If a corporation has issued common stock at various prices that exceed par value,legal capital will be made up of the
A)par value of the shares issued.
B)total stockholders' equity plus total liabilities.
C)total amount of contributed capital.
D)total amount of contributed capital plus retained earnings.

Question

Quizplus · Accepted Answer

Legal capital refers to the minimum amount of capital that a company should maintain to protect the interest of its creditors and investors. For corporations that have issued common stock at prices that exceed par value, the legal capital will be made up of the par value of the shares issued. This is because par value represents the minimum amount that investors are required to pay for their shares, so this amount is always protected as legal capital. The excess amount (the amount paid over par value) is recorded in contributed capital. Total stockholders' equity plus total liabilities (B) and total amount of contributed capital plus retained earnings (D) do not accurately reflect legal capital for corporations that have issued stock at prices above par value.

If a Corporation Has Issued Common Stock at Various Prices