In the last lesson, we learned about managerial accounting and stockholders' equity. This lesson describes how investors analyze financial statements in order to calculate figures such as shares of oustanding stock and dividend values.

The post closing year-end balance sheet of Technical Services, Inc. In this case there is no additional paid-in capital associated with preferred stock.

Treasury shares would be subtracted from total shares, but only when they are present. At least some of the stockholders paid a price greater than par value for their shares. Since stock prices tend to fluctuate, this would be a typical situation for most corporations. Legal capital is the total of par value of all shares issued.

Legal capital laws and requirements vary from state to state. Check with the Secretary of State to find out the legal capital requirements in your state. Paid-in capital represents all amounts paid by stockholders to the corporation in exchange for stock. Donated Capital is also called Contributed Capital. GAAP requires us to include Donated Capital in the computation of paid-in capital.

Calculate the average issue price of the common stock

See the note below on Donated Capital. What is the book value per share of common stock? Assume there are no dividends in arrears. Book Value is an artificial amount. It merely represents the amount of value due to the common stockholders, divided by the number of common shares outstanding. Call price of preferred stock represents the amount that would be paid to buy out preferred stockholders. What was the dividend declared during the year on each share of common stock?

This part simply follows the general format of a Retained Earnings statement.

Accountants generally carry Dividend and EPS calculations out to 4 decimal places, for greater accuracy. Most publicly traded companies have millions, perhaps even tens-of-millions of shares of common stock.

It's easy to see how those 2 extra decimal places can make a big difference in accuracy when you are dealing with many shares of stock. Donated Capital is a gift of assets to a company, usually by state or local governments, typically to induce a business to relocate to their jurisdiction. Donated Capital belongs to the Common Stockholders, unless otherwise stated in stockholders' agreements. When calculating part g, you will use the CALL price of preferred stock.

If there is no call price, then you will use the par value. But when preferred stock has a call price, that is the amount used, because it is the amount that would be paid to preferred stockholders if the corporation were to call and retire the preferred stock. Stock must be paid for before it can be issued. It is a violation of law to issue or record stock prior to receiving payment from investors.

It's easy to value a stock sale for cash, since the cash paid fixes the actual value of the transaction. Sometimes stock is issued for something other than cash. Land, buildings, equipment, vehicles or other assets can be exchanged for stock. Shares of one company's stock can also be exchanged for shares of another company. Investments of various types stocks, bonds, etc. In some cases, the value of the property given up can easily be determined, making it easy to place a value on the stock transaction.

When a non-cash transaction occurs, we have to take a market value approach, and we try to identify the part of the transaction that has the most widely accepted market value. There is a specific hierarchy accountants must use to determine the overall value of such transactions.

We apply the hierarchy in the following order. If the stock being issued is publicly traded, the entire transaction is the market value of the stock given up. We will assign that value to any assets received. On March 27, Microsoft Corp. What is the value of this transaction? We assign the market price of Microsoft stock to this transaction, because the stock is heavily traded on global stock markets, and the price is fixed by a very large market of investors.

If Microsoft feels that the real estate is worth , shares, who are we to argue? Accountants just have to record the transaction. We don't have to care if company management is making a good deal or not.

But we do assume that the transaction is "fair" and "at arms length" and that neither party is under any particular pressure or duress to enter into this fair market value agreement. This is a rather unusual example because Microsoft's par value is so low. But this is how it's done, regardless of the dollar amounts involved. If the stock being issued is NOT publicly traded, the entire transaction is the market value of the asset received.

We will assign that value to any shares of stock issued. XYZ Corporation is a small private company. It's stock is not sold on a public stock exchange, and there is no ready market for the company's stock at this time.

XYZ Corporation agrees to exchange 10, shares of company stock for a piece of unimproved real estate. Two independent, certified and licensed appraisers are hired to provide appraisals of the real estate value. We follow the conservatism rule to minimize the effect of making an estimate. In some rare instances neither of the two approaches above will work, and we have to take a slightly different approach.

We still need to approximate true market value of the transaction, since that is always considered the fair approach. Assume ABC Corporation is not publicly traded. They agree to exchange 5, shares of company stock for a piece of unimproved real estate.

Having trouble finding the average issue price per share of common stock? | Yahoo Answers

The real estate is in an area that is facing economic downturn in the real estate market, and has been available for sale for many years, with no interested buyers or offers.

Appraisers are reluctant to place a market value on the property. We seldom use book value for any calculation, but this is one rare instance where it is used.

This represents a future interest in profits and ownership to the person selling the property. Both parties will apply the same value to the transaction. But message and data rates may apply. Start here or give us a call: TUTORING RESOURCES Become a Student Become a Student Sign In. Lessons All Answers Blogs Files Videos.

Investor Analysis of Financial Statements In the last lesson, we learned about managerial accounting and stockholders' equity. Analysis of an Equity Section of a Balance Sheet Stockholders' Equity and Paid in Capital The post closing year-end balance sheet of Technical Services, Inc. Date Account Debit Credit. Related Answers What is the significance between the methods of analysis: Which of the following is NOT a design feature of effective internal controls?

Horizontal analysis examines trends in a company: Related Blogs CPA Prep Do we really need accountants? Recommended resource for upper level accounting courses Retirement Plan: A link to the app was sent to your phone.

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