The formula for computing additional paid-in capital in excess of par is shares of stock times
To compute additional paid-in capital in excess of par, you need to multiply the number of shares of stock by the amount that each share is issued above its par value. Here's the step-by-step explanation:
1. Determine the number of shares of stock: This information can usually be found in the company's financial statements or other relevant documentation. Let's say the number of shares is denoted as "N."
2. Find the par value per share: The par value is a nominal value assigned to each share by the company. It is determined during the initial public offering (IPO) or set by the company's articles of incorporation. For this explanation, let's assume the par value is denoted as "P."
3. Calculate the amount above par per share: To find the excess of the stock's price over the par value, subtract the par value from the price paid per share. Let's call this amount "E," where E = (Price per share) - (Par value per share).
4. Multiply the number of shares by the excess amount: Multiply the number of shares (N) by the amount above par per share (E) to calculate the additional paid-in capital in excess of par. The formula is: Additional Paid-in Capital in Excess of Par = N * E.
By following these steps and plugging in the appropriate values for N, P, and E, you'll be able to compute the additional paid-in capital in excess of par for a given situation.