 Corporations can issue stock directly to investors or indirectly through an investment bank. Investment banks consider several factors when trying to set the initial stock price, including future earnings, market conditions, and anticipated dividend rates. If you've ever heard the term IPO, this means initial public offering. And it's what we're talking about here. After the initial offering, the market price of a stock is determined by supply and demand. Since supply is fixed until there's a new offering, movement in demand causes the market price to go up or down. When more people want to buy the stock than want to sell the stock, the price goes up. Historically, stock was issued with a legal value known as par value. Par value is just an arbitrary value assigned to a share of stock as required by a state. Usually, par value is set low to avoid legal issues. In fact, most states do not allow companies to issue stock below par value. So often, par value is a penny to a dollar. Nowadays, most states no longer require par value. So no par value stock is becoming more popular. Sometimes corporations assign a stated value to a no par stock. So let's look at some examples of issuing different types of common stock. Here we have a simple example of par value stock being issued at par value. You will never see this type of transaction in real life, but it's a good place to start here. In this example, the Wombats Corporation issued 15,000 shares of $1 par value stock for $15,000. So cash is debited for $15,000 and common stock is always credited for its par value, which in this case is also $15,000. In this next example, the Wombats Corporation issued 15,000 shares of $1 par value stock for $50,000. This is a much more common occurrence. Cash is debited for $50,000 and common stock is always credited for its par value, which in this case is $15,000. Finally the difference is credited to an account called Pating Capital and Excess of Par for the amount of $35,000. In this next example, the Wombats Corporation issued 15,000 shares of no par value stock for $40,000. So cash is debited for $40,000 and common stock is credited for $40,000. There is no other account used when the stock is no par value. In this example, the Wombats Corporation issued 15,000 shares of no par $2 stated value stock for $60,000. The accounting for stated value stock and par value stock are very similar. So cash is debited for $60,000 and common stock is credited for its stated value, which in this case is $30,000. Finally the difference is credited to an account called Pating Capital and Excess of Stated Value for $30,000. Finally, stock can be issued for assets other than cash. In this example, the Wombats Corporation issued 15,000 shares of $1 par value stock for equipment with a fair market value of $60,000. Equipment is debited for $60,000 and common stock is always credited for its par value, which in this case is $15,000. Finally the difference is credited to Pating Capital and Excess of Par for $45,000. From this last transaction, the stockholders' equity section would look like this. The Pating Capital section would show common stock at its par value and Pating Capital and Excess of Par. These two balances, these accounts together would equal the total Pating Capital balance. I just made up the retained earnings to show you how that would look to complete out the section.