Additional Paid-In Capital
Additional paid-in-capital (APIC) represents capital received by a company when its shares are sold above their par value.
When a company issues shares, two entries in the shareholders’ equity section take place (Exhibit 6.21):
Common stock (par value)
Exhibit 6.21. Apic Represents Capital Received by a Company When its Shares are Sold Above Their Par ValueSource: Used with permission. Microsoft 2005 Annual Report.
Suppose a company issues 1 million shares with par value of $0.10 per share for net proceeds of $20 million. What is the impact on the financial statements?
Common stock total value: 1 million shares × $0.10/share = $100,000
APIC: $20 million – $100,000 = $19.9 million
Cash: $20 million
|Common stock||$0.1 million|