Answer:
Mauricio invested $30,000 in Pizza Aroma in exchange for its stock. Pizza Aroma now has $30,000 IN COMMON STOCK under shareholders' equity.
Explanation:
Mauricio invested a certain amount of money in exchange for common stock of a small corporation, Pizza Aroma. Corporations are legal entities that operate separately from its owners or stockholders.
Usually a small business like Pizza Aroma would be a sole proprietorship or a partnership, at least at the beginning when it just started to operate. But the main advantage of a corporation is that it limits owners liability to the amount invested in stocks, therefore if the business fails, the most Mauricio can lose is $30,000. While sole proprietors and partners have unlimited liability, which means that they are legal liable for all the debts and obligations of the business. The main disadvantage of corporations is that they are double taxed, that means that the corporation pays corporate taxes and the owners pay income taxes also.
