Hoskins Limited legally incorporated on January 1, 2008. In its initial public offering (IPO), the firm issued 15,000 shares of €0.10 par value common stock for €10 cash per share. During 2008, Hoskins generated net income of €30,000 and paid dividends of €10,000. The shareholders’ equity section of the balance sheet of Hoskins on December 31, 2008, is as follows:
|
Common Stock (at par value of €0.10 per share, 15,000 shares issued and outstanding) |
€ 1,500 |
|
Additional Paid in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
148,500 |
|
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
20,000 |
|
Total Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
€170,000 |
The €1,500 amount reported as the total par value of the shares is the par value per share times the total number of shares issued, or €0.10 per share _ 15,000 shares. The €148,500 amount reported as additional paid in capital (APIC) is the difference between the proceeds from the sale of stock of €150,000 (_ 15,000 _ €10) and the par value of €1,500. The €20,000 amount of retained earnings reported by Hoskins for its first year of operations is the amount of undistributed earnings, €30,000 of income minus €10,000 dividends.