Series 7 Exam Question 18: Answer and Explanation

Question: 18

The amount of money a corporation receives above its stated par value when issuing stock is known as

• A. earned surplus
• B. shareholder's equity
• C. book value
• D. additional paid in capital

Correct Answer: D

Explanation:

D. Unless a corporation's stock is issued with no par value, they set a par value (stated par value) of a certain amount ($1, $5, $10, and so on), which is used for bookkeeping purposes. However, even though the par value is set, the issuing corporation typically sells the stock above its stated par value. The amount they receive above that stated par value is called additional paid in capital or capital surplus.