Paid in Capital Journal Entry Examples Help

Paid in Capital Journal Entry Examples, Concepts, Illustrations, Sample Help Online

 

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Meaning of Paid in Capital

 

Paid in Capital is that amount of capital paid in by the investors at the time of issuance of stock. It is the fund raised by the business from equity. It may be at par or above the par value. Paid in capital is shown in the balance sheet.
 

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Paid in Capital Journal Entry Examples Explanation

 

Understanding the concept of paid in capital with the help of an example
 

Example1: Suppose the business firm, which is authorized to issue 10,000 shares of common stock without par value, issues at stated value $20 per share to its stock. It also issues the 10,000 shares for cash at $ 23 per share. The journal entry to record this transaction is
 

Cash (10,000 shares x $23 per share) Dr. $250000
Common Stock, $20 stated value
(10,000 shares x $20 stated value per share) $200,000
Paid-In Capital in Excess of Stated Value
Common (230,000 cash – 200,000stated) $30,000
 

Example2: suppose the owners of a piece of land contracts with a business firm the piece of land in exchange for 1,000 shares of $12 par value common stock. The market value of land is $14,000. The required journal entry is
 

Land Dr. $14,000
Common Stock, $12 par (1,000 shares x $12 par) $12,000
Paid-In Capital in Excess of Par Value—Common Stock
(14,000 market value – 12,000 par) $2,000
 

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