A New Company Issues 2,000 Shares of $5 Par Common

question 231

Multiple Choice

A new company issues 2,000 shares of $5 par common stock in exchange for the services of a lawyer during its first month of business. The lawyer's normal fee is $15,000 for similar work. Which of the following accounting equation effects would be recorded if the stock is not currently trading?

• A) A decrease in Common Stock for $10,000
• B) An increase in Common Stock for $15,000
• C) A decrease in Additional Paid-In Capital--Common Stock for $5,000
• D) An increase in Additional Paid-In Capital--Common Stock for $5,000