Contributed surplus can result from reacquisition of shares.

Contributed surplus can result from reacquisition of shares.

• A. Not related
• B. True
• C. Not applicable
• D. False

Answer: (B)

Contributed surplus (APIC) reflects funds provided by shareholders beyond par value and can be created when a company later reissues shares it had bought back. Reacquiring shares creates treasury stock and reduces equity. If those treasury shares are sold for more than the cost to reacquire them, the excess is credited to contributed surplus. So the act of reacquiring shares can lead to an increase in contributed surplus when the shares are later reissued at a premium. If reissued at cost or less, there isn’t an increase in contributed surplus.

Contributed surplus (APIC) reflects funds provided by shareholders beyond par value and can be created when a company later reissues shares it had bought back. Reacquiring shares creates treasury stock and reduces equity. If those treasury shares are sold for more than the cost to reacquire them, the excess is credited to contributed surplus. So the act of reacquiring shares can lead to an increase in contributed surplus when the shares are later reissued at a premium. If reissued at cost or less, there isn’t an increase in contributed surplus.