Use the Information for the Question(s)below

question 5

Multiple Choice

Use the information for the question(s) below.
You founded your own firm two years ago. You initially contributed $250 000 of your own money and in return you received 2.5 million shares of stock. Since then, you have sold an additional 1.25 million shares of stock to angel investors. You are now considering raising capital from a venture capital firm. This venture capital firm would invest $5 million and would receive 2 million newly issued shares in return.
-After the venture capitalist's investment, what percentage of the firm will you own?

• A)66%
• B)65%
• C)63%
• D)50%

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Definitions:

Bad Debts Expense

An expense reported on the income statement, representing the estimate of receivables that are not expected to be collected.

Contra Account

An account used in the ledger to offset a related or a parent account, often showing the amount of reductions or adjustments to the main account.

Sales Account

An account in the general ledger that records the sales of goods or services.