3 Questions
What are the two major components of contributed capital?
Legal capital and additional paid in capital
Which component of contributed capital represents the par value of the stock?
Legal capital
What is the purpose of additional paid in capital?
To represent the amount received from shareholders in excess of the par value
Study Notes
Contributed Capital
- Contributed capital has two major components:
- One component represents the par value of the stock, known as common stock or stated capital
- The second component is additional paid-in capital, which represents the amount paid by investors in excess of the par value
Purpose of Additional Paid-in Capital
- The purpose of additional paid-in capital is to record the excess amount received from investors when they buy shares at a price higher than the par value
Test your knowledge of contributed capital and paid in capital with this quiz. Learn about the two major components - legal capital and additional paid in capital.
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