Stocks of public companies are bought and sold on a stock exchange, such as the New York Stock Exchange (NYSE) or Cambodia Securities Exchanges(CSX).
Tombstone
A written advertisement placed by investment bankers in a
public offering of a security. It gives basic details about the issue
and, in order of importance, the underwriting groups involved in the
deal.Example
Smart Touch’s tombstone shows that the company hoped to raise approximately $200,000,000 of capital (10,000,000 shares times $20 per share).
Issuing Common Stock at Par
Suppose Smart Touch’s common stock carried a par value of $1 per share. The stock issuance entry of one million shares at par value on January 1 would be as follows:
Issuing Common Stock at a Premium
The amount above par is called a premium or Paid-in capital in excess of par or Additional paid-in capital.
Example 1
Assume Smart Touch sells an additional one million shares for $20 a share on January 2. The $19 difference between the issue price ($20) and par value ($1) is a premium or additional paid-in capital. The entry would be as follow:
Example 2
Assume Smart Touch sells an additional 2 million shares for $25 a share on April 15. The $24 difference between the issue price ($25) and par value ($1) is a premium or additional paid-in capital. The entry would be as follow:
Smart Touch would report stockholders’ equity on its balance sheet after the January 1,January 2 and April 15 stock issuance as follows, assuming that its charter authorizes 20,000,000 shares of common stock and also assuming the balance of retained earnings is $9,000,000.
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