What is meant by par value, and what is its significance to stockholders?
The par value is a fixed and arbitrary amount per share attributed to the shares by the incorporators. It helps to determine the overall value of the shares issued.
The face value of a bond is referred to as par value. The par value determines its maturity value and the dollar value of coupon payments, which is why it is essential for bond or fixed-income instruments.
Except maybe when shares are first offered to the public, the par value has little to no impact on shareholders.
Market forces of demand and supply decide the market prices of stock shares that most shareholders must acquire for those shares; hence the par value has no bearing on those prices.
(Stock Split and Stock Dividend) The common stock of Alexander Hamilton Inc. is currently selling at $120 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is $10; book value is $70 per share. Nine million shares are issued and outstanding.
Prepare the necessary journal entries assuming the following
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