In the context of the characteristics of a corporation, how is common stock most commonly presented on a classified balance sheet?

• A. As revenue on the income statement because issuing shares increases the company’s inflows from operations
• B. As a current asset because it represents ownership that can be converted to cash within one year
• C. As part of stockholders’ (shareholders’) equity, typically at par value with related amounts such as additional paid-in capital disclosed separately
• D. As a long-term liability because it represents an obligation to repay shareholders in the future

Answer: (C)

Verified step by step guidance

1. Understand that common stock represents ownership in a corporation and is not an asset, liability, or revenue item.
2. Recall that on a classified balance sheet, items are grouped into assets, liabilities, and stockholders' equity sections.
3. Recognize that common stock is part of stockholders' equity, reflecting the owners' claims on the company's assets after liabilities are settled.
4. Note that common stock is typically presented at its par value, which is a nominal value assigned to the shares when issued.
5. Identify that any amount received from shareholders above the par value is recorded separately as additional paid-in capital, also within stockholders' equity.