Question

How would Square’s IPO impact its balance sheet and income statement?

Square, Inc., is an electronics payment company. Its small credit card readers plug into smartphones, making it easy for sellers to accept credit and debit card payments. Jack Dorsey, the founder of Square and Twitter, is said to have been inspired to start Square in 2009 when a friend of his was unable to complete a $2,000 sale of glass faucets because he had no way to accept a credit card (source: Wikipedia.)

In November 2015, Square completed its Initial Public Offering (IPO.) In the IPO, Square issued 29,700,000 shares of its Class A Common Stock with a par value of $0.0000001 per share in exchange for cash of $9 per share. After deducting underwriting and offering expenses, Square’s net proceeds from the IPO were $245.7 million.

Questions

1. On the date of the IPO, how would Square’s balance sheet have been impacted? What about its income statement?

2. Since the date of the IPO, Square’s stock price has fluctuated from a low of $8.37 (February 8, 2016) to a high of $13.09 (December 31, 2015.) Does the fluctuating stock price have an impact on Square’s total stockholders’ equity? Why or why not?

Answer 1

Anewer P. No. 1 As per the information about the Square , Inc.., is an electronics payment Company 1. On the data of IPO, the shareholders fund will increase by $ 945.7 million including share Capital of $ 0.97 (99,700,000 shares @ 0.000000 pen shate). Now assuming issue Costs as a reduction of the amounts paid in. The debit to Cash and the Credit to additional poid-in - Capital ate geduced acestdingly. * This method results in a smalley increase in stockholder's equity upon issuance of the shates and ultimately the shareholdey fund is $ 945.7 million * Alternatively, Capitalize the amount as an Organe-zakional cost on the balance sheet and ametline the this intangible asset similarly to the amortization of Good wilt.

P. 2 This method resells in a greater increase in Stodchoder's equity initially and reduced poolitability in the future as the amortization expense is recorded. * Rescelting which, shareholder fund will be $ 964.3 million (29700000 xq) and essere expense Copetalised will be $ 91.6 million (367.3 -045.7) fluctuation of stock price dont affect the Shareholders fund in Company's perspect. The benefit a loss of stock police fluctuation is alunys in hande el Shacholdes personally. Company account remains Same. a lot please vote positively. It's help Thank you