A no par value share is share capital that has not

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A no par value share is share capital that has not been assigned a value in the corporate charter. This means there are no questionable practices of using par value as a basis for legal capital. In general, par value (also known as par, nominal value or face value) refers to the amount at which a security is issued or can be redeemed. For example, a bond with a par value of $1,000 can be redeemed at maturity for $1,000. This is also important for fixed-income securities such as bonds or preferred shares because interest payments are based on a percentage of par. So, an 8% bond with a par value of $1,000 would pay $80 of interest in a year. It used to be that the par value of common stock was equal to the amount invested (as with fixed-income securities). However, today, most stocks are issued with either a very low par value such as $0.01 per share or no par value at all. You might be asking yourself why a company would issue shares with no par value. Corporations do this because it helps them avoid a liability to stockholders should the stock price take a turn for the worse. For example, if a stock was trading at $5 per share and the par value on the stock was $10, theoretically, the company would have a $5-per-share liability. Par value has no relation to the market value of a stock. A no-par-value stock can still trade for tens or hundreds of dollars. It all depends on what the market feels the company is worth. Corporate Capital
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Equity in a corporation is identified as shareholders’ equity. The shareholders’ equity section consists of contributed capital and retained earnings. Legally, dividends can be paid out of retained earnings but cannot be paid out of contributed capital. Contributed Capital Contributed capital is the total amount of assets paid/contributed to the corporation by shareholders in exchange for share capital. Retained Earnings Retained earnings is the net income/loss that has been not distributed to shareholders and retained in a corporation. The following is how to calculate Retained Earnings using closing entries. Presentation Delta Robotics: Unlimited amount of authorized no par value common shares, with 50,000 issued - $800,000 Reported $210,000 ($500,000 - $290,000) of net income $80,000 dividends paid Because there’s no opening balance of retained earnings, net income - dividends paid=130k COMPANY SHAREHOLDERS’ EQUITY SECTION IS AS FOLLOWS: The permanent equity accounts of a corporation is only Common Shares and Retained Earnings
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Accounting for Common Share Issues Issuing No Par Value Shares for Cash When no par value common shares are issued, the entire proceeds become legal capital. Issuing Stated Value Shares for Cash Cash proceeds from issuing stated value shares is equal or greater than stated value. When the issue of common shares for cash is recorded, the stated value of the shares is credited to the common shares account. The portion that is above stated value is recorded is in the contributed capital account.
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