Question

Additional paid-in capital is:

a. The amount received for the issuance of stock in excess of the par value of the stock.
b. The net income that has been made by the corporation but not paid out as dividends.
c. An arbitrary amount that represents the legal capital of the firm.
d. The number of shares issued less the number of shares held as treasury stock.

Answer 1

Additional paid-in capital refers to the funds that a company receives from issuing stock that are above the stock's par value during an IPO or other offerings.

Step-by-step explanation:

Additional paid-in capital is a. The amount received for the issuance of stock in excess of the par value of the stock. When a company conducts an IPO (initial public offering) or subsequent stock offerings, it may set a nominal par value for each share. If the shares sell for more than this amount, the excess is recorded as additional paid-in capital. This is different from retained earnings, which are the net income retained in the corporation and not paid out as dividends. Additional paid-in capital does not include the number of shares issued or treasury stock considerations and is not an arbitrary amount representing legal capital.