Porter Hardware, Inc. issues $2 par common stock. Which of the following is true?

Question

Quizplus · Accepted Answer

The par value of a stock represents the minimum value per share that the company is allowed to sell the stock. In this case, the par value is $2 per share, which means that the common stock account on the balance sheet will show the number of shares outstanding multiplied by the par value of $2. Therefore, option A is correct. Option B is incorrect because the market value of the stock can be higher or lower than the par value. Option C is also incorrect because the issuance of common stock does not result in an increase in liabilities. Option D is incorrect because the payment of dividends depends on the company's financial performance and decision to distribute profits to shareholders.