Question

If the stock is issued for a price that is more than its par value, the stock

A) has been sold at a premium.
B) has been sold at a discount.
C) has been sold at its stated value.
D) is converted to no-par stock.

Answer 1

A stock sold for more than its par value is sold at a premium. The term 'premium' reflects the additional amount investors are willing to pay above the nominal or face value of the stock. Option A

Step-by-step explanation:

When a stock is issued for a price that is higher than its par value, the stock has been sold at a premium. Par value is the face value of the stock, essentially a nominal value assigned when the stock is issued. In contrast, selling a stock below its par value would mean it's sold at a discount.

Stocks don't change to no-par stock based on selling price; a no-par stock is one that was issued without a declared par value. The price above par that investors pay is often referred to as the share premium or additional paid-in capital, and is recorded in the shareholders' equity section of the balance sheet. Option A