Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Retained Earnings

Financial Accounting

12. Stockholders' Equity

Retained Earnings

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Multiple Choice

Capital in excess of par is the difference between a stock's par value and its:

dividend value

book value

issue price

market value

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Verified step by step guidance

Understand the concept of 'Capital in excess of par': This term refers to the amount received by a company from issuing stock that exceeds the stock's par value. Par value is the nominal or face value of the stock, often set at a minimal amount.

Identify the components involved: Par value is the base value of the stock, while the issue price is the actual price at which the stock is sold to investors. The difference between these two values represents the 'Capital in excess of par.'

Clarify why other options are incorrect: Dividend value refers to the portion of profits distributed to shareholders, which is unrelated to the par value or issue price. Book value represents the net asset value of the company and is also unrelated to the stock's par value.

Explain the relationship between par value and issue price: When a company issues stock, the issue price is typically higher than the par value. The excess amount is recorded in the 'Capital in excess of par' account in the equity section of the balance sheet.

Summarize the correct answer: The difference between a stock's par value and its issue price is what constitutes 'Capital in excess of par.' This is an important concept in financial accounting as it reflects the additional paid-in capital from shareholders.