P Co. issued 5,000 shares of its common stock, valued at $200,000, to the former shareholders of S Company two years after S Company was acquired in an all-stock transaction. The additional shares were issued because P Company agreed to issue additional shares of common stock if the average post combination earnings over the next two years exceeded $500,000. P Company will treat the issuance of the additional shares as a (decrease in):

Question

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The issuance of additional shares is a form of contingent consideration, which is recognized as an increase in paid-in capital.

P Co Issued 5,000 Shares of Its Common Stock, Valued at at $200,000