Question

Investments by stockholders have what effect on the accounting equation?A. Assets increase and liabilities increase.B. Expenses increase and liabilities increase.C. Assets increase and revenues increase.D. Assets increase and stockholders' equity increases.

Answer 1

Answer:

D. Assets increase and stockholders' equity increases

Explanation:

When a stockholoder invests in the company the company has increase its Assets by the amount or fair value of the investment made by the stockholder.

Consequently, the company should also recognize and increase in the stockholders' equity since it is a stockholder that is adding value ("equity")  by investing in the company.