Question

The excess of the fair value of the consideration received over the stated value of no par common stock should be credited to _____________

a) Common stock.
b) Additional paid‐in capital.
c) Retained earnings.
d) A liability account.

Answer 1

Answer:

b) Additional paid‐in capital.

Explanation:

Common stock: When the stock is issued at the par or stated value is recorded under the common stock.  

Additional paid-in capital: When the excess value received over the stated value than it is credited to the additional paid-in capital

Retained earning: The earning which is left after paying the dividend to the shareholders. It is shown under the liabilities account

Liability account: The account in which the due amount is recorded. Like: Bill payable, accounts payable.

So, all other options are wrong except b option