asked 26.5k views
0 votes
When a company issues stock at an amount greater than the par value, a gain is recorded for the difference between the issue price and the par value.

A. True
B. False

asked
User Schoener
by
7.5k points

1 Answer

2 votes

Final answer:

It is false that a company records a gain when stock is issued above par value; the excess is recorded as additional paid-in capital, distinct from capital gains which reflect asset value increases upon sale.

Step-by-step explanation:

The statement that a company records a gain for the difference between the issue price and the par value when it issues stock at an amount greater than the par value is false. When a company issues stock above its par value, the excess amount over par is recorded as additional paid-in capital on the balance sheet, not as a gain on the income statement. Gains, such as capital gains, typically refer to the increase in value of an asset between the time it is bought and when it is sold, which is a different concept from equity financing transactions.

answered
User Nesono
by
7.7k points

No related questions found

Welcome to Qamnty — a place to ask, share, and grow together. Join our community and get real answers from real people.

Categories