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Date Posted: 17:53:35 01/23/00 Sun
Author: John Keller
Subject: Re: Some Accounting Questions and Answers
In reply to: Charles Hodges 's message, "Some Accounting Questions and Answers" on 09:50:22 01/23/00 Sun

I've still got a question concerning #2. The information on the quiz does not contain anything about common stock. It does have info on "Retain Earnings" and dividends but I don't see how they are related to Paid-in capital. The question is on page 3 of the practice quizzes download.

Thanks

John


> > 2. What is "Paid Capital" (#13 on one of the
> > quizzes)
>
> If a firm does not have preferred stock, then most
> firms have 2-4 accounts listed in owners equity area.
> These accounts are retained earnings, commons stock,
> (additional) paid-in capital, and treasury stock. The
> accounts listed are generally driven by the the laws
> of the state in which a company is incorporated and
> the corporations charter and bylaws.
>
> Retaining earnings represents the history of the firms
> profits (causing an increase) and dividends (causing a
> decrease).
>
> The accounts which represent investments by stock
> holders go into either one account, Common Stock
> account, or two separate accounts, the Common Stock
> and Additional Paid-in Capital account.
>
> The common stock account is typically the number of
> share outstanding times the par value of the stock.
> Paid-in Capital is money received by the firm over and
> above the par value. Thus if a firm sell 1 share of
> $1 par value stock for $10, this would cause the
> common stock account increase by $1 and the paid-in
> capital account to increase by $9 ($10 selling price -
> $1 par value)
>
> Treasury stock is an account with the primary purpose
> of accounting for stock repurchased by the company on
> the market. Companies can usually resell this stock
> to the public or issue this stock to employees without
> shareholder approval.

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