Which set reflects the components of equity on the balance sheet?

Which set reflects the components of equity on the balance sheet?

• A. Par value, APIC, RE, and Treasury stock added
• B. Par value, APIC, RE, minus Treasury stock
• C. Par value only
• D. APIC and RE only

Answer: (B)

Equity in the balance sheet is made up of the amounts investors have put in plus the company’s accumulated profits, with a deduction for shares the company has repurchased. Par value shows the nominal value of issued shares and is part of contributed capital; APIC (additional paid-in capital) covers amounts paid over par; retained earnings (RE) are the profits kept in the business. Treasury stock represents shares the company has bought back and held, which reduces total equity. Therefore, the set that includes par value, APIC, RE, with a subtraction for Treasury stock best matches how equity is reported.

Equity in the balance sheet is made up of the amounts investors have put in plus the company’s accumulated profits, with a deduction for shares the company has repurchased. Par value shows the nominal value of issued shares and is part of contributed capital; APIC (additional paid-in capital) covers amounts paid over par; retained earnings (RE) are the profits kept in the business. Treasury stock represents shares the company has bought back and held, which reduces total equity. Therefore, the set that includes par value, APIC, RE, with a subtraction for Treasury stock best matches how equity is reported.