Which items flow into Additional Paid-In Capital (APIC)?

• A. Old APIC + stock-based compensation (SBC) + stock created by option exercises
• B. Net income plus depreciation
• C. Treasury stock plus cash
• D. Par value of stock issued only

Answer: (A)

APIC tracks the amounts investors pay above par value plus certain equity-related items. Old APIC carries forward, and two key components add to it: stock-based compensation that is recognized in equity, and the proceeds from option exercises beyond the par value. When options are exercised, the par value goes into common stock and the excess over par goes into APIC, increasing that balance. Net income plus depreciation affect retained earnings and the income statement, not APIC. Treasury stock and cash involve share repurchases and cash flows, which don’t add to APIC. Par value by itself goes to common stock unless there’s a premium, in which case the premium goes to APIC. Therefore, the items that flow into APIC are the existing APIC balance plus stock-based compensation and stock created by option exercises.