, or other non-cash considerations, underscoring that fair market value is the standard measure throughout the exam unless otherwise specified.
Updated: Oct. 20, 2021 Create an account