When Common Stock Is Issued by a Corporation for a Cash

question 82

Multiple Choice

When common stock is issued by a corporation for a cash price above par value,the excess of the cash proceeds over the par value should be reported in the financial statements as a component of

• A)retained earnings on the balance sheet.
• B)total liabilities on the balance sheet.
• C)operating income on the income statement.
• D)total contributed capital on the balance sheet.

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Definitions:

Income Statement

A financial document that reports a company's financial performance over a specific period, showing revenues, expenses, and net income or loss.

Balance Sheet

A balance sheet showing the total assets, financial obligations, and shareholders' equity of a company at a specific moment.

Ledgerizing

The process of posting journal entries to the ledger accounts as a step in the accounting cycle for organizing financial information.

Journalizing

The act of recording financial transactions in a company's journal in order of occurrence before they are posted to the general ledger.