When new shares are sold at a price greater than par value,the excess over par is recorded as:
A) capital surplus.
B) retained earnings.
C) treasury stock.
D) authorized capital.

Question

Quizplus · Accepted Answer

When new shares are sold at a price greater than par value, the excess over par value is recorded as capital surplus. This is because the par value is the minimum amount at which the shares can be issued, and any amount over the par value is considered to be a premium. This premium is added to the company's capital surplus account on the balance sheet, which represents the amount by which the company's paid-in capital exceeds the par value of its shares. Retained earnings are profits that have been earned by the company and not distributed to shareholders. Treasury stock refers to shares that a company repurchases from its shareholders. Authorized capital is the maximum number of shares that a company is authorized to issue.

When New Shares Are Sold at a Price Greater Than