When New Shares of Stock Are Sold at a Price

question 62

Multiple Choice

When new shares of stock 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.

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Definitions:

Cash Flows

The sum of funds flowing in and out of a company, particularly influencing its ability to cover short-term obligations.

Selling Price

The cost at which a service or item is sold to purchasers.

Required Rate of Return

The minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.

Dividend Yield

A financial ratio that indicates how much a company pays out in dividends each year relative to its share price.