Tommy Tom Company Stock Issuance Analysis

Tommy Tom Company - Stock Issuance

Overview of Stock Issuance

• Company: Tommy Tom Company
• Type of Stock: Common stock
• Number of Shares Issued: 5,000 shares
• Par Value per Share: $4
• Issuance Price per Share: $20

Financial Impact of Stock Issuance

• Total Cash Received:

  • Cash = Number of Shares Issued × Issuance Price per Share
  • Cash = 5,000 shares × $20/share = $100,000

• Accounting for the Par Value of Stock:

  • Total Par Value = Number of Shares Issued × Par Value per Share
  • Total Par Value = 5,000 shares × $4/share = $20,000

• Calculation of Additional Paid-in Capital:

  • Additional Paid-in Capital is the excess of the issuance price over the par value.
  • Formula: Additional Paid-in Capital = Total Cash Received - Total Par Value
  • Additional Paid-in Capital = $100,000 - $20,000 = $80,000

Summary of Choices

• An increase to Cash for $100,000:

  • Correct Statement. This reflects the total cash received from the stock issuance.

• An increase to Additional Paid-in Capital for $80:

  • Incorrect Statement. The calculated Additional Paid-in Capital is $80,000, not $80.

• An increase to Additional Paid-in Capital for $100,000:

  • Incorrect Statement. The correct figure is $80,000 for Additional Paid-in Capital, not $100,000.

• An increase to Cash for $80:

  • Incorrect Statement. Cash increased by $100,000, not $80.