A company received $100,000 cash from issuing 10,000 shares of $4 par value stock.

Question

Which of the following items would be increased by this stock issuance transaction? (check all that apply)

Total Liabilities

Cash from Operations

Revenue

Total Assets

Additional Paid in Capital

1 point
6.
Question 6
A company received

Answer 1

When a company issues shares of stock and receives cash, several elements of its financial statements are affected. In the case presented, the company receives $100,000 in cash from issuing 10,000 shares of $4 par value stock.

Here's how each of the items listed is affected:

1. Total Liabilities: This will not increase because stock issuance is an equity transaction, not a liability.

2. Cash from Operations: This would not be affected. While cash is received, it is not categorized as cash from operations—it is part of financing activities.

3. Revenue: This will not increase because issuing stock does not constitute revenue; revenue comes from operations (like selling goods or services).

4. Total Assets: This will increase because the company receives $100,000 in cash, which is an asset.

5. Additional Paid in Capital: This will increase. The par value of the issued stock is $4 per share for 10,000 shares, totaling $40,000. The excess amount received over the par value ($100,000 - $40,000 = $60,000) will be recorded as Additional Paid in Capital.

From the options given, the following items would increase as a result of the stock issuance transaction:

• Total Assets
• Additional Paid in Capital