Falcon Crest Corporation Issues 100 Shares of No-Par Common Stock

question 167

Multiple Choice

Falcon Crest Corporation issues 100 shares of no-par common stock for $10 per share. The stock has a stated value of $1 per share. This transaction will include a credit to Common Stock for:

• A)$100 and a Gain on Issue of Common Stock for $900.
• B)$100 and a credit to Retained Earnings for $900.
• C)$100 and a credit to Paid-in Capital in Excess of Stated Value for $900.
• D)$1,000 and no entry to Paid-in Capital.

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Definitions:

Budget Line

A graphical representation of all possible combinations of two goods that can be purchased with a given budget and prices.

Substitution Effect

The substitution effect describes the change in consumption patterns due to a change in relative prices, leading consumers to substitute a product for a cheaper alternative.

Income Effect

The adjustment in demand for goods and services triggered by a change in consumers' discretionary income.

Income Increases

Situations where an individual's or household's earnings rise, potentially affecting their spending, saving, and investment behaviors.