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Key Steps in Accounting for Equity Issuance Costs under ASC 505-10 Determine the total amount of equity issuance costs. Allocate the equity issuance costs to the related equity accounts. Record the equity issuance costs as a reduction of the related equity accounts.
Journal entry for the issuance of common shares with par value. Common shares with par value are journalized by debiting cash (asset) for the amount received for the shares and crediting common shares (equity) up to the par value, with the balance of the entry credited to additional paid-in capital (equity).
A company issues common stock to raise money, so the debit will always be to cash. There will always be a credit to common stock for the # of shares issued x the par value. Additional paid-in capital (APIC) is the plug.
Upon issuance, common stock is generally recorded at its fair value, which is typically the amount of proceeds received. Those proceeds are allocated first to the par value of the shares (if any), with any excess over par value allocated to additional paid-in capital.
How is common stock calculated? The formula for calculating common stock is Common Stock = Total Equity ? Preferred Stock ? Additional Paid-in Capital ? Retained Earnings + Treasury Stock.