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

Revenue

Additional Paid in Capital

Cash from Operations

Total Assets

1 point
6.
Question 6
A company

Answer 1

When a company issues stock for cash, several accounting items are affected. In this case, the company received $100,000 cash for issuing 10,000 shares of $4 par value stock. Below are the items that would be increased by this transaction:

1. Cash: The company receives $100,000 in cash.

2. Total Assets: Since cash is an asset, total assets will increase by the amount of cash received, which is $100,000.

3. Additional Paid in Capital: The par value of the issued shares is $4 per share, totaling $40,000 (10,000 shares x $4 par value). The additional paid-in capital is the amount received above the par value, which is calculated as follows:

   • Cash received: $100,000
   • Par value of issued stock: $40,000
   • Additional Paid in Capital = Cash received - Par value = $100,000 - $40,000 = $60,000.

Based on this analysis, the following items would be increased:

• Additional Paid in Capital
• Total Assets

The other options—Total Liabilities, Revenue, and Cash from Operations—would not be affected by this stock issuance transaction.

So the correct responses are:

• Additional Paid in Capital
• Total Assets