Since the companys financial position would not be

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Unformatted text preview: 400,000 Cash (+A) Common Stock (+SE) Additional Paid­in Capital, Common Stock (+SE) Issued common stock. 300,000 500,000 10,000 390,000 100,000 200,000 P12–3 (4 ) b. Concluded Cash (+A) Preferred Stock (+SE) Issued preferred stock. 400,000 400,000 Par value has accounting significance only in that it is used to determine the amount that is allocated to the paid­in capital accounts associated with common stock or preferred stock accounts when stock is issued. Economically, par value has little significance. Par values were initially established to protect creditors. Par value represents the amount that stockholders are liable to creditors. However, because par values are usually very small amounts, such as $1.00 or even $0.01 and because debt covenants now exist to protect creditors, par value no longer has much economic significance. P12–4 a. Dividends are paid only on the shares that are both issued and outstanding. In this case, 55,000 shares have been issued, but 8,000 of these...
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