# The total amount of cash and other assets received by a corporation from the stockholders in exchange for the shares is ________. A. always equal to par value B. referred to as retained earnings C. always below its stated value D. referred to as paid-in capital

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 14, Problem 8MC
Textbook Problem
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## The total amount of cash and other assets received by a corporation from the stockholders in exchange for the shares is ________.A. always equal to par valueB. referred to as retained earningsC. always below its stated valueD. referred to as paid-in capital

To determine

Introduction:

The Company plans to issue most of the shares in exchange for cash, and other shares in exchange for kitchen equipment provided to the corporation by one of the new investors. Two common accounts in the equity section of the balance sheet are used when issuing stock - Common Stock and Additional Paid-in Capital from Common Stock. To choose:

The correct option.

### Explanation of Solution

Common Stock consists of the par value of all shares of common stock issued. Additional paid-in capital from common stock consists of the excess of the profits received from the issuance of the stock over the stock’s par value. When a company has more than one class of stock, it usually keeps a separate additional paid-in capital account for each class.

1. Always equal to par value - Par value is the minimum price at which the stock can be sold. This value is printed on the stock certificates and is often referred to as a face value because it is printed on the “face” of the certificate. Incorporators typically set the par value at a very small arbitrary amount because it is used internally for accounting purposes and has no economic significance. So, the total amount of cash and other assets received by a corporation from the stockholders in exchange for the shares are cannot be equal to par value.
2. Referred to as retained earnings - Retained earnings is the primary component of a company’s earned capital...

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