What is the impact of the Candy Crush Saga maker’s IPO on its balance sheet?

King Digital Entertainment (NYSE: KING), the maker of the Candy Crush Saga app, had its initial public offering (IPO) the week of March 24^th, 2014.  King’s stock was priced at $22.50 per share for the IPO; its par value is $0.000197 per share.  The IPO raised about $500 million for King.  Assume that approximately 2,300,000 shares were issued in the IPO.

Questions

1.        Assume the IPO took place on March 26, 2014.  What journal entry would King make on this day to reflect the stock issuance?
2.        What is the impact on assets of this IPO?  On liabilities?  On stockholders’ equity?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions. The YouTube video link below is a narration of the blog post article (no discussion questions are included in the YouTube video; those can be assigned separately.)

• Student handout (pdf) (word) (contains entire blog posting + discussion questions)
• PowerPoint file (brief article overview + discussion questions)
• YouTube video (narrated article in shareable YouTube link)

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