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    Talyomaly's Avatar
    Talyomaly Posts: 7, Reputation: 1
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    #1

    May 29, 2008, 12:39 PM
    Accounting with affect of a stock issuance
    OK this is the question and I've been trying to figure it out but my book isn't helping much so I tried to find a site that would explain it better and couldn't find much... and my mom doesn't know how to do accounting either so not much help there. It's the last question I have to anwer and couln't figure out so will somebody lend a helping hand... thank you very much!

    IHOP issued common stock and received $32,000,000. The par value of the IHOP stock was only $32,000. Is the excess amount of $31,968,000 a profit to IHOP? Does the excess affect net income? If not, what was it?
    thulani mwinga's Avatar
    thulani mwinga Posts: 1, Reputation: 1
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    #2

    May 29, 2008, 12:49 PM
    No it doesn't
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
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    #3

    May 29, 2008, 11:33 PM
    The extra amount is merely the excess over the par value of the stock, but it's still equity. The stock really did sell for $32,000,000 and that's how much stock is going to be on the books. It's not like an asset that got sold for a gain. They're just issuing ownership, and the amount of that ownership is $32 million. The par and excess of par is just a way to split it down, but doesn't change the fact that it's still stockholder's equity.
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