This is off of my online homework, I got the right answer by lucky guess of the multiple choices, but I don't understand the second part of the question. Here is the question:
Part 1: SHOE received $73,000,000 for the issuance of its stock on April 24. The par value of the SHOE stock was only $73,000. Was the excess amount of $72,927,000 a profit to SHOE? If not, what was it?
I answered to this part: The excess is not a profit and therefore has no effect on net income. The $72,927,000 is paid-in capital.
Part 2: Suppose the par value of the SHOE stock had been $2 per share, $12 per share, or $15 per share, Would a change in the par value of the company's stock affect SHOE's total paid-in capital? Give the reason for your answer.
The second part is where I am totally confused becausea it wanted the answer to be:
The par value of the stock has no affect on total paid-in capital. Total paid-in capital is the total amount that stockholders have invested into a corporation. The total paid in capital includes the par value plus any additional paid-in capital.
I don't understand how they first wanted me to say that "the part value of the stock [has no affect on total paid-in capital.]" Then in the end they want me to say "The total paid in capital includes [par value plus any additional paid-in capital]."
Totally flip floping back and forth. What the hell is going on????
Part 1: SHOE received $73,000,000 for the issuance of its stock on April 24. The par value of the SHOE stock was only $73,000. Was the excess amount of $72,927,000 a profit to SHOE? If not, what was it?
I answered to this part: The excess is not a profit and therefore has no effect on net income. The $72,927,000 is paid-in capital.
Part 2: Suppose the par value of the SHOE stock had been $2 per share, $12 per share, or $15 per share, Would a change in the par value of the company's stock affect SHOE's total paid-in capital? Give the reason for your answer.
The second part is where I am totally confused becausea it wanted the answer to be:
The par value of the stock has no affect on total paid-in capital. Total paid-in capital is the total amount that stockholders have invested into a corporation. The total paid in capital includes the par value plus any additional paid-in capital.
I don't understand how they first wanted me to say that "the part value of the stock [has no affect on total paid-in capital.]" Then in the end they want me to say "The total paid in capital includes [par value plus any additional paid-in capital]."
Totally flip floping back and forth. What the hell is going on????