Question

Danley Corporation began business by issuing 200,000 shares of $5 par value common stock for $24 per share. During its first year, the corporation sustained a net loss of $40,000. The year-end balance sheet would showa. Common Stock of $1,000,000.b. Common Stock of $4,800,000.c. total paid-in capital of $4,760,000.d. total paid-in capital of $3,800,000.

Answer 1

The year-end balance sheet would show total paid-in capital of $3,800,000 (Option D). Common stock is the portion of a company's equity that represents the ownership interest of the shareholders.

Step-by-step explanation:

The year-end balance sheet would show total paid-in capital of $3,800,000 (Option D).

Common stock is the portion of a company's equity that represents the ownership interest of the shareholders. In this case, Danley Corporation issued 200,000 shares of $5 par value common stock for $24 per share. The total value of the common stock is calculated as: 200,000 shares x $5 par value per share = $1,000,000. However, since the company sustained a net loss of $40,000, this loss reduces the total paid-in capital. Therefore, the year-end balance sheet would show total paid-in capital of $1,000,000 - $40,000 = $960,000.

In addition to common stock, paid-in capital includes any excess amounts received over the par value of the shares. Since the common stock was issued at $24 per share, the excess amount is calculated as: (200,000 shares x $24 per share) - $1,000,000 = $4,800,000. However, since this excess amount is not received in the first year but rather in the initial stock issuance, it is not included in the year-end balance sheet.

Answer 2

Common Stock of $1,000,000.

d. Total paid-in capital of $3,800,000.

Step-by-step explanation:

When the company report a par value, the total common stock are valued at this par value, which is, $5 * 200.000 = $1.000.000

Rest of the capital it's reported as Paid in Capital = (24-5)*200.000 = $3.800.000, Total stockholders' equity $4.800.000.

The total net loss of $40.000 it's reported as retained earning (deficit) , so the net loss impact the total stockholders' equity but no the Common stock or the Paid in capital balance.