When a Company Issues Common Stock for Cash,what Is the Effect

question 150

Multiple Choice

When a company issues common stock for cash,what is the effect on the accounting equation for the company?

• A)Assets increase and liabilities increase.
• B)Assets increase and stockholders' equity increases.
• C)Assets decrease and liabilities decrease.
• D)Liabilities decrease and stockholders' equity increases.

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Definitions:

Depreciation Expense

The process of charging a portion of the cost of an asset to expense over its expected useful life, reflecting the asset’s consumption or wear and tear.

Capital Spending

Expenditures by a company on physical assets such as buildings, equipment, or machinery, intended to improve its long-term operations.

Sales

The total amount of goods and services sold by a company within a specific period, indicating the company's ability to generate revenue.

Dividends Paid

The portion of a company's earnings distributed to shareholders, typically in the form of cash payments or additional shares.