In short
A stock subscription is an investor's contract to buy shares and pay later. The issuer records a subscription receivable and common stock subscribed, and issues the shares when they are fully paid.
Key takeaways
- Subscriptions receivable are generally shown as a deduction from equity, not as an asset.
- Additional paid-in capital is recorded at the time of subscription.
- On a default, the treatment of amounts already paid depends on state law and the agreement.
Where it's tested
FAR: Equity & Earnings Per Share — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company has net income of $600,000 and paid $50,000 in dividends on cumulative preferred stock during the year, none of which were declared. What amount should be used as the numerator for basic EPS?