Finance Help Please?

Question

Can someone please Explain the effect of issues $2 million of new common stock on the balance sheet of a firm:?

Answer 1

it depends on the specifics.  but you would have $2 million in cash on the asset side.  and in the Shareholders' Equity side you'd have

Capital Stock

Additional Paid-In Capital

totalling $2 million.  the amounts to each account depend on the par value of the stock.  if the par value was one dollar per share, and the offering took place at 1,000,000 shares sold at $2 per share, it would be:

Capital Stock   $1,000,000

Additional Paid-In Capital $1,000,000

thsee would be credits, while the two million in cash would be a debit.