Question

Which of the following statements regarding equity is false? Par value represents the legal capital that...

Which of the following statements regarding equity is false?

Par value represents the legal capital that must be retained when a stock is issued.

Paid-in capital in excess is generated with no-par stock with no stated value.

Dividends declared reduce earned capital.

Preferred shareholders typically do not receive voting rights.
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Answer #1

The statement paid-in capital in excess is generated with No-par stock with no stated value is FALSE.

No-par stock means issue of stock without face value. If the issued stock does not have a par value, the proceeds from the issuance goes into just one paid-in-capital account within stakeholders equity.

Incase of no-par stock with stated value is issued above stated value, then such excess amount is credited to "Paid-in capital in excess of stated value". But given option is no-par stock with no stated value, in this case whole amount is credited to paid-in capital account.

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