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Production Possibility Curve
In ECONOMICS
Viliami Sevele
Tutor
Aug 13, 2022
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Find/ calculate the par value of a shared stock
In ACCOUNTING
Viliami Sevele
Tutor
May 12, 2022
Hi Sesilia, I have not heard from you since my previous post. Anyway, I am providing the following hoping it is the appropriate level of information you are after. Please let me know if you need me to elaborate more or provide additional information. Some background information The share capital of a company represents the amounts that owners have contributed to the organization. Traditionally, when shares are issued in most countries, directors of these companies would set the par value (or notional value) of the shares. Shares were normally not issued below par value, but they could be, and usually were, issued in excess of par. If shares were issued at a price in excess of par, this excess amount was referred to as a share premium. For example, if a company issued 1 million shares at $1.80 each and they had a par value of $1.00 each, the share premium on the issue would have been $0.80 per share. The share premium is recorded in the Share Premium Reserve account. Please note that the requirement to have a par value now varies depending on the form of business ownership, from country to country, and within certain country this will vary depending on the jurisdiction or state in which the company is organized. Shares of a limited liability company in NZ or Australia for example are not permitted to have par value. The "issue price" is determined by directors at the time of issue and whether a share is fully or partly paid is determined by reference to the amount of the issue price that has been paid to the company. The use of a share premium reserve is therefore no longer necessary. A company may now elect to issue its shares at any price. However, the issue price of a company’s shares will depend on market demand. Relating to your question So as to how to determine/calculate the par value, you use the following formula: Fully-Paid Capital = No, of Shares x par value per share, so rearrange the equation so par value is the subject of the equation. Refer to example 1 below. Here is how the above example be reported under the two scenarios: 1. With Par value of $1 per share Shareholders’ equity Fully-Paid Capital $1,000,000 Share Premium Reserves $800,000 Total Shareholders’ equity $1,800,000 Assuming you are given the following : 1 million shares and paid-up capital $1,000,000 excluding share premium, find the par value of each share. Par value = Paid-up Capital/no of shares = $1,000,000/1,000,000 shares =$1/share 2. With No Par value Shareholders’ equity Share Capital $1,800,000 Total Shareholders’ equity $1,800,000
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Viliami Sevele

Viliami Sevele

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