If a company issues 2,500 shares of common stock at a market price of $48 per share, which of the following is the correct balance sheet effect? A. Increase cash by $120,000 and increase contributed capital by $120,000 B. Increase cash by $120,000 and increase earned capital by $120,000 C. Increase stock revenues by $120,000 D. Stock issuances are not reported on the balance sheet E. None of the above

Question

Business

Haven

24 December, 22:15

If a company issues 2,500 shares of common stock at a market price of $48 per share, which of the following is the correct balance sheet effect? A. Increase cash by $120,000 and increase contributed capital by $120,000 B. Increase cash by $120,000 and increase earned capital by $120,000 C. Increase stock revenues by $120,000 D. Stock issuances are not reported on the balance sheet E. None of the above

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Faith Cunningham · Answer 1

A. Increase cash by $120,000 and increase contributed capital by $120,000

Explanation:

when a company issues common stock then the company's cash balance and shareholders fund increases.

in this case, the company issued 2,500 shares of common stock at price $48;

The effect increase cash = 2,500*48

= $120,000

The effect increase contributed capital = 2,500*48

= $120,000

Therefore, The the correct balance sheet effect is, increase cash by $120,000 and increase contributed capital by $120,000.