In a rising stock market, the result of any subsequent sale of a firm's previously issued common shares from one investor to another (such as occurs on public stock exchanges):
A)the total paid-in capital amount reported on a balance sheet will usually be less than the current market value of the common shares.
B)the total paid-in capital amount reported on a balance sheet will usually be greater than the current market value of the common shares.
C)the total paid-in capital amount reported on a balance sheet will usually be equal to the current market value of the common shares.
D)the total paid-in capital amount reported on a balance sheet will be eliminated.
E)None of these answer choices is correct.

Question

Quizplus · Accepted Answer

In a rising stock market, the market value of the common shares will usually exceed the original price paid by investors, resulting in a capital appreciation. However, the total paid-in capital amount reported on the balance sheet will remain the same, as it reflects the original price paid by investors when the shares were first issued. As subsequent sales occur between investors, the market value of the shares may increase, but this does not affect the reported total paid-in capital amount. Therefore, choice A is correct.

In a Rising Stock Market, the Result of Any Subsequent