Question

Juarez Company acquired $1,200 from the issue of common stock. Which of the following shows how this event will affect the company’s accounting equation? The letters "NA" indicate that the component of the equation is not affected. Assets = Liabilities + Common Stock + Retained EarningsA. $1,200 = $400 + $400 + $400B. $1,200 = $1,200 + NA + NAC. $1,200 = NA + $1,200 + NAD. $1,200 = NA + $600 + $600

Answer 1

Answer:

C) $1,200 = NA + $1,200 + NA

Explanation:

This transaction should increase both the cash account which is an asset, and the common stock account.

assets     =   liabilities + common stock + retained earnings

+$1,200  =        NA      +     +$1,200        +         NA

this transaction doesn't increase debts (liabilities) and doesn't affect retained earnings either.