On form 1120, how to determine value of capital stock?

On form 1120, how to determine value of capital stock?

On form 1120, how does one determine the value of capital stock on Schedule L?

For a publicly traded corp, I imagine it would be the value the stock is trading at multiplied by the number of shares, for each class of stock, on the last moment of the last day (ie. the closing price) of the fiscal year. Or do you have to use some sort of average price? And though many companies have preferred stock, where does one find quotes for this stocks. All the finance sites I've seen just give the value of the common stock.

For a private but large corp, I imagine you have to get an appraiser to do it. What methods do they use?

And for a tiny corp, what does one do? I guess one could do as follows: suppose you start the corp with 10k and 10000 shares, so the value of each share at the start of the year is $1. The corp has 2k of earnings which is retained, so its assets are 12k at the end of the year. The share price is now $1.20, and adjustment to shareholders equity is zero.

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In either of the above cases, ask the CFO of the corp. what the FMV of the stock was on the date in question. They (almost) always have a number for this for their own use. You (almost) always want to use the same number.

If the corporation has no CFO, ask the chairman of the board or whoever is in charge.

Steve

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Steve Pope

wrote

The ~~company~~ records it's stock at face amount, also called "par". Stock that carries $10 par would record $10 for each share issued.

Anything above that amount is "Additional Paid In Capital" in the equity section of the balance sheet.

The market value of the stock is meaningless for book purposes.

And this is true regardless of the size of the company. GE, GM, Microsoft, etc do not make adjustments to their stock account unless new shares are issued or shares are recalled or repurchased. Ma and Pa companies likewise, do not make adjustments to their stock accounts unless the company issues or recalls shares.

Reply to
Paul Thomas, CPA

Oops, my above answer. Paul's answer it correct -- it is not FMV that is needed for Form 1120, Schedule L, "capital stock". It is instead a bookkeeping number that is known to the coporation.

Steve

Reply to
Steve Pope

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