How Is Cash Invested by Shareholders in Exchange for Shares

question 24

Multiple Choice

How is cash invested by shareholders in exchange for shares initially recorded in the accounting records?

• A)as an increase in Retained Earnings,and an increase in Cash
• B)as an increase in Long-Term Investments,and a decrease in Cash
• C)as an increase in Common Shares,and a decrease in Cash
• D)as an increase in Common Shares,and an increase in Cash

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Definitions:

LIFO

Last In, First Out, an inventory valuation method where the most recently acquired items are assumed to be sold first, affecting cost of goods sold and inventory value on the balance sheet.

Basic Accounting Equation

The fundamental equation representing the relationship between assets, liabilities, and owner's equity (Assets = Liabilities + Owner's Equity).

Owners' Equity

Represents the residual interest in the assets of a company after deducting liabilities, essentially the owner's claim against the company's assets.

Assets

Resources controlled by a business as a result of past events and from which future economic benefits are expected to flow to the entity.