A company separates the total proceeds it receives from issuing common stock into par value and paid-in surplus on its balance sheet. Par value is a small value per share of stock that a company designates for accounting purposes. Paid-in surplus equals the stock’s total proceeds minus its total par value. A company reports paid-in surplus and par value on its balance sheet. You can calculate these amounts using information about a company’s common stock.
Find a company’s balance sheet in its 10-K annual report, which you can obtain from the U.S. Securities and Exchange Commission’s online database, which is known as EDGAR. Find the last section of the balance sheet, called the “Stockholders’ Equity” section.
Identify the line item labelled “Common Stock,” and find the stock’s issue price per share, par value per share and total number of shares issued, listed with the line item’s description. The number of shares issued is the number of shares the company has sold to investors. If the company does not report the issue price per share on its balance sheet, it may report it in the footnotes in its annual report, or in the annual report for the year in which it issued the shares. For example, assume a company issued 10 million shares of a $1 per-share par value stock for $10 per share.
Multiply the number of shares issued by the par value per share to calculate the total par value of common stock, which is the amount the company reports on the “Common Stock” line item. In this example, multiply 10 million by $1 to get $10 million in total par value of common stock.
Multiply the number of shares issued by the issue price to calculate the total proceeds the company received from issuing its common stock. In this example, multiply 10 million shares by $10 to get $100 million in total proceeds from common stock.
Subtract the total par value of common stock from the total proceeds to calculate the paid-in surplus of common stock. In this example, subtract $10 million in par value from $100 in total proceeds to get $90 million in paid-in surplus. This is the amount the company reports on the “Paid-in Capital in Excess of Par” line item on its balance sheet. A company with a larger amount of par value of common stock and paid-in surplus has more money to spend on growing its operations.
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