APIC Question

[Taxman]

I have a question regarding APIC. If a shareholder contributes $10,000 of capital to an S-Corp for 1,000 shares with a par value of $1 per share, the following entry will be recorded.

Dr. Cash 10,000
Cr. Common Stock 1,000
Cr. APIC 9,000

Am I correct in saying the only time the APIC account balance would change is if the shareholder makes an additional investment in the comany or the company goes bankrupt or liquidates?

[Matt Sova]

Apic

Somewhat correct. The only times the APIC will change if the corp sells some stock to him or another shareholder and they pay an amount greater than par for the stock, or he has distributions in excess of his AAA. Then the APIC will go down because he is starting to eat away at his basis in the stock.

[OldJack]

Come on guys... lets not use the initials for things. My 40 years of practice is mainly corporate work and I happen to know that your "PIC" means "paid-in-capital" but what is the "A" for? If after all these years I don't know the meaning how do you expect newbees to know. My 2¢±¼

[veritas]

Give them %4! Oldjack

[Matt Sova]

What is A?

I do agree with you Old Jack. The A is for additional.

[OldJack]

I do agree with you Old Jack. The A is for additional.

Oh... that was covered in accounting 101 back in 1959. I don't recall ever seeing it since. lol

[Matt Sova]

Acctg 101

They taught acctg 101 the same way in 1984 Jack. Called it APIC. Like you, I haven't seen it since.

Of course there is a lot of stuff I saw in college that I haven't seen since. Much of which I cannot post on a public message board!!

[Taxman]

Sorry for any confusion

It should say additional paid in capital. Matt, you mentioned that additional paid in capital will be reduced if a shareholders AAA account is less than zero, basically a return of the shareholder's capital. Once additional paid in capital is zero (assuming shareholders basis is equal to the company equity) then anything paid to the shareholder will start to become capital gains?