Stock issuance (Learning Objective 3) 5–10 min.

Sullivan, Corp., issued stock above par on July 31. Answer the following questions about Sullivan, Corp.

1. Sullivan, Corp., received $6 million for the issuance of its stock. The par value of the Sullivan, Corp., stock was only $4.5 million. Was the excess amount of $1,500,000 a profit to Sullivan, Corp.? Did the excess affect net income? If not, what was it?

2. Suppose the par value of the Sullivan, Corp., stock had been $2 per share, $5 per share, or $10 per share. Would a change in the par value of the company’s stock affect Sullivan’s total paid-in capital? When issuing stock, what does affect total paid-in capital?

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