Clothing Emporium was organized on January 1,2018.The firm was authorized to issue 100,000 shares of $5 par value common stock.During 2018,Clothing Emporium had the following transactions relating to shareholders' equity: Issued 30,000 shares of common stock at $7 per share.Issued 20,000 shares of common stock at $8 per share.Reported a net income of $100,000.Paid dividends of $50,000.What is total paid-in capital at the end of 2018?

Question

Quizplus · Accepted Answer

The total paid-in capital at the end of 2018 consists of the par value of the common stock plus any additional paid-in capital from issuing the stock.

The par value of the 50,000 shares outstanding at the end of the year is:
50,000 shares × $5 par value per share = $250,000

The additional paid-in capital from issuing 30,000 shares at $7 per share and 20,000 shares at $8 per share is:
30,000 shares × ($7 per share - $5 par value per share) = $60,000
20,000 shares × ($8 per share - $5 par value per share) = $60,000
Total additional paid-in capital = $120,000

Therefore, the total paid-in capital at the end of 2018 is:
$250,000 (par value) + $120,000 (additional paid-in capital) = $370,000.

The correct answer is B, $370,000.

Clothing Emporium Was Organized on January 1,2018