Any Capital Surplus Shown by a Firm on Its Balance

question 17

Multiple Choice

Any capital surplus shown by a firm on its balance sheet results from:

• A) not paying out all net income as dividends.
• B) repurchasing shares for treasury stock.
• C) issuing stock at a price higher than par value.
• D) retained earnings.

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Definitions:

Equity in Subsidiary Earnings

The share of earnings attributed to the parent company from its ownership interest in a subsidiary.

Equity Method

An accounting method used to record investments in associate companies where the investor has significant influence but not full control, typically 20%-50% ownership. The investor's share of the investee's net income or loss is reflected in the investor's financial statements.

Net Income

A company's profit after deducting expenses and taxes from revenue.

Dividends

Payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.