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

1. Introduction to Accounting

Fundamental Accounting Equation

Financial Accounting

1. Introduction to Accounting

Fundamental Accounting Equation

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Multiple Choice

Historically, par value was considered to be:

The market value at which shares are traded on the stock exchange.

The minimum legal capital per share that must be retained in the business for the protection of creditors.

The total value of all assets owned by a corporation.

The amount paid by shareholders above the stated value of the stock.

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Verified step by step guidance

Understand the concept of par value: Par value is the nominal or face value assigned to a share of stock by the corporation's charter. It is not related to the market value or trading price of the stock.

Clarify the historical significance of par value: Historically, par value represented the minimum legal capital per share that a corporation was required to retain to protect creditors. This ensured that shareholders could not withdraw this amount, providing a safeguard for creditors.

Differentiate par value from other terms: Par value is distinct from market value (the price at which shares are traded), total asset value (the sum of all assets owned by the corporation), and paid-in capital in excess of par (the amount shareholders pay above the par value).

Recognize the modern relevance: In many jurisdictions today, par value has lost much of its significance, and some corporations issue no-par stock. However, understanding its historical role is important for foundational knowledge in financial accounting.

Apply this understanding to the problem: Based on the explanation, the correct answer is that par value historically represented the minimum legal capital per share that must be retained in the business for the protection of creditors.