At December 31, Year 1, Adam Corporation has 5,000 shares of par value common stock, additional paid-in capital of $25,000, total shareholders' equity of $80,000, and retained earnings of $45,000.What is the par value per share?
A)$1.00
B)$1.50
C)$2.00
D)$2.50
E)$3.00

Question

Quizplus · Accepted Answer

The par value per share can be calculated by first determining the total contributed capital (common stock at par value plus additional paid-in capital) and then subtracting this from the total shareholders' equity to isolate the retained earnings. Given that the total shareholders' equity is $80,000 and retained earnings are $45,000, the contributed capital is $80,000 - $45,000 = $35,000. This contributed capital consists of the par value of the common stock and the additional paid-in capital ($25,000). If the par value of the common stock is represented by 5,000 shares, then the par value per share is ($35,000 - $25,000) / 5,000 = $10,000 / 5,000 = $2.00 per share.

At December 31, Year 1, Adam Corporation Has 5,000 Shares